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Insights Tag: Chipset leader

MediaTek Weather’s Macroeconomic Headwinds With 9% YoY Revenue Growth

MediaTek‘s revenues fell 8.7% sequentially but increased 8.5% YoY to NT$142.1 billion. On a USD basis, revenues were comparatively flat due to FX weakness. Global macro headwinds, inventory correction, slow China market and weak consumer demand led to the revenue decline and weak outlook. Declining 8% QoQ, the smartphone segment contributed to 55%  (NT$ 78.2 in Q3 2022) of MediaTek’s total revenue in Q3 2022. Smartphone segment demand was affected by customers’ inventory adjustments, especially in the 5G mid-range SoCs. Demand for LTE SoCs was strong in QoQ terms.

MediaTek Earning 2022 Q3

 

  • The company has expanded its portfolio for the flagship and mid-range segments by launching Dimensity 9000+ and Dimensity 1050, respectively. The newly launched premium SoC has been adopted by top-end gaming smartphones. Also, MediaTek will launch a next-generation flagship SoC in Q4 2022. This will add to its premium segment revenue.
  • The Smart Edge segment, which contributed 38% to the company’s revenue in the third quarter, declined 9% QoQ as telecommunication operators cut back on orders, negatively impacting the company’s Wi-Fi and wired businesses. Also, the consumer market weakness affected the tablet, Chromebook and monitor businesses.
  • The power IC segment, which accounted for 7% of MediaTek’s revenue in Q3 2022, declined 17% QoQ due to weak demand for power ICs in consumer devices such as smartphones and PCs. But demand for power ICs for automotive and industrial applications remained robust in Q3 2022.
  • MediaTek guided Q4 2022 revenues in the range of NT$108 billion to NT$119.4 billion ($3.4 billion to $3.8 billion), a decline of 16%-24% QoQ and a decline of 7%-16% YoY. The gross margin is expected to be around 48.5% and the operating expense ratio is expected to be 31%. LTE SoCs will decline more severely than 5G SOCs in Q4 2022. Wi-Fi, broadband and routers will also be impacted as some of the Wi-Fi operators will slow down their fourth-quarter buy-in. The company also projected a sequential increase in revenues in Q1 2023.
  • The inventory level came down in Q3 2022 compared to the previous quarter. For both 4G and 5G, SoC inventory will come down in Q4 2022. Inventory corrections will be normalized in H1 2023.
  • According to Counterpoint Research’s Smartphone AP/SoC Shipment Tracker, MediaTek dominated the smartphone AP/SoC market in Q3 2022 with a share of 36.5%, followed by Qualcomm. MediaTek shipments have declined due to order cuts from major Chinese OEMs. MediaTek’s relatively greater dependence on the mid-end and low-end smartphone segments, which are likely to be more affected by the current macroeconomic situation as well as excess channel inventory, will lead to a weaker fourth quarter.

Overall, weak market outlook for Q4 2022 from MediaTek echoes increasingly cautious views from the foundry and IC packaging makers, which are seeing a slowdown in smartphone IC orders in early 2023. We expect 2023 to be challenging with inventory correction going on till H1 2023 and coming down to a normal level (80-90 days) by the end of 2023. The demand outlook for 2023 also looks challenging after inventory corrections due to macroeconomic uncertainty and weak China market. From the technology migration point of view, 5G SoCs are going to be a growth opportunity for the company. MediaTek will focus on maintaining gross margin, following price discipline at a time of uncertainty in the global semiconductor industry.

The Rise of In-House Application Processor Design

The application processor (AP) or the system-on-chip (SoC), is the most critical component in a smartphone. This is what makes your smartphone a “smart” phone, by giving it the ability to perform a variety of tasks in parallel. The smartphone application processor industry is dominated by Qualcomm with its Snapdragon line of processors, but major smartphone OEMs (Original Equipment Manufacturers) like Apple, Samsung and Huawei are pivoting towards a more vertically integrated approach by using in-house designed SoCs.

There are multiple benefits in developing an in-house SoC ranging from cost benefits, tight control on the software to integrate new technologies. Major OEMs understand that the SoC can be a differentiating factor for them in an already crowded smartphone market that is gasping for innovation.

But it is not easy or cheap for a smartphone OEM to develop its own SoC. Different paths have been taken, including: acquisitions (PA Semi, Passif, Intrinsity, etc); so-called acqui-hires of smaller companies and their staff; poaching key R&D executives; external consulting costs; IP licensing from ARM and others; investment in tooling; software and much more, accrued over the years.

Samsung and Huawei are increasingly using their in-house SoCs, challenging the incumbents like Qualcomm, MediaTek and Unisoc (Spreadtrum). Qualcomm and others are pushing back by betting on the growth of Chinese smartphone players like OPPO, vivo and others. The high cost of developing in-house SoCs is likely to keep most OEMs away from doing so and to remain dependent on existing suppliers.

Exhibit 1: Qualcomm Share in Xiaomi, OPPO, vivo

Source: Counterpoint Research Component Tracker Service

The first two products to market using TSMC’s latest 7nm process node are both SoCs produced by vertically oriented OEMs; Apple and Huawei. We are confident that Qualcomm will quickly catch-up and potentially leapfrog them, but it underlines that in-house SoC designers are not trailing, but in some cases, leading the market. With critical innovations around 5G coming rapidly, having close ties with leading AP vendors, or having deep in-house know-how, will be critical to remaining competitive.

Download the complete report with analysis from our research portal (click here).

LTE devices made up 77% of total shipments in Peru

Peru smartphone shipments grew 27% annually in Q3 2017, and 10% compared to the previous quarter. Since the entrance of Entel, the 4th operator, Peru has become one of the most competitive markets in LATAM. Operators still offer subsidies on devices to retain or to compete for new subscribers. As a consequence operators control more than 90% of handset distribution.

The, top six brands represent more than 70% of the smartphone market. The remaining 30% is shared by a long tail of more than 40 brands. Chinese smartphone brands had almost 40% share of the total smartphone market. The leading players are Huawei, Motorola and ZTE.

Opportunities such as number portability and low mobile penetration in some rural areas, triggered carriers to adopt different strategies to increase market share.  Amid this race, OEMs that can offer the best brand-price-feature combination, will likely advance. Huawei has been aggressive, surpassing Samsung to become the number one player in the smartphone market in 3Q 2017. Huawei had 18% market share followed by Samsung with 14% share. LG and Motorola grabbed third and fourth positions in the smartphone market. Motorola registered strong annual growth of 150%, with its C series smartphones performing well. Vietnamese carrier Bitel is a surprisingly strong player – its own branded smartphones captured fifth position, almost quadrupling its shipments annually in the quarter, albeit from a low base.

Exhibit 1: Peru Smartphone Shipments Ranking and Market Share – Q3 2017Source: Counterpoint Research: Quarterly Market Monitor Q3 2017

MediaTek captured almost half of the smartphone market followed by Spreadtrum and Qualcomm with 15% and 13% market share. MediaTek is catering to the needs of low-mid range segment and is being embedded by LG, Huawei and Motorola in their key models. These three SOC players captured almost 80% of the total smartphone market. The rest of the market is shared by Huawei’s HiSilicon-branded processors, Apple and Samsung (Exynos).

 

Market Summary

  • Shipments in Peru during Q3 2017 grew a healthy 27% annually and 10% sequentially.
  • Smartphones represented 79% of handset shipments in the quarter.
  • LTE devices made up 77% of total shipments and grew 29% YoY and 4% QoQ.
  • Huawei became the number one player in the Peru smartphone market surpassing Samsung in 3Q 2017.
  • Samsung declined 34% annually and 52% sequentially falling to second position behind Huawei. Samsung is facing strong competition from Huawei, Moto and LG.
  • LG captured third position with 13% share. LG grew 12% annually, with its K series performing well and providing tough competition to Samsung’s J series.
  • Motorola more than doubled its shipments annually in Q3 2017 with its best-selling smartphone Moto C providing the driving force.
  • More than 70% of smartphones shipped had a screen size that was greater than 5.0 inches.
Exhibit 2: Peru Bestselling Smartphone Rankings – Q3 2017
Source: Counterpoint Research: Quarterly Market Pulse Q3 2017
  • Top 10 smartphones represent almost 40% of the total smartphone market.
  • Eight of the 10 bestselling smartphones were in the <100 USD import price band.
  • Motorola Moto C was the top sell-in Smartphone during Q3 2017. More than half of the model’s volume was pushed by Entel.
  • Huawei Y6 and Y7 models have the highest ASP among the top selling models. Both have ASP higher than USD 100.
  • Samsung has only two older models J1 Mini Prime and J2 Prime in the top 10 bestsellers.

 

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