MediaTek’s revenue was down 25% YoY and 26% QoQ in Q4 2022.
The mobile phone segment’s revenue declined 25% YoY and 30% QoQ.
MediaTek has downgraded Q1 2023 revenues to $3.0-$3.4 billion, a decline of 35-40% YoY and 3-12% QoQ.
The company has guided the inventory levels to normalize by the end of H1 2023.
MediaTek has reported $3.4 billion in revenue for Q4 2022, down 25% YoY and 26% QoQ. For the full year of 2022, the revenue was $18.7 billion, up 6% YoY. MediaTek delivered a strong H1 2022 driven by 5G SoCs but a weak H2 2022 due to macroeconomic headwinds and customer inventory adjustments. The QoQ decline was due to the slow China market, weak consumer demand and inventory correction by smartphone OEMs. The mobile phone segment’s revenue declined 25% YoY and 30% QoQ due to aggressive inventory adjustments by customers. The segment contributed 52% of MediaTek’s Q4 2022 revenue.
The smart edge segment, which contributed 42% to the company’s revenue in the fourth quarter, declined 18% sequentially due to order cuts from telecommunication operators for inventory adjustment. Revenues from enterprise ASIC and automotive products increased due to growing popularity in the US and Europe regions.
The power IC segment accounted for 6% of MediaTek’s revenue, declining 37% QoQ in Q4 owing to weak demand from consumer devices such as smartphones. But the demand for power ICs from automotive and industrial applications increased in Q4.
Changing view from the previous quarter’s guidance, MediaTek downgraded Q1 2023 revenues to the range of $3.0-$3.4 billion, a decline of 35-40% YoY and 3-12% QoQ. Gross margins in Q1 2023 are expected to be around 47.5% and the operating expense ratio around 33%. Most smartphone OEMs will follow a conservative approach to maintaining their inventory. Smart TV and Wi-Fi will see a slight increase in demand in the first quarter.
MediaTek also launched satellite-based connectivity solutions with Bullitt group, to be available in Q1 2023. MediaTek is the third player after Apple and Qualcomm to offer satellite-based connectivity solutions.
MediaTek guided the inventory levels to normalize by the end of H1 2023. This is in line with our view. In H2 2023, MediaTek expects to see growth in revenues. Currently, Chinese smartphone OEMs have 3-3.5 months of smartphone inventory levels, which will come down to 2-2.5 months by the end of Q1 2023.
Overall, weak guidance from MediaTek for Q1 2023. The first half of 2023 is going to be tough due to inventory correction and macroeconomic uncertainties. We forecast the market to bounce back and inventory levels to come back to normal in the second half. We expect the overall smartphone shipments to be flat in 2023. Therefore, despite the growth in the second half, we forecast smartphone AP SoC shipments to contract in 2023.
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.
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.
Both Qualcomm and MediaTek posted healthy growth in Q1 2022. MediaTek recorded an impressive set of numbers for the quarter with revenues growing 32% YoY and 10.2% QoQ to reach $4.8 billion. Qualcomm saw its third consecutive quarterly record revenue in Q1 2022 at $11.6 billion. Its business units recorded annual growth of between 28% and 61%.
MediaTek led the Android smartphone SoC market in 2021 with a 44% share, followed by Qualcomm with 35%, according to the latest research from Counterpoint’s Global Handset Model Sales Tracker.
Qualcomm’s focus on the premium smartphone segment (>$500) has helped it to grow revenues. Its Snapdragon 800 series and Snapdragon 700 series, notably the flagship Snapdragon 8 Gen 1 and Snapdragon 778G, are both key volume drivers. Furthermore, Qualcomm has gained a 75% share of Samsung’s Galaxy S22 series shipments. In previous Samsung flagship models, there was a more equitable split between Qualcomm Snapdragon-powered SKUs and Samsung Exynos-powered SKUs. Qualcomm is also driving more revenues with its RFFE (RF Front End), allowing it to capture a higher share in the BoM.
MediaTek dominates the low-mid tier wholesale price segment ($100-$299), driven by its Dimensity 700 and Dimensity 900 series. Also, the 4G SoC in the <$199 price band is driven by the P35, G80 and G35 chipset models. MediaTek has entered the premium segment with the Dimensity 9000 series, but the sales will only start to pick up in Q2 2022.
AP Chipset Share for Android Smartphones by Price Band, Q1 2022
Qualcomm is focusing on the premium (>$500) and mid-high ($300-$499) segments for revenue growth. Qualcomm is an industry benchmark when it comes to premium smartphones.
Qualcomm’s focus is on the 7 and 8 series Snapdragon chipsets, which drive higher revenue and profitability. Qualcomm acknowledged it has seen a slowdown in the low- and mid-price tiers. But this was more than offset by strong premium-tier sales.
Further, the design wins with 75% of sales of the Galaxy S22 family, up from 45% of the S21 family, helped Qualcomm strengthen its position in the premium Android segment in Q1 2022.
Qualcomm’s share in the >$500 band increased from 47% in Q1 2020 to 71% in Q1 2022, growing 23% YoY in Q1 2022, owing to the launch of its Snapdragon 888 and Snapdragon 8 Gen 1 chipsets.
Focus on the premium segment will help Qualcomm ride out the slow China market, global macro-economic situation and high inventories.
MediaTek dominated the <$299 price tier and drove significant volumes both for 4G and 5G in this tier. Entry of the Dimensity 9000 enables MediaTek to capture share in the premium band (>$500). This is the first time MediaTek has entered this tier. MediaTek has already announced design wins with Chinese smartphone OEMs like OPPO, vivo, Xiaomi and HONOR. This opens more competition and opportunities for growth in the premium segment.
The volume in the ≤$99 price band was driven by LTE smartphones, where MediaTek captured a 47% share. LTE SoCs have been affected by the ongoing shortages and will be in short supply in 2022.
In the $100-$299 price band for Android, MediaTek captured a 60% share in Q1 2022 driven by its Dimensity 700 and 900 series.
MediaTek will continue to gain share in the $100-$299 price band as 5G penetrates markets like India, APAC others, LATAM and MEA. Smartphone OEMs like Xiaomi, Samsung, OPPO and vivo will likely launch affordable 5G smartphones under $200.
MediaTek has entered the premium segment with its Dimensity 9000 series. However, the sales are only expected to pick up in Q2 2022.
Overall, we forecast around an 8% share for MediaTek in the premium segment in 2022. MediaTek growth in Q2 2022 is expected to come from mid-high range phones due to the shifting of demand from LTEto 5G AP/SOCs. Further, with the launch of the Dimensity 8000 series, MediaTek wants to focus on and consolidate the $300-$499 price bands. This will also help MediaTek pivot volumes from the low-mid segment to mid-high to premium segments.
Samsung Exynos’ share declined in Q1 2022 due to the loss in share to Qualcomm in the Galaxy S22 series and also due to the low yields of the 4nm premium Exynos chipsets.
Share in the premium segment declined from 34% in Q1 2021 to 23% in Q1 2022.
Samsung has launched the Galaxy A33 and A53 with its Exynos 1280 SoCs. These are the volume drivers that will help it to regain share from MediaTek and Qualcomm through the rest of 2022.
In the low-mid segment ($100-$299), Samsung’s share declined to 7% in Q1 2022 from 10% in Q1 2021 due to outsourcing of its models (A, F and M series) to ODMs, which integrated mostly Qualcomm, MediaTek or UNISOC solutions in different models depending on the target price bands.
In the low tier, Samsung is using UNISOC SOCs in the Galaxy A03 smartphone. The share of Samsung smartphones is almost negligible in this segment.
UNISOC continues to gain share in the low bands (<$99) driven by the LTE portfolio. Its share in the <$99 band grew to 47% in Q1 2022 from 20% in Q1 2021.
With realme, HONOR, Motorola and Samsung launching phones with its Tiger series SoC, UNISOC has expanded its customer base with design wins at ZTE and TECNO and entry into the Samsung Galaxy A series.
It has also captured an 8% share in the $100-$199 price band with HONOR, realme and Samsung.
For 2022, we expect UNISOC to maintain the momentum with its portfolio catering to LTE smartphones, as MediaTek struggles with supply issues for 4G chipsets and Qualcomm focuses on 5G solutions. Also, a few design wins with 5G chipsets will add to its overall volumes and help support its value growth.
We expect HiSilicon volumes to decline in 2022 as the inventory is depleted. Huawei has already started using Qualcomm SoCs in its new launches, but these are limited to 4G due to the prevailing US sanctions.
Growth in the global smartphone market declined annually for the first time ever in 2018. This was primarily due to the lengthening replacement cycles in key geographies such as the US, China, and parts of Europe. At the same time, there is also a gradual shift among entry-level (sub-US$100) smartphone users towards mid-tier (US$100-US$250) and high-tier (US$250-US$400) smartphones in 2018. In fact, more than half of the total smartphones sold across the world in 2018 came from the mid-tier and the high-tier price bands.
There are several reasons for this shift. A key reason is the maturing global smartphone user base. Many of them are buying their second or third smartphone. Aspirations are also increasing. Not everyone can afford a premium-tier flagship device but most smartphone users in mid-to-high-tier segments are demanding better specs, features, and performance. As a result, the feature sets and product quality offered by the upstart smartphone vendors such as Xiaomi, OPPO, Vivo, Huawei, Asus, Realme, and others are attracting entry-tier and mid-tier smartphone users to purchase their next phones in the US$100-US$400 price segment. Some of the most in-demand features in this price segment are as follows: –
Artificial Intelligence –On-Device AI for advanced imaging, computing, AR translation, scene detection, low-light enhancements, portrait modes, and more.
Imaging – Multiple and varied camera sensors from telephoto zoom to higher resolutions to ultra-wide support, hybrid auto-focus, and more.
Gaming – Optimizations for stunning realistic graphics rendering, faster frame rates, and immersive audio support to enhance the gaming experience.
Power – Advanced CPU optimization for efficient power consumption and better battery life, quick charging, and other such features.
Connectivity – Advanced LTE (600Mbps+ throughputs), WiFi (802.11ac), Bluetooth connectivity with optimized RF performance for better signal performance.
All these advanced features and technologies have trickled down to mid-to-high-tier segments because of chipset vendors like Qualcomm, Samsung, HiSilicon, and MediaTek. In this regard, Qualcomm has been ahead of the competition and has been swiftly able to democratize cutting edge features. It has helped upstart brands to compete with vertically integrated players such as Samsung and Huawei.
Qualcomm’s 4, 6 and 7 series platforms of System of Chipsets (SoCs) have driven this trend in these key price segments bringing innovations to masses. Together, these series powered more than 41% of smartphones in this segment (US$100-US$400) in 2018 according to our latest Global Soc Model Sales Tracker research.
Exhibit 1: Smartphone SoC Family Sales Share by Price Bands in 2018
Building on the success of 6 and 7 series, Qualcomm today announced new SoCs Snapdragon 665 and Snapdragon 730/730G for smartphones. Here’s a closer look at what these new SoCs have to offer: –
Qualcomm Snapdragon 665
The Qualcomm Snapdragon 665 is the latest generation 6 series SoC platform. It builds upon the 14nm based Snapdragon 660, which was launched 23 months ago. However, the 665 is significantly better than the 660.
The major upgrades are advanced AI, optimized gaming, and cutting-edge imaging capabilities. It brings in near-premium experiences for someone buying a first or second smartphone.
For the first time, Qualcomm brings its third-generation AI engine (AIE) to the affordable 6 series platforms.
Exhibit 2: Snapdragon 665 – 3rd Gen AI Engine
It incorporates the powerful heterogeneous computing-based AI engine leveraging the latest Qualcomm Hexagon 686 DSP, Adreno 610 GPU and 11nm based Kyro 260 CPU
The Snapdragon 665 AIE promises 2x faster AI processing and 2x Hexagon Vector eXtensions compared to the Snapdragon 660 (14nm)
The AIE also unlocks newer AI driven capabilities such as 3D Face Unlock, object detection, single camera portrait mode and relighting, scene recognition, augmented reality-based text translation, and more.
The improved AI-powered Qualcomm Spectra 165 ISP also supports a triple camera configuration (telephoto, wide, and ultra-wide), 48 MP sensor, 4K video capture, Portrait Mode and HDR stills, Hybrid Autofocus, 5x Optical Zoom, Zero Shutter Lag, and a multitude of camera-centric features.
Gaming has been a key use-case followed by camera and communication. The Snapdragon 665 offers an enhanced gaming performance and is the first 6 series SoC to support Vulkan 1.1 graphics driver for smooth and realistic graphics as well as faster frame rates, all powered by the Adreno 610 visual processing sub-system.
However, the Snapdragon 665 continues to offer the same connectivity options in the form of LTE-Advanced (Cat 12 – 600Mbps 3x20MHz CA DL/ Cat 13 – 150 Mbps 2x20MHz CA) as the Snapdragon 660 targeting emerging markets.
Qualcomm Snapdragon 730/730G
The Qualcomm Snapdragon 730 platform is the latest generation of the 7 series SoC platform and it builds upon the 10nm based Snapdragon 710 which was launched 11 months ago.
Snapdragon 7 series is a new tier which is filling up a huge gap left between Snapdragon 6 and 8 series SoCs. The flagship 8 series-based devices will continue to be more expensive with the addition of technologies such as 5G and new form-factors such as the dual or foldable displays.
Exhibit 4: Snapdragon 730 – Major Upgrade from Imaging to AI to CPU
Snapdragon 730 is a significant upgrade compared to Snapdragon 710 and cements its position nicely in the high-to-premium tier.
Qualcomm has integrated its fourth generation AI Engine (AIE) into the 730, in tow with the first ever Hexagon Tensor Accelerator (HTA) (INT16, INT8, Mixed) for 7 series. It also has more floating point ALUs as well as dot product instructions support. This provides powerful AI experiences for the camera, gaming, and performance.
The AIE incorporates Qualcomm Hexagon 688 DSP, Adreno 618 GPU, and a highly efficient advanced 8nm based Kyro 470 CPU promising 2x faster AI processing than its predecessor.
The Snapdragon 730 sports AI + voice engine to enhance voice recognition accuracy and pick up even voices from far or even in a noisy environment.
It has the first Computer Vision based Image Signal Processor (CV-ISP) for 7 series. This was earlier featured in the 8 series platform.
The Spectra 350 features the CV-ISP, which supports advanced imaging features such as 4K HDR video in Portrait Mode allowing depth sensing at 60fps, Object Segmentation, Cinemagraph video, HD slo-mo videos @ 960fps, and almost 4x power savings.
The SoC also supports the new generation HEIF compression format which saves photo, video and CV data in almost half the size.
Qualcomm also announced for the first time a 7 series chipset variant, called 730G, specially designed for OEMs looking to target advanced smartphone gamers. It allows for a more powerful but affordable gaming smartphone.
With Snapdragon 730G, Qualcomm enhances the gaming experience for a 7 series phone in a couple of ways –
The 8nm Kyro 470 drives extreme power efficiency by balancing workload across to performance and six efficiency cores for demanding gameplay, promising a 35% power saving compared to Snapdragon 710.
The Adreno 618 GPU visual sub-system is powered with some of the “Elite Gaming” features trickling down from the Snapdragon 855 such as true HDR10 gaming, 25% faster graphics rendering, Wi-Fi latency manager, Jank reducer, anti-cheat extensions, and other gaming related optimizations.
The sub-system also supports 4K HDR10 PQ and HLG Video Playback (10-bit color depth, Rec. 2020 color gamut)
In addition to the powerful graphics and AI engine, the Snapdragon 730/30G sports an X15 LTE-Advanced (Cat 15 – 800Mbps 3x20MHz CA DL/ Cat 13 – 150 Mbps 2x20MHz CA) modem with 4×4 MIMO and up to 256-QAM
Snapdragon 730 is also the first non-8 series platform to integrate Qualcomm Wi-Fi 6 (802.11ax)
Qualcomm has some great 6 and 7 series announcements which should help it maintain a wider lead in the sizeable mid-to high-tier market. The 6 series portfolio now spans from a cheaper Snapdragon 625 to 665 and the 675 offering multiple options for different OEMs to design and differentiate. The 7 series currently contributes a smaller volume. But with Snapdragon 730/730G, we should see more design wins in the US$300-US$500 wholesale price segment phones. As the premium Android flagship market median has shifted beyond the US$600 wholesale price, the 7 series is a great solution for this year’s affordable premium Android smartphones. Qualcomm’s focus on three core use-cases imaging, gaming, and AI should pay off as a sizeable maturing smartphone user base looking to upgrade and enjoy these enhanced experiences.
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