MediaTek is actively entering the enterprise-level customized chip market, optimistic about the urgent need of cloud service providers for data center performance upgrades and the demand for high-performance computing brought about by the increasing complexity of automotive electronic systems. The company estimates that these two areas will each generate a total addressable market (TAM) of more than US$40 billion in the medium and long term, becoming one of the key drivers of future revenue growth.

MediaTek noted that as large CSPs accelerate the adoption of customized chips to improve data center computing efficiency, the enterprise customized chip business is expected to see positive growth. To capitalize on this rapidly expanding business opportunity, the company is further strengthening its R&D efforts and actively expanding its team. The company is particularly investing in advanced processes, advanced packaging technologies, and key IP development. These include next-generation high-speed transmission technology 448G SerDes and advanced co-packaged optics (CPO), which have become key technologies at this stage.

Currently, MediaTek has entered into collaborative discussions with several cloud service providers regarding customized chips for data center applications. Leveraging its long-standing SerDes IP expertise and excellent project execution efficiency, the company is confident in further expanding into data center applications and expects to generate substantial annual revenue starting next year.

MediaTek stated that it continues to expand its technology and talent portfolio in the enterprise customized chip sector, focusing on data center, automotive, AI, and high-speed communications applications, further strengthening its competitive position in the high-performance application market.

Mobile phone chip giants seek change

According to a biweekly report by Caijing, the consumer electronics market experienced an uncertain first half of this year. On July 29th and 30th, chip giants MediaTek and Qualcomm held separate earnings conferences. Comparing the two companies' financial reports provides insights into the latest trends within these major consumer electronics companies.

This quarter, MediaTek's revenue was NT$150.3 billion, a 1.9% decrease from the previous quarter but an 18.1% increase from the same period last year. During the same period, Qualcomm's quarterly revenue was US$10.3 billion, or approximately NT$300 billion, making it twice the size of MediaTek. Qualcomm's revenue grew by approximately 10% year-on-year, with its chip design division, QCT, seeing an 11% increase. MediaTek's revenue growth was significantly higher, however.

Comparing operating profit margins, MediaTek's operating profit for the quarter was NT$28 billion, with an operating profit margin of 19.5%, a 2 percentage point decrease from the previous quarter and a 17 percentage point increase from the same period last year. Qualcomm's operating profit for the quarter was US$2.76 billion, or approximately NT$81 billion. This represents a 24% year-over-year increase, but an 8% decrease from the previous quarter, with its operating profit margin also declining by 4 percentage points. In contrast, MediaTek's operating profit margin declined less significantly.

Clearly, MediaTek outperformed Qualcomm in terms of revenue growth and profitability this quarter. However, despite Chinese government subsidies for mobile phone purchases in the first half of this year, mobile phone sales remained sluggish. How can MediaTek maintain both revenue growth and profitability?

MediaTek's strongest growth performance this quarter wasn't in its mobile phone chips, but in its intelligent edge platform, which includes chips for tablets. This year, MediaTek has entered the supply chain of major tablets, including Samsung, and its years of hard work have paid off. As a result, in the second quarter, MediaTek's intelligent edge platform revenue increased by 26% year-over-year and 7% quarter-over-quarter, accounting for 43% of MediaTek's revenue.

In contrast, MediaTek's mobile phone chip business saw revenue increase by 19% year-over-year and decrease by 3% quarter-over-quarter, representing slower growth. Next quarter, NVIDIA's GB10 chip for DGX SPARK will begin shipping. However, MediaTek stated that due to some forward-pushing of revenue in the first half of this year, its intelligent edge division's revenue will decline slightly next quarter.

Overall, MediaTek's continued development of high-end flagship mobile phone chips is driving profitability. Meanwhile, its aggressive development of data center ASIC chips and automotive cockpit chips will begin contributing to profits next year. MediaTek's expansion strategy is proving effective, resulting in strong revenue growth and profitability.

Qualcomm, on the other hand, is in a transitional phase, focusing on establishing a strong foothold in the mobile phone market while simultaneously expanding its influence. Qualcomm remains the leader in mobile phone chips, with revenue from its mobile phone chip division alone reaching $6.9 billion, exceeding MediaTek's overall revenue. However, this quarter's mobile phone chip revenue only grew by 11% year-over-year.

However, Qualcomm is aggressively developing automotive and IoT chips, both of which are experiencing rapid growth. Qualcomm's automotive chips generated $950 million in revenue this quarter and have already penetrated major automotive platforms, making progress far faster than MediaTek. Qualcomm's automotive chip revenue grew 59% year-over-year this quarter, while its IoT division also achieved $1.68 billion in revenue, a 24% year-over-year increase. Qualcomm CEO Amon revealed that the company is actively expanding into the cloud market and wearable devices, both of which MediaTek is actively pursuing.

This quarter's financial report demonstrates that IC design companies are currently preparing for the post-mobile era, with numerous opportunities in automotive chips, tablet and PC processors, head-mounted displays, and cloud computing. Seizing these new business opportunities will be crucial for these two companies.

Source: Content from moneyDJ

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