MediaTek (2454 TT Equity)

Currently traded at:785.00 TWD

Market Cap: 1130.9 billion TWD
P/E: 11.01
Est P/E: 15.88
Revenue Distribution:
Mobile Phone: 53.41%
Smart Edge Platforms: 39.33%
Power IC: 7.26%

Major clients:
Samsung(5.8%), Xiaomi(4.6%), Panasonic, HP, LG, Tencent, Asustek, Huawei(2%~3%)

Historical Analysis

2018
Entering in 2H18, the smartphone demand in China was particularly weak
despite traditionally high season due to the transition stage between 4G and
5G. MTK’s key customers (Oppo/Vivo/some Xiaomi) were also losing share to
Huawei, leading to MTK’s share loss in flagship models.

2019
⚫ Feb 25: MediaTek rises as much as 6.8% to highest intraday level since last July,
as BoAML upgrades the chip designer to buy from neutral on "attractive"
valuation and bets 5G technology will benefit the company.
1)Leading operators and equipment makers including China Mobile and Nokia
 have successfully tested co.’s Helio M70 5G chip
2)Estimates 13% mobile revenue growth for co. in 2020
3)Cites smartphone market improvement and expectation of 5G focus at the
upcoming World Mobile Congress

2020
⚫ Mar 9: In order to reflect that the sales of MediaTek Dimensity 1000 5G chips
were affected by the Wuhan pneumonia epidemic, and that rival Qualcomm’s
S765 chips cut prices to defend their market share
⚫ May 18: Huawei’s suppliers fall across the Greater China region after the U.S.
moved to prevent chipmakers using U.S. technology from supplying the firm.
⚫ Jun 19: MediaTek shares reach a 10-year high Friday after Nomura hiked its
target 59% on anticipated big 5G business next year with Huawei.
1)Firm seen grabbing 60%-70% of Huawei’s 5G system-on-a-chip business next
year as MediaTek is unlikely to be blocked from selling to Huawei

⚫ Jul 08: MediaTek rises as much as 9.1% to a record high, after Aletheia Capital
boosts its target price by 108% on higher earnings estimates and China market
share gain with big shipments to Huawei.
1)Co. is expected to seize about 50%-60% of 5G market in China in 2021 “without
pierce ASP pressure,” and keep the momentum into 2022, when Huawei runs out
of inventory of its HiSilicon chips(Shipments to Huawei could top 100m units next
year)

⚫ Aug 18: Shares of Huawei suppliers fall sharply in Taiwan after the U.S.
announces new curbs on the company’s access to semiconductors.
1)Latest steps unveiled by U.S. Commerce Department aim to further restrict
Huawei’s ability to acquire commercially available chips
2)MediaTek says development won’t have a material impact on near-term
operations

⚫ Oct 12: MediaTek hits a fresh 2-month high after reporting sales increased 61%
y/y in September, with Morgan Stanley raising expectations while predicting the
firm will regain bargaining power in low-end 5G chips amid rival Qualcomm’s
limited capacity.

2021
⚫ April 28 : Post-1Q Earnings Outlook: MediaTek may sustain its rapid sales
growth of more than 75% for at least one more quarter. That expansion is
fueled by quicker-than-expected expansion in market share for high-end 5G
Android smartphone chips and among Chinese phonemakers, while rival
Qualcomm wrestles with supply difficulties surrounding its premium
Snapdragon chips outsourced to Samsung. MediaTek's gross margin may also
expand to 46% on the expectation that 5G chipsets will comprise a larger share
of the sales mix compared with 4G chipsets.
⚫ May 5 : Semiconductor-related stocks in Taiwan and Hong Kong fall after U.S.
Commerce Secretary Gina Raimondo called for a major increase in U.S. chip
 production capacity to tackle shortages and wean off from over-dependence on
Taiwan and China.
1)In the shorter term, the Biden administration is in talks with Taiwan and TSMC
to prioritize the needs of American automakers

⚫ Oct 14: Since September 29, MediaTek has been withdrawn by foreign capital
in large numbers. As of October 13, the band has sold more than 12,000
copies.

⚫ Nov 18: Asian semiconductor-related stocks may move after Nvidia Corp., the
world’s largest chipmaker by market value, gave an upbeat forecast for the
fourth quarter, fueled by its expansion into data-center chips and other
markets.

2022
⚫ March 29: Shares of some Chinese consumer-electronics suppliers slump
Tuesday after a report that Apple looks to cut production of entry-level
smartphones and orders for AirPod earphones this year, while Xiaomi pares
losses after denial of a local media report on investigations into its invested
firms.
1) Apple plans to reduce output of iPhone SEs by about 20% next quarter
because of signs that demand is being hurt by the war in Ukraine, while also
cutting orders for AirPods by more than 10 million units for 2022.

⚫ Jul 6: BNY Mellon Emerging Markets Fund added Tong Hsing Electronic
Industries Ltd. to its investments and exited its position in IShares MSCI
Emerging Markets ETF in May. The fund's disclosed holdings fell 4.7% in value
to $803.7 million.

1)Boosted Momo.com Inc.

2)Reduced MediaTek Inc.
3)Taiwan Semiconductor Manufacturing Co. was the biggest investment,
representing 8.9% of disclosed assets

⚫ Sep 28: The demand in the mobile phone market is sluggish. The legal person
expects that the revenue of the mobile phone chip factory MediaTek may
decline quarter by quarter in the second half of the year. In addition, the fourth
quarter may face the pressure of falling prices of 5G mobile phone chips.

2023
⚫ Apr 17: MediaTek falls as much as 7.2% after Goldman Sachs downgraded the
stock to sell and cut it price target, citing a deteriorating earnings outlook,
intensifying pricing competition and declining market share.
1)Cuts price target by 15% to NT$620, with a weak recovery in smartphone
demand weighing on earnings outlook
2)Slashes 2023-25E earnings estimates by 11-15%, as “the market has yet to fully
 reflect the potential downside from a weaker market demand outlook, pricing
erosion starting 2H23, and the less favorable operating leverage as revenue
scales down,”

⚫ Jun 19: MediaTek Inc. jumps as much as 5.5% in Taipei as a local report says that
the company will produce chips for Google’s AI servers.
1)MediaTek will make chips for Google’s new AI servers
2)The chips will use TSMC’s 5nm technology
3)MediaTek aims to begin mass-production by early 2024

Takeaway

Stock price is highly correlated to 5G shipment of China market, or more precisely,

the expectation of people to the MediaTek’s shares on 5G chip. And the competition
with QualComm is also a import factor to cause the price volatilize. The shipment is
downward because of the restriction from US and COVID-19 .