China’s anti-monopoly probe may be positive for MediaTek: analyst

December 2, 2013 Leave a comment

China’s anti-monopoly probe may be positive for MediaTek: analyst

CNA
December 2, 2013, 12:01 am TWN

TAIPEI — Taiwanese chip designer MediaTek Inc., which supplies chips mostly to Chinese phone makers, might benefit from a recent anti-monopoly probe in China into its rival, Qualcomm Inc., according to a foreign brokerage analyst. Qualcomm, the world’s largest maker of chips for smartphones, disclosed Nov. 25 that China’s National Development and Reform Commission (NDRC) had opened an investigation into the company related to China’s Anti-Monopoly Law.The NDRC has advised that the substance of the investigation is confidential, Qualcomm said in a statement, adding that the company “is not aware of any charge by the NDRC” that it has violated the Anti-Monopoly Law.

The investigation is believed to be driven by some smartphone makers that have filed complaints with the Chinese government seeking to lower the licensing fees they must pay to chip suppliers, according to a study by Andrew Lu, an Asia-Pacific semiconductor analyst at British bank Barclays Plc.

“We do not expect an announcement on the outcome of the investigation to be released any time soon,” Lu wrote in a Nov. 29 report. “However, if the outcome is favorable to the industry overall, we believe there could be some benefit for MediaTek’s smartphone IC customers.”

Chinese smartphone makers are currently paying nearly 3 to 6 percent of their phones’ free-on-board shipping prices as licensing fees, which rise if the companies are selling higher-end smartphones using premium components such as octa-core processors or 5-inch ultra-high resolution displays, Lu noted.

The analyst estimated that smartphone vendors in China will need to pay nearly US$2.4 billion in combined licensing fees this year and roughly US$3 billion in 2014.

If Chinese phone makers no longer need to worry about rising licensing fees, they will be able to introduce smartphones with richer features by adopting MediaTek’s octa-core application processors, better screens, higher-resolution digital signal controllers, fingerprint sensors and additional memory, Lu explained.

MediaTek, which controls a large share of China’s low-cost and mid-range smartphone market, unveiled the world’s first “true octa-core” mobile processor in China Nov. 20 to woo the high-end smartphone and tablet markets.

The system-on-a-chip (SOC) is expected to roll out in new mobile devices running the Android 4.3 “Jelly Bean” operating system by the end of 2013 and is slated to be installed in devices running the latest Android 4.4 “Kit-Kat” software in early 2014.

The Hsinchu-based chip designer said it expects its consolidated sales for the fourth quarter to fall up to 5 percent from the third quarter to range between NT$37 billion (US$1.25 billion) and NT$39 billion after taking the slow season effect into account.

Market analysts said the fourth-quarter guidance was better than expected, as MediaTek has gained the upper hand in competition in the huge China smartphone chip market.

Shares in MediaTek closed up 0.23 percent at NT$436 Friday on the Taiwan Stock Exchange.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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