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Weak Q4 2022 for MediaTek; Revenues to Further Decline in Q1 2023

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.

MediaTekhas 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 delivereda 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 theslow China market, weak consumer demand and inventory correction by智能手机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.

Highlights

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 andautomotive productsincreased due to growing popularity in the US and Europe regions.
The power IC segment accounted for 6% ofMediaTek’s revenue, declining 37% QoQ in Q4 owing to weak demand from consumer devices such as智能手机s. 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 TVandWi-Fiwill see a slight increase in demand in the first quarter.
MediaTekalso launchedsatellite-based connectivitysolutions 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 OEMshave 3-3.5 months of smartphone inventory levels, which will come down to 2-2.5 months by the end of Q1 2023.
According toCounterpoint Research’sSmartphone AP/SoC Shipment Tracker,MediaTek shipmentshave declined due to ongoing inventory adjustments, global macroeconomic situation, anda weak China market. LTE SoCs declined more than5G SoCsin Q4 2022.
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智能手机shipmentsto be flat in 2023. Therefore, despite the growth in the second half, we forecast smartphone AP SoC shipments to contract in 2023.

MediaTek Weather’s Macroeconomic Headwinds With 9% YoY Revenue Growth

MediaTek‘s revenues fell 8.7% sequentially but increased 8.5% YoY to NT$142.1 billion. On a USD basis, revenues were comparatively flat due to FX weakness. Globalmacro headwinds, inventory correction, slowChina market and weak consumer demand led to the revenue decline and weak outlook. Declining 8% QoQ, the智能手机segment contributed to 55% (NT$ 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 forLTE SoCswas strong in QoQ terms.

The company has expanded its portfolio for theflagshipand mid-range segments by launchingDimensity 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’sWi-Fiand 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 and5G, SoC inventory will come down in Q4 2022. Inventory corrections will be normalized in H1 2023.
According to Counterpoint Research’sSmartphone AP/SoC Shipment Tracker, MediaTek dominated the smartphone AP/SoC market in Q3 2022 with a share of 36.5%, followed byQualcomm. 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 globalsemiconductor industry.

Foundry Strategy & Chipsets Supply Shaping Smartphone SoC Competitive Dynamics in 2021

Seoul, Taipei, Beijing, London, Boston, Toronto, New Delhi, Hong Kong – May 3, 2021

MediaTek to lead global smartphone SoC market with 37% share whereas Qualcomm will lead the global 5G smartphone SoC market with 30% share.
The leading-edge nodes (7nm, 6nm and 5n) will account for almost half of the smartphone shipment volume during 2021.
5G AP/SoC chipset volumes willmore than doubleannually in 2021.

The competitive dynamics in the smartphone AP/SoC market is changing fast for the fabless SoC vendors such as Qualcomm, MediaTek, Apple and others. The market outlook for these vendors is being shaped by not only the breadth and depth of the capabilities or tiering of the chipset portfolio but also by the choice, the share of the capacities across different edge-nodes at the foundries.Global smartphone AP (Application Processor)/SoC (System on Chip) chipset shipmentswill grow 3% YoY in 2021, factoring in the impact of supply constraint, rapid growth of 5G smartphones and related competitive dynamics according to the latest research from Counterpoint’s Foundry & Application Processor (AP/SoC) research.

Commenting on the research,Research Director Dale Gaisaid, “When we break down our forecast with respect to the current demand-supply dynamics,MediaTek is likely to continue its Q4 2020 momentum into 2021and likely to capture 37% unit share of all the smartphone AP/SoC shipped for the full the year. This 20% potential annual uptick in demand is a function of competitive 5G portfolio powering sub-$150 5G smartphones manufactured at TSMC without any supply constraint and growing share in 4G segment. Further, MediaTek in the first half of 2021 will benefit from Qualcomm’s currentsupply constraintsaround RFICs (radio-frequency integrated circuits) from Samsung’s Austin fab, Power management ICs (PMIC), and relatively lower 5nm production yields.”

Exhibit 1: Global Smartphone AP/SoC Market Share (%) Outlook

Global smartphone chipset share

Source: Counterpoint Research – Foundry & SoC Outlook, Apr 2021

Mr Gai, added, “However, we believe Qualcomm to bounce back strongly in H2 2021, firstly by securing greater capacity at TSMC to boost its 5G-centric tiered Snapdragon portfolio. Secondly, taking key steps to improve the supply of PMICs and RFICs should alleviate the supply constraints in coming months. This will allow Qualcomm to maintain its leadership in 5G SoC market and overall market share of 31% still growing annually.”

突出前沿节点的重要性and securing capacities for the same, Mr Gai noted, “The leading-edge nodes, including 7nm, 6nm and 5nm, will account for almost half of the smartphone shipment volume in 2021. These leading nodes are mainly for 5G smartphone models, as advanced nodes (e.g., 11/12/14nm at TSMC and Samsung) will serve the mainstream 4G LTE chipsets in 2021.”

Exhibit 2: Global 5G Smartphone AP/SoC Market Share (%) Outlook

5G smartphone chipset forecast

Source: Counterpoint Research – Foundry & AP/SoC Outlook, Apr 2021

Commenting on the growth of 5G smartphone chipsets,Research Analyst Parv Sharmahighlighted, “We estimate Qualcomm to increase its 5G SoC market share to grow to 30% mark in 2021, with 5G solutions across the tiers, from Snapdragon 8-series down to 4-series. If you include 5G baseband shipments to Apple, the overall 5G chipset market share jumps to 59% level. In an ideal scenario, Qualcomm’s market share in 5G segment would have been even higher if it did not face the unfortunate supply constraints in the first half of 2021. As Qualcomm turns to place more wafer orders on TSMC’s 6nm/5nm from Q2 2021, following the below-expectation wafer output of theSnapdragon888 in the beginning of the year, we expect it to resume its 5G SoC shipment growth from H2 2021.”

Mr. Sharma further adds, “MediaTek leveraging TSMC and its affordable 5G portfolio is well-positioned to almost double its market share in 5G smartphone SoC/AP segment. Together, MediaTek and Qualcomm occupy nearly two-thirds of the 5G smartphone SoC market demand, but the gap between the two has narrowed. Having said that, the foundry capacity will continue to remain tight till early 2022, before the next wave ofCAPEXrealizes at the leading nodes.”

For our comprehensive research on foundry to chipsets to devices, feel free to contact us at the contacts below.

Background:

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts:

Dale Gai

Parv沙姆a

Follow Counterpoint Research
press(at)www.arena-ruc.com

Samsung Captured 43% of Global 5G Smartphone Sales in 2019

Samsung led with healthy sell-through globally.

Huawei was second and kickstarted a wave of 5G sales in China in Q4 2019.

New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires –Feb 10^th, 2020

According to the latest research from Counterpoint’sMarket Pulseservice which tracks sell-through (sales), global 5G smartphone sales contributed to 1% of the global smartphone market in 2019. The sales were driven by the early adoption of 5G in South Korea, the USA, and China, where operators played a big role in the adoption by offering subsidies and promotions. We expect2020 to be the first inflection pointin terms of 5G network rollouts, coverage and device availability.

Commenting on the results,Research Director, Tom Kangsaid, “Samsung was the leader in the 5G smartphone segment capturing 43% of the global sales volume for the full year 2019. Samsung offered the largest 5G product portfolio, ranging from the mid-tier to premium, and sub-6GHz to mmWave models. These smartphones also were widely available acrossSouth Korea,the USA,the EU,亚太地区和国家competiti相比on. The strong operator and channel partnerships, in-house semiconductor prowess and broad reach helped Samsung gain a first mover’s advantage in 5G smartphones. However, 2020 will be the real test for Samsung, as it will face competition from the wave of lower-cost smartphones, thanks to China’s 5G ramp-up and 5G-capable Apple iPhones in the second half.”

Exhibit 1: Global 5G Smartphones Sales by OEM – 2019

Research Analyst, Parv Sharma,commenting on Huawei’s performance added, “Huaweicaptured the second position with 34% share of 5G smartphones sold globally, though most of the sales were in China. Huawei’s Mate 20 X was the only 5G phone with Google Mobile Services (GMS) selling outside China in 2019. 5G version of Huawei’s Mate 30 series drove the bulk of the demand across China, as users preferred upgrading to the 5G rather than the 4G version, futureproofing their purchase. We expect Huawei to be more aggressive in 2020, driving the 5G smartphone pricing down to sub-$200 price points by the end of the year. This will help Huawei capture the lion’s share of China’s 5G smartphone market and also increase its global market share thanks solely to its performance in China.”

Mr. Sharma, adds, “The competition in 5G is expected to increase as other Chinese OEMs: Xiaomi, OPPO, Vivo and Realme will likely adopt Qualcomm’s Snapdragon 6 and 7 series 5G solutions as well as solutions from 5G chipsets from Samsung, MediaTek, UNISOC and, potentially, HiSilicon.”

Commenting on the 5G chipset players for smartphones,Research Analyst, Shobhit Srivastavaadded, “According to our智能手机application chipset tracker, in 2019 Qualcomm, Samsung and Huawei each captured around one-third of 5G smartphone chipset market. In 2020, we expect Qualcomm to gain share in the 5G smartphone chipset market, accounting for around 40% of the market followed Huawei with 27% share. MediaTek 5G chipsets will be available during 2020 but its share is expected to be in single digits. Apple will be using a baseband solution from Qualcomm, meaning Qualcomm will account for around half the 5G smartphone baseband market in 2020.”

Market Summary (Other Players):

LGwas in the number three position, capturing 10%. LG launched the V50 series in Korea, the USA, and the EU.
Vivocaptured 5% share with sales in China following Huawei. It offered its cheapest 5G model in 2019 through its iQoo sub-brand with a 5G smartphone priced below USD 500. It was also the first OEM other than Samsung to launch a 5G smartphone with a Samsung 5G chipset.
Xiaomicontinues the strategy of offering smartphones at competitive prices. It launched a 5G smartphone at less than USD 400. It was in the fifth position globally, capturing a 3% share.
Oppooffered 5G smartphones in the premium segment in China, EU, and MEA. It captured a 2% share.
In 2020, we expectQualcommto dominate the5G chipset market通过捕获约40%的市场份额紧随其后Huaweiwith 27%.
Qualcomm is expected to capture around a half of the 5G smartphone baseband market in 2020.

Key smartphone players plan to introduce the maximum number of 5G flagships to speed up the 4G to 5G transitions in 2020. And, they are also continuously focusing on reducing the ASP of 5G devices to make them affordable to the mass market.

Please feel free to contact us atpress(at)www.arena-ruc.comfor further questions regarding our latest research or insights

Analyst Contacts:
Parv沙姆a

Follow Counterpoint Research
press@www.arena-ruc.com

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Foundry Strategy & Chipsets Supply Shaping Smartphone SoC Competitive Dynamics in 2021

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