MediaTek Climbs After Flagging Strong Growth From China, India

  • Its 4G-ready chips have been popular in developing countries
  • Revenue should come in towards high end of 24-32% growth range

MediaTek Inc. shares climbed after a senior executive said second-quarter revenue growth is on track to come in toward the higher end of its forecast for a 24 to 32 percent rise, thanks to surging demand for mobile chips from China and India.

The Taiwanese company, which supplies lower-cost Chinese brands and is one of Qualcomm Inc.’s biggest adversaries, is running out of 4G-enabled chips because of surprisingly strong demand from developing countries, Chief Financial Officer David Ku said in an interview at the Computex trade show. The stock rose as much as 3.9 percent in Taiwan trading.

That take-up should shift sales toward the upper end of its previously forecast range for quarter-on-quarter growth, Ku said. That means revenue growth may trump analysts’ average expectations for a 26 percent jump from the first quarter, when the company reported revenue of NT$55.9 billion ($1.7 billion).

“Most likely we’re looking at mid- to higher-end of the range,” he said. “But we didn’t really see better gross margin because the competition is still out there.”

MediaTek competes with Qualcomm to supply processors for smartphones and tablets, a market that’s growing as Chinese brands like Oppo and Vivo make inroads into still-expanding developing countries across Asia. Even in a slowing market like China, wireless carriers may be promoting cheaper phones that carry MediaTek chips to attract new users, said Anand Srinivasan, an industry analyst with Bloomberg Intelligence.

Its battle with Qualcomm however is depressing margins. To boost its bottom line in the longer term, the company hopes to get its chips to a standard that leading brands like Apple Inc. -- which uses its own processors -- can accept. The U.S. company declined to comment.

“If our technology is right, we will look after Apple. Not the processor but the other parts. It will be within two or three years,” Executive Vice-President Jeffrey Ju said.

“We don’t think anyone will supply Apple in the processor,” he added. “Their scale is big enough and they have quite a capable team to deliver what they need and they have a bunch of money to sustain the team.”

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