MediaTek posts record-low gross margin in Q4 2016

By Christine ChouThe China Post

TAIPEI, Taiwan — MediaTek Inc., a leading Taiwan-based integrated circuit designer, announced Thursday its annual revenue for 2016 totaled a record-busting NT$275.5 billion, up 29.2 percent compared to the previous year, with earnings per share of NT$15.16. However, its fourth quarter saw a record-low gross margin at 34.5 percent, which may go down further in the first quarter this year. The chip designer released financial results for its fourth quarter ending Dec. 31, 2016. Fourth quarter consolidated revenue was NT$68.6 billion, down 12.4 percent from the previous quarter and up 11.3 percent year-over-year.

The company attributed the quarterly decrease to seasonal decline for consumer electronics, and the annual growth was mainly due to a rise in shipments for consumer electronics. Fourth quarter consolidated net income was NT$5.13 billion with an EPS of NT$3.23.

Gross profit for the fourth quarter was NT$23.7 billion, declining 14.1 percent quarter-over-quarter and falling 0.3 percent compared to the same period the previous year.

The fourth quarter’s gross margin was 34.5 percent, down 0.7 percent sequentially and down 4-percent year-over-year — one of the causes for the latter included smartphone market competition, the chipmaker said in a statement. Annual gross profit amounted to NT$98.1 billion (gross margin: 35.6 percent), up 6.5 percent year-over-year. On the company’s outlook for 2017, MediaTek Vice Chairman Ching-jiang Hsieh (謝清江) said it expected the first quarter to see revenue drop between 14 to 22 percent to NT$53.6 billion to NT$59.1 billion resulting from seasonal factors — such as fewer working days — and impact felt in emerging markets caused by a stronger U.S. dollar. Gross margin of the first quarter is expected to fall between 32.5 to 35.5 percent, Hsieh said. “Last year we saw very strong growth, with revenue rising more than 29 percent. This year we don’t expect to see growth of that extent, while pressure from competition continues and we are continuing to adjust our product mix, gross margin increase will be limited, but we will aim to control it to single-digit levels,” Hsieh said. When asked his outlook for smartphone and tablet shipment in the first quarter, Hsieh estimated shipment volume would reach from 105 to 115 million. Globally, he expects smartphone market growth to rise by 4 to 6 percent to 1.6 to 1.7 billion handsets.

The company said it planned to gradually roll out new products starting the second half of the year and had confidence that demand in India and emerging markets in Southeast Asia would grow in the coming year.