Key facts
- MediaTek's board approved a $5 billion financing budget for long-term growth and AI chip expansion.
- The company aims to reduce reliance on smartphones and target the custom AI chip market for data centers.
- MediaTek expects its data-center AI chip business to generate over $2 billion in revenue by 2026.
- The company's first custom AI chip is set for production in the fourth quarter.
- MediaTek's mobile-chip revenue decreased by 20% in the second quarter.
- Quarterly revenue was T$152.18 billion ($4.71 billion), a 1.2% increase year-over-year.
MediaTek, Taiwan's largest chip designer, announced that its board has approved a discretionary financing budget of $5 billion to support long-term growth, including its expansion into artificial intelligence chips for data centers. This strategic move aims to reduce the company's reliance on the smartphone market and establish it as a key supplier of custom AI chips, known as ASICs, to major cloud providers.
Despite a market currently dominated by a few players, MediaTek sees an opportunity in the rapidly increasing spending on AI infrastructure. Chief Executive Rick Tsai stated on an earnings call that this flexible framework provides the company with optionality to agilely support long-term growth and capitalize on significant data center opportunities. The company has raised its estimate for the addressable market for custom AI chips in 2027 to $80 billion, up from a previous range of $70 billion to $80 billion, and increased its target market share to 15% to 20%, from 10% to 15%.
Tsai also confirmed that MediaTek has successfully developed its first custom AI chip, with production scheduled to commence in the fourth quarter. A second chip is on track for volume production in 2028. MediaTek anticipates its data-center AI chip business will generate more than $2 billion in revenue by 2026.
In contrast to its AI ambitions, MediaTek reported a 20% year-over-year decline in mobile-chip revenue for the second quarter, attributed to higher component costs impacting smartphone demand. Global smartphone shipments fell 11% during the quarter, reaching their lowest level for the period since 2013, partly due to a memory-chip shortage that drove up handset prices. Tsai indicated that the company is implementing pricing adjustments to reflect rising supply chain costs and maintained its expectation of a roughly 15% decline in global smartphone unit shipments for the year.
MediaTek, a customer of TSMC, is the second-most valuable company on the Taiwan stock exchange with a market capitalization of $176 billion. The company reported quarterly revenue of T$152.18 billion ($4.71 billion), a 1.2% increase from the previous year, while net income decreased by 12.3% to T$24.6 billion. MediaTek shares closed up 9.9% on Friday, ahead of the results, and have gained 148.6% year-to-date, significantly outperforming Taiwan's benchmark index, which rose 48.9%.