MediaTek Shifts To IoT

　　MediaTek, which has seen its share of the smartphone business plummet during the past two years, is turning to new products such as IoT chips to drive sales growth.

　　MediaTek is shifting to products boosting sales that in the third quarter brought in about a third of the company’s revenue. The company expects that chips for IoT, game consoles and ASICs will contribute about a third of MediaTek’s total revenue this year.

　　The company is selling IoT devices to new customers such as Amazon, Google and other Chinese internet companies that MediaTek declined to name. MediaTek said it also has made chips, including ASICs, that go into game consoles for Sony and Microsoft.

　　The company’s shift away from Chinese smartphone makers to the world’s internet giants comes as Apple said it may start buying modems from the Taiwanese company in the future, according to the Wall Street Journal. MediaTek sells smartphone chips to all of the major handset makers except Apple.

　　MediaTek’s IoT strengths include existing designs for sensors, processors, communications and power consumption, Chief Financial Officer David Ku said on a conference call to discuss the company’s third-quarter 2017 financial results.

　　While the IoT business is growing, the pathway to the market that includes refrigerators, televisions and air conditioners remains unclear.

　　MediaTek’s growth segment is benefiting from fast-growing demand for shared bikes in China, voice assistants, game-console ASICs and set-top boxes.

　　The company is selling its tablet quad-core processor into the Amazon Echo, a product expected to ramp up to more than 25 million units, including about $7 to $8 of processor and connectivity silicon, according to Randy Abrams, an analyst with Credit Suisse in Taipei.

　　“We estimate the growth business will be up 30-35 percent year on year in 2017, contributing 25-30 percent of the company’s sales at greater than 40 percent gross margins, and the momentum should sustain into 2018-2019,” Abrams said in a Nov. 1 report.

　　Sales Plunge

　　MediaTek’s sales during the third quarter plunged more than 18 percent to NT$63.7 billion ($2.1 billion) compared with NT$78.4 billion in the same period a year ago.

　　MediaTek says it is facing strong price competition in the smartphone business, especially in China. The smartphone business during 2017 and last year has been “flattish," MediaTek said as more handset makers including Apple, Samsung and Huawei are using their own chip designs, especially for high-end phones.

　　The worldwide smartphone market will increase about 1.7 percent to 1.5 billion units shipped in 2017, compared with the 1.47 billion units shipped in 2016, according to market research firm IDC. For 2017, MediaTek expects to ship about 440 million chips for smartphones and tablets, about the same number as it did last year.

　　The company made rapid gains in the Chinese smartphone market in 2015 against Qualcomm to take an approximate 40 percent share of the long-term evolution (LTE) business. Now MediaTek has a 20 percent smartphone market share in revenue terms, according to Ku. Roughly half of MediaTek’s sales come from China.

　　The company’s high-end Helio line of smartphone chips peaked at about 20 percent of the company’s product mix in revenue terms last year. The Helio chips now account for about 15 percent of the overall product mix. MediaTek expects the Helio line to show increases next year.

　　Key launches for MediaTek will include the Helio P23 and the MT6739 through the fourth quarter this year as well as the Helio P40/P70 chipsets for the mid-high-end, which the company should announce at Mobile World Congress next year and ramp up through the second quarter of 2018, according to Credit Suisse analyst Abrams.

　　The chipsets upgrade the technology node to 12nm at TSMC and the modem spec to CAT 12 for the P70 and CAT 7 for the P40.

　　“Mediatek lost almost all the share in this category in the past year to Qualcomm’s Snapdragon 630/660, though MediaTek should gain some back with the new modem,” Abrams said.

　　MediaTek will face a refresh from Qualcomm with the Snapdragon 636/670 built on Samsung’s 10nm process, he said. MediaTek’s new chips position the company better to meet the minimum CAT 7 spec at the mid-tier of the market, according to Abrams.

　　“With our new product portfolio coming online, we are more confident about gaining market share back next year,” Ku said. MediaTek said its new Helio P series chips will help to gain market share during 2018.

　　While MediaTek has focused more on the entry-level smartphone market in emerging markets like India, companies like Apple and China’s HiSilicon have been designing AI accelerator chips for mobile phones. MediaTek said that it may have a deep learning accelerator ready sometime in 2018, and it is also working on vision processing units.