Taipei, July 8 (CNA) MediaTek Inc., the largest integrated circuit designer in Taiwan, has achieved its sales guidance for the second quarter of this year after its revenue for June rose to a seven-month high.
Meanwhile, an Asia-based brokerage has raised a target price on shares of MediaTek to NT$355 (US$11.6) from NT$206, praising the company's continued efforts to strengthen chip design and cut operating costs.
For the April-June period, the IC designer posted NT$58.08 billion in consolidated sales, up 3.56 percent from a quarter earlier. The second quarter figure came within the company's earlier guidance which forecast the quarterly sales would range between NT$56.1 billion and NT$60.6 billion.
It came as MediaTek, which specializes in smartphone chip design, posted a double-digit increase in its June sales at a time when Chinese smartphone brands unveiled new models to boost buying, market analysts said.
In June, MediaTek's consolidated sales returned to the NT$20 billion level to hit NT$21.89 billion, up 18.75 percent from a month earlier. The June figure was the highest level since November, when sales stood at NT$23.52 billion.
Before a significant comeback in sales in June, analysts said, MediaTek's monthly revenue failed to reach the NT$20 billion mark in April and May since demand for smartphones in the China market remained weak.
In addition, MediaTek had been faced with escalating competition in the global smartphone chip market, suffering a decline in its market share caused by a failure to adjust its product portfolio to meet clients' needs, analysts added,
Earlier this year, MediaTek Chairman Tsai Ming-kai said that his company was determined to improve its product mix to strengthen its competitive edge.
Tsai added that the 4G products in its flagship Helio series of smartphone chips have secured orders from major Chinese brands for the second half of this year, which is expected to stabilize the company's profit margin and eventually raise its market share.
In a research note, an Asian brokerage said that due to MediaTek's efforts to improve its cost structure and profit margin, it is expected that the IC designer will see its smartphone chip gross margin, the difference between revenue and cost of goods sold, grow to 30 percent in 2018, from around 25 percent in 2016 and 2017.
Even better, MediaTek's smartphone chip gross margin is expected to rise further to 34 percent in 2019, the brokerage said.
It added that while rival U.S.-based Qualcomm Inc. has focused on the 5G smartphone chip development, MediaTek is expected to see its foothold in the 3G and 4G market getting firmer.
As a result, the Asian securities house has raised a target price on MediaTek shares to NT$355 from NT$206, while upgrading a recommendation on the stock to "buy", from "hold."
On Friday, MediaTek shares fell 1.19 percent to close at NT$250.00 in line with the weakness of the bellwether electronics sector, which was hammered by a fall on the tech-heavy NASDAQ index on Thursday.
CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the name of a foreign brokerage when it gives price forecasts for specific stocks.
