MediaTek Inc. has reported strong Q1 results, mainly attributed to better product mix and healthy market demand.
MediaTek Inc. began its 2021 on a strong note. The company announced consolidated revenues of NT$108 billion for the first-quarter ended March 31, 2021, up by 12.1% sequentially and up by 77.5% year-over-year (YoY), mainly attributed to better product mix and healthy market demand.
MediaTek breaks down its revenues into four product groups, namely: Mobile Phone; IoT, Computing and ASIC; Smart Home; and Power IC.
“Addressable markets for all four groups are around $70 billion this year. Among which, Mobile Phone accounts for $29 billion dollars; IoT, Computing and ASIC has $28.5 billion—representing another sizable market opportunity; and Smart Home and Power IC have $5.5 billion and $7 billion, respectively,” CEO Rick Tsai explained during the company’s earnings call. “With our competitive IP portfolio and technology investments, we are confident that we could not only capture the industry uptrend but also outperform in each of these markets.”
MediaTek’s Mobile Phone segment accounted for 54% of first quarter revenue, growing very strongly at 149% YoY and 32% sequentially. The substantial increases were mainly driven by 5G revenue share gain as the company further expand into high-end models.
“We are seeing healthy smartphone end market demand and continue to believe global 5G smartphone shipment would exceed 500 million units this year,” said Tsai. Numerous high-end smartphones from global major brands, powered by MediaTek’s Dimensity, were launched in the first quarter. Tsai noted that they expect the strong shipment and revenue ramp to continue in the second quarter and beyond.
“For the high-volume mid-range and mass markets, we expect 5G penetration to continue,” said Tsai. “MediaTek is already a leading 5G solution supplier to all major Android smartphone brands. Based on our strong roadmap and design-in pipeline, we believe we are able to grow this business further. Moreover, with MediaTek’s continuous advances in 5G, we are making significant progress in the US and Europe markets with further share gains. In early second quarter, a global major Android brand launched MediaTek-powered 5G and 4G smartphones in the US. Together with other models, we expect our smartphone shipments in the US and Europe markets to grow meaningfully in 2021.”
Moving forward, MediaTek will continue to launch new products to further capture market opportunities next year and beyond. One is to offer mmWave technology, in addition to the company’s sub-6GHz 5G solutions.””
The IoT, Computing and ASIC group, which consists of several fast-growing markets such as Wi-Fi, ARM-based computing and ASIC, accounted for 22% of revenues in the first quarter. The segment recorded a 50% YoY growth, thanks to rising demand in routers, broadband and Chromebook, as well as strong Wi-Fi 6 migration.
“We continue to gain great traction in the Chromebook and notebook PC markets via our competitive Wi-Fi 6, 5G thin modem and ARM-based computing SoCs. We also see spec migration to continue. We forecast our Wi-Fi 6 to account for around 15% of our total Wi-Fi shipment this year, substantially increasing from low-single digit % last year,” said Tsai. “For ASIC, we have seen very robust gaming console demand since product introduction last year. Our switch IC and AI accelerator ASIC projects are also ramping smoothly into rest of the year.”
The Smart Home segment, which accounted for 16% of revenues in the first quarter, grew by 42% YoY, driven by the recovery of the global TV demand from a year ago. “For the coming quarters, we see healthy demand in anticipation of global sports events such as European Football Championship in June and Tokyo Olympic in July. Consumers are also more willing to upgrade their TV spec as they now spend more time at home entertainment,” said Tsai.
Accounting for 7% of revenues, the Power IC segment grew by 47% Y0Y, mainly driven by higher power IC content from continuous consumer product upgrades as well as the recovery of global market demand. MediaTek provides comprehensive and reliable power IC solutions. Power ICs are widely adopted by majority of the company’s business lines.
“Not only can it grow as a standalone business but also bring synergic benefits to our overall businesses,” said Tsai. “We expect Power IC business to exceed $1 billion this year and to grow faster than the overall company in the next few years.”
Following a strong first quarter, MediaTek expects second quarter revenue to continue to increase for the four business groups, mainly led by the 5G smartphone ramp.
“We expect our second quarter revenue to be in the range of NT$118.8 billion to NT$127.5 billion, up 10% to 18% sequentially, and up 76% to 89% year-over-year at a forecasted exchange rate of NT$28.20 to $1. Second quarter gross margin is forecasted at 45%, plus or minus 1.5 percentage points, and quarterly operating expense ratio at 23%, plus or minus 2 percentage points,” said Tsai.