MediaTek Vice Chairman Hsieh Ching-jiang says China smartphone demand will weaken in the fourth quarter. (Photo by Cheng Ting-fang)
TAIPEI -- Vice Chairman Hsieh Ching-jiang of MediaTek, the largest mobile chip supplier to China, said Wednesday that demand for smartphones on the mainland would weaken in the October-December quarter.
"Demand is slowing down a bit in the last quarter of this year. We now know
that the third quarter was the peak season this year," Hsieh said.
Hsieh said that a current tight supply of smartphone panels would have some impact on the overall handset market. He was referring to the advanced organic light-emitting diode panels manufactured by Samsung Electronics for leading Chinese smartphone brands OPPO and vivo.
Hsieh said his company's gross margins would continue to be pressured by the ongoing price war with U.S rival Qualcomm and China's Spreadtrum Communications. For the April-June period, MediaTek's margin fell to a low of 35.2%, from 45.9% in the year-ago period.
Still, MediaTek's revenue for the first eight months of 2016 surged more than 36% to 179.12 billion New Taiwan dollars ($5.69 billion) as its Chinese customers were quickly gaining market share and changing the global smartphone landscape.
MediaTek's major customers such as Huawei Technologies, OPPO and vivo are currently the world's third, fourth and fifth handset brands by shipments.
To diversify its customer base, MediaTek has won chip orders from Samsung Electronics for the first time and will begin shipping to its new customer in the fourth quarter, according to an industry source. But the source said the contribution from Samsung orders to MediaTek's revenue would be negligible.
Earlier this week, Hong Kong-listed FIH Mobile, which makes smartphones for Huawei, Xiaomi and OPPO, warned that its full-year consolidated net profit would decrease by at least 52% from a year ago.
That translates into an 11% year-over-year decline in profit in the second half of 2016 for FIH Mobile, which is a subsidiary of key iPhone assembler Hon Hai Precision Industry, better known as Foxconn Technology Group.
Randy Abrams, an analyst at Credit Suisse, said that even though tech companies were generally adopting a conservative outlook for the latter part of 2016, demand was not as weak as originally expected at the beginning of the year.
"The overall demand turns out to be a bit better than the very conservative view at the start of the year," said Abrams. "We don't see serious inventory over-building in the fourth quarter so far, although we would caution that there could be a short-term gap in the first quarter in 2017."
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