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.

Four Out of Five Best Selling Models in the Premium Segment Were From Apple

The premium smartphone segment (wholesale price >US$ 400) sell-through declined 13% YoY globally during the first quarter of 2020, according to Counterpoint’s Market Pulse service. The contraction was part of the general smartphone market slowdown due to the COVID-19 pandemic. The segment remains key as it contributed close to 57% of total global smartphone revenue during the quarter.

Apple led the premium segment with a 57% market share, followed by Samsung and Huawei. While most of the brands declined, OPPO grew 67% YoY (from a low base) driven by its Reno 3 and Reno 3 Pro 5G series, and Xiaomi also grew 10% from a small base driven by the Mi 10 5G and Mi Note 10 series. This is the first time since Q3 2018 that Xiaomi has entered the top 5 players in the Premium segment, globally. Compared to the other price bands, the premium segment remains the most consolidated. The top 3 players together captured 88% of the segment during the quarter.

Within regions, Apple and Samsung remained in the top 2 spots in all the regions except China, where Huawei was the market leader in the premium segment. Notably, over 90% of Huawei’s premium segment sell-through in Q1 2020 were in China. Driven by the popularity of OnePlus 7 series, OnePlus also featured in top 5 players in the premium segment in all the regions except LATAM and China.

Exhibit 1: Premium segment market share (sell-through) by OEMs and Regional Rankings, Q1 2020

Within Models, iPhone 11 continued to do well and was the highest-selling model in the premium segment for 2020 Q1. Top four out of five highest selling models in the premium segment were from Apple. This was also the first time that a 5G device entered the top 5 bestselling models in the segment.

Exhibit 2: Best Selling Models in the Premium segment, Q1 2020

Exhibit 2: Best Selling Models in the Premium segment, Q1 2020

5G devices cornered one-fifth of the total premium segment during the quarter. Huawei with its strong push in China captured close to 42% of the total 5G device sell-through in the premium segment. The 5G portfolio is also trickling down the price bands, which is helping to drive growth.  39% of all 5G device sales are now in 400 to 600 USD price band, up from 35% in the previous quarter. Within the regions, 63% of all 5G devices in the premium segment were in China.

The overall premium segment declined but within the price bands that make up the premium segment: the 600 to 799 USD grew 47% YoY capturing over 42% of the premium price band sell-through. This was driven by the iPhone 11 series, which captured three-quarters of this price tier. The price segment has been growing steadily since 2Q 2019, first driven by the popularity of iPhone XR and now iPhone 11. This is now the strongest price band for Apple. Apple has tested its price elasticity and realized that marginally aggressive pricing can potentially generate a much higher “customer lifetime value (CLV)” over 24-30 months

Exhibit 3: Premium segment share by wholesale price (US$) tiers and YoY Growth, Q1 2020

Exhibit 3: Premium segment share by wholesale price (US$) tiers and YoY Growth, Q1 2020

Going forward, the launch of 5G devices by Apple will play a key role in the growth of the premium segment. We also think the premium segment is likely to remain the most resilient from the COVID-19 impact.

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