MediaTek’s gross margin dips to new low in Q1

Taipei--MediaTek Inc., the largest integrated circuit designer in Taiwan, saw its gross margin for the first quarter of this year dipping to a new low in the company's history amid escalating competition in the global smartphone chip market.

In an investor conference held Friday, MediaTek said that its gross margin, the difference between revenue and cost of goods sold, for the January-March period, fell by one percentage point from the previous quarter to 33.5 percent.

The first quarter gross margin also dropped from the 38.1 percent recorded over the same period of last year.

MediaTek's operating margin, the difference between sales and both the cost of goods sold as well as operating expenses, for the first quarter also fell to 2.2 percent from the fourth quarter's 5.8 percent.

MediaTek has suffered falling gross and operating margins as smartphone chips are squeezed by rising competition at a time when its rivals, such as U.S.-based Qualcomm Inc., lowered their prices to secure orders, market analyst said.

According to MediaTek, chips used in smartphones and tablet computers accounted for 45-50 percent of its total sales.

Due to the price competition, along with slow season effects in the first quarter, MediaTek posted NT$56.08 billion (US$1.86 billion) in consolidated sales, down 18.3 percent from a quarter earlier and down 0.3 percent from a year earlier.

Despite the falling sales, MediaTek posted NT$6.64 billion in net profit for the first quarter, up 29.2 percent from a quarter earlier due to a disposal of its subsidiary AutoChips Inc., located in China, for US$600 million.

Looking ahead, MediaTek Vice Chairman and President Hsieh Ching-jiang (???) said in the investor conference that with global smartphone demand recovering in the second quarter after inventory adjustments in the first quarter, the company's consolidated sales for the three-month period is expected to rise by about 8 percent from the first quarter to range between NT$56.1 billion and NT$60.6 billion.

Hsieh added that MediaTek will continue to improve its product portfolio to boost its gross margin which could range between 32.5 percent and 35.5 percent in the second quarter.

He said that MediaTek's shipments of smartphone and tablet microchips could range between 110 million units and 120 million units for the April-June period.

Peak season effects are expected to help MediaTek have a better third quarter, Hsieh said.

Meanwhile, MediaTek revealed that its board of directors has approved a proposal to issue NT$9.5 in cash dividend for each MediaTek share for 2016, when the IC designer raked in NT$15.16 in earnings per share. The dividend proposal is pending approval from the company's shareholders.

The latest cash dividend plan was down 13.6 percent to a low in four years, and its dividend yield reached 4.37 percent based on MediaTek's closing price of NT$217 on the Taiwan Stock Exchange Friday.

MediaTek's board also plans to issue NT$5.93 billion in bonuses to its employees based on the 2016 earnings and each of its 9,500 employees is expected to receive NT$624,000 in bonuses on average. But that amount is down almost NT$60,000 from a year earlier.

Source: Focus Taiwan News Channel