TAIPEI - MediaTek, whose breakthrough chips unleashed a flood of inexpensive gray-market "bandit phones," is falling prey to ruthless discount competition, slowing smartphone sales and an outdated business model. With its earnings sputtering, the Taiwanese company needs to forge a new way to growth. The question is: how?
MediaTek has overcome slowdowns before by savvily reading demand trends for next-generation devices, so analysts are watching to see what, if anything, the company has up its sleeve.
Price pain
"Price competition remains tough, eating into our profit," Hsieh Ching-jiang, MediaTek's vice chairman and president, said during a Monday teleconference announcing the company's results for the year ended in December.
MediaTek's group net profit of 25.7 billion New Taiwan dollars (US$763 million) was down 45 per cent from the previous year, for the first contraction in four years.
Shipments of system chips -- the "brain" of smartphones -- reached the company's target of about 400 million units, but sales remained roughly flat, at NT$213.2 billion, due to price cuts.
As a fabless maker that develops and designs chips, MediaTek supplies low-cost products to clients ranging from major smartphone makers, such as China's Xiaomi and Huawei Technologies, to no-brand manufacturers in emerging economies.
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