MediaTek, a large mobile phone chip manufacturer, announced its third quarter financial report today (28). In addition to the release of the third quarter financial report, the fourth quarter and the full year outlook, Cai Lixing, CEO of MediaTek, answered hot issues such as terminal market demand, supply chain inventory and semiconductor boom at the meeting.

Q3 Consolidated revenue slightly higher than forecast

According to the information of the French Press Conference, the consolidated revenue of MediaTek in the third quarter was NT $142.161 billion, a quarterly decrease of 8.7%, but an increase of 8.5% over the same period last year. The third quarter's revenue was slightly higher than the lower edge of the original forecast range with a gap of more than NT $400 million.

It is reported that the consolidated operating profit of MediaTek in the third quarter was NT $33.054 billion, a quarterly decrease of 15.6%. The net profit after tax in a single quarter reached NT $31.085 billion. Among them, the consolidated gross profit rate was 49.3%, and the cumulative performance of the first three quarters was NT $440.601 billion, an annual increase of 20.7%. Net profit was NT $31.085 billion, down 12.7% quarter on quarter and up 9.6% year on year. The net income per share was NT $19.54, the lowest point in the last three quarters, and the revenue and profit were cut to a high level.

MediaTek said that due to factors such as the war between Russia and Ukraine, inflation and interest rate rise, the overall market demand for consumer electronics, smartphones, PCs and NBs was weak. MediaTek had previously reduced the growth rate of its performance this year. The expected growth rate of this year's performance is revised from 20% of the original estimate to between 17% and 19%, while the annual gross profit margin is expected to remain between 48% and 50%.

Conservatively view Q4 operating customers' efforts to adjust inventory will reach the peak

MediaTek's Q4 operation outlook tends to be conservative. The revenue will be between NT $108 billion and NT $119.4 billion, with a quarterly decrease of 16% to 24%, an annual decrease of 7% to 16%, and a gross profit margin of 47% to 50%. Cai Lixing, CEO of MediaTek, said that the annual revenue may be lower than originally expected.

As for the reason for the conservative view, Cai Lixing said that MediaTek's 4G, WiFi and TV products would decline significantly in the fourth quarter. The rise of interest rates in the US dollar made the market in developing countries weak, affecting 4G sales, while TV continued to be affected by inventory adjustment. Even though the inventory of channels and customers is now close to the normal level, many customers are still very careful to control the inventory and reduce the orders for parts and components in Q4 under the uncertainty of the future demand outlook.

In terms of inventory, MediaTek is relatively optimistic. Cai Lixing said that customers who have observed earlier substantial inventory adjustment have begun to recover some momentum in the fourth quarter, indicating that there is an opportunity to see more demand for restocking in the first half of 2023. Most customers are still conservative in placing orders. It is expected that customers' ability to adjust inventory will reach its peak in this quarter.

The Taiwan media Electronic Times pointed out earlier that the source said that the inventory adjustment of Android smartphones had been going on for nearly a year, but it was expected to end as early as the end of the fourth quarter of 2022. The source said that if the year-end promotion failed to boost Android phone sales, the time to complete inventory adjustment may be postponed to the first quarter of next year.

Annual revenue may be lower than expected

MediaTek expects that the annual revenue will be 17-19% lower than the previous estimate. Based on the fourth quarter estimate, this year's revenue will be about 548.6-560 billion yuan, with an annual growth of 11-13%, lower than the previous estimate.

Cai Lixing explained that the overall global economic environment has deteriorated, and the uncertainty brought about by high inflation, strong US dollar and geopolitics has impacted the purchasing power of global consumers for various commodities. Customers are also very cautious in controlling their inventory and reducing their ability to pull goods from spare parts. For MediaTek, although the annual revenue will be lower than originally expected, it believes that this year is still the highest annual revenue and profit in history.

In the face of the semiconductor downturn, Cai Lixing said that MediaTek has stood on a stronger basis to face challenges. He said that MediaTek has established advantages in 5G, WiFi, multimedia, low-power processors and other fields in the past few years, and can provide strong support in this inventory cycle. These advantages not only consolidate the stable global market position across product lines, but also bring many future growth opportunities. Therefore, it is believed that today's MediaTek has stood on a stronger foundation to face the challenges.