TAIPEI, Taiwan — Taiwan-based integrated circuit designer MediaTek Inc. said yesterday its January sales fell 5.22 percent from December to NT$7.53 billion.
The January figure was down 44.57 percent from a year earlier, the company said.
It said due to the fewer work days as a result of the Lunar New year holiday in February, sales for this month are expected to drop further but business in March is expected to return to normal.
“The month-on-month fall in MediaTek’s sales indicated that the impact from fierce competition in the China cell-phone chip market remained ugly,” Grand Cathay Securities analyst Mars Hsu said.
Hsu said a price war in China shows no signs of ending anytime soon.
“Under such unfavorable circumstances, I expect the company’s gross margin will continue to be affected in the first half of this year,” Hsu said.
Affected by an escalating price war in China, MediaTek’s gross margin in the fourth quarter fell three percentage points from the third quarter to 49.2 percent.
MediaTek is heavily dependent on sales of less expensive chips to China’s unbranded cell phone market, leaving it vulnerable to price erosion in a product category known for its price sensitivity.
Hsu said it is possible for the company to see its gross margin drop to 45-46 percent in the first quarter, adding that he expects MediaTek’s gross margin will hit bottom in the second quarter. In addition to falling cell-phone chip prices, MediaTek also felt the impact from a rising Taiwan dollar which is hurting the island’s high-tech product exports, Hsu said.
Earlier, MediaTek said its sales for the first quarter is expected to fall 7-14 percent to between NT$19.5 billion and NT$21 billion.