MediaTek shifts focus to chips for cars and AI computing

MediaTek, which reported a drop in revenue in Q1 2023, is focusing more resources on chips for cars and AI computing as its smartphone clients face a supply glut and inflation and macroeconomic uncertainty dent demand for consumer electronics.
MediaTek MT6739 chipset for 4G phonesMediaTek said its first-quarter revenue was NT$95.652 billion, down 11.6 percent sequentially and 33 percent year-over-year, mainly due to customers’ inventory adjustments.

MediaTek generated 46 percent of its total revenue from smartphone business segment. Revenue from smartphone business posted drop of 41 percent year-on-year and 20 percent quarter-on-quarter in Q1 2023.

MediaTek has generated 47 percent of its total revenue from Smart Edge Platforms. MediaTek’s revenue from Smart Edge Platforms fell 20 percent year-on-year and flat growth quarter-on-quarter.

MediaTek is targeting to achieve revenue of NT$91.8 billion – 99.5 billion during the second quarter of 2023 amid indications that there will be significant drop in demand for smartphones and consumer devices.

“We are moving our resources very, very rapidly towards the automotive and computing areas, because those areas will provide our growth in the next three to five years,” MediaTek Chief Executive Rick Tsai told an earnings report.

“In this very demanding environment, we are not reducing people. We’re not increasing either. The critical thing is to allocate those precious resources,” he said.

Tsai said everyone, including MediaTek, was rushing to claim that they were able to support generative artificial intelligence, such as ChatGPT.

“We’re confident that we will be able to provide the capability to our customers,” Tsai said.

MediaTek, Taiwan’s top chip design company, is investing in AI because the new areas the company is focusing on are all related to computing. The development of autonomous vehicles, for instance, requires AI chips.

While smartphone demand has remained lacklustre in the first quarter, the company expects signs of recovery later this year.

“Demand for certain consumer electronics such as smartphones is weaker than we expected,” Tsai said. “As customers remain cautious about future demand, we expect our mobile revenue to be flattish in the second quarter and to improve in the second half.”

The first-quarter gross profit was NT$45,912 million, down 12.1 percent sequentially and 36 percent year-over-year. Gross margin for the quarter was 48 percent, down 0.3 percentage points from the previous quarter and 2.3 percentage points from the year-ago quarter. The decrease reflected changes in prices and costs of certain products.