MediaTek in 2018 – Shifting to a Positive Track

Smartphone and growth products are 70%+ revenue

MediaTek is likely to wrap-up 2018 with flat revenue over the previous 2017 at about NT$235 billion or over US$7.6 billion. Declining sales in its mature product lineups covering e.g. feature phone, optical storage and digital TV are only partially offset by growth products. MediaTek has regained share in the mid-tier smartphone segments. But the smartphone market is weak – limiting the benefit of its share gains. Nevertheless, MediaTek has been able to improve its gross margin by around ~3 percentage points, primarily due to a better product mix.

MediaTek started its 2018 journey from a low base, considering the over 25% revenue slump in February. It rebounded from that low point due in part to its recovery in the smartphone business.

MediaTek Monthly Revenue Dynamics (US$ mn)

Concentrating on low-/mid-end segments, MediaTek’s smartphone business slightly recovered due to the growing demand from overseas markets

The global smartphone market declined in 2018 for the first time, primarily due to the further slowdown of saturated markets, especially in China falling over 7% and only partially offset by the volume increase from emerging markets, like India, Indonesia, Pakistan, etc..

Despite of the recession in mainland China, MediaTek was benefiting from the overseas expansion of major China clients, such as OPPO, Transsion, Huawei and Vivo, in which OPPO played a pivotal role and shipped more than 50 million MediaTek-powered smartphones (>40% in the Helio P60) as of the end of 3Q18. In addition, the removal of a sales ban for MediaTek-powered devices in India also spurred increased demand. Counterpoint expects more MediaTek powered smartphones will be sold in India as MediaTek’s core segments are well-aligned with India’s high volume market segments.

MediaTek Powered Smartphone Shipments by OEM, 2018 Q1~Q3

In 2018, MediaTek suspended its attempt to gain high-end share and readjusted its strategic focus to mid-tier smartphone launching the Helio P60, P70 and P90 respectively in February, October and December. By incorporating a dedicated AI Processing Unit (Mobile APU), MediaTek was attempting to create an advantage over competitors in the low-/mid-tier price segments. In addition, MediaTek has been striving to upgrade its network specifications and it will launch its first 5G baseband M70 in first half of 2019.

Smartphone and tablets remain the largest revenue source for MediaTek, likely accounting for around 40% of total revenue in 2018 based on Counterpoint’s AP Tracker service. Looking forward, the smartphone market in 2019 will see narrowing room for growth, resulting in escalating competition and the development of niche segment applications (like gaming phones), which casts a shadow on MediaTek’s efforts to raise the ASP of its smartphone chipsets.

MediaTek Targets “Growth Products” as New Revenue Momentums

Through active investment and acquisition, MediaTek has formed a comprehensive product portfolio, which is conducive to healthier development and make it more resistant to the soft mobile market. In 2018, sales revenue from “growth products” mainly covering IoT, power management IC, ASIC was expected to reach 35%~40%.

  • Turn-key solutions for IoT applications: A broad range of connectivity technology (Wi-Fi/BT/GNSS/NFC, 2G/3G/NB-IoT, etc.) enable MediaTek tapping into emerging connected devices with growth potential, such as intelligent wearables, connected home and office appliances, utilities and more.
  • The strong demand of AI voice assistant device (VAD), especially in China and North American markets, has more than doubled compared to that in 2017. Thanks to the top-tier players such Amazon, Google, Alibaba and Baidu, MediaTek was able to ship tens of millions of VAD chipsets.
  • Power management ICs are expected to grow around 8% between 2017~2022, primarily driven by demand for electric vehicles, 5G communications, IoT and the related development of the so-called Industry 4.0.
  • With silicon-proven ASIC solutions at 16nm and 7nm, MediaTek engaged with Alibaba, Microsoft, Sony and CISCO, and tapped into new business opportunities such as data center, gaming consoles, networking and wireless infrastructure.
  • MediaTek has been steadily advancing automotive electronics, with its Autus platform focusing on Telematics, Infotainment, mmWave Radar and V-ADAS.

As the era of growth in the smartphone sector is coming to an end, MediaTek is leveraging its rich wireless and multimedia technologies to unlock the new troika, AI + IoT + 5G for sustainable growth.

Senior Analyst Ethan is a Senior Analyst with Counterpoint Mobile and Semiconductors, dedicated to IoT, the wearable, Integrated Circuits and emerging technologies. Ethan had been working in the mobile phone and semiconductor industry for 10+ years. Prior to joining Counterpoint Research, Ethan served Coolpad, VIA and Intel sequentially as senior technology researcher and product manager respectively.

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