MediaTek has posted its earnings report for Q4 2016 and things aren’t looking too great for the chip maker. The company has posted a total revenue of NT$68.68 billion, which represents a decline of 12.4% when compared to Q3, though it’s still an increase of 11.3% year on year. Looking into operating profits, the company saw a decline sequentially and increase year on year, with the company posting NT$3.98 billion for the quarter, which represents a decline of 47.8% when compared to Q3 but a 6.2% decline when compared to last year. As a result of this, for the whole of 2016, MediaTek posted an overall operating profit decline of 6.7%, with a total of NT$23.08 billion.
Aside from revenue and profits, perhaps more worryingly for the company, MediaTek saw its gross margin decline significantly during 2016. For Q4 2016, the company reported a gross margin of 34.6%, representing a decline of 0.7% over Q3. As well as this, the company has reported a gross margin of 35.6% for 2016 as a whole, meaning an overall decline of 7.6% for the year which is a record-low for the company. With all of this in mind, the company has warned that demand for its chips could slow down further in Q1 2017, with the company expecting to ship between 105 and 115 million units, a significant decline from the 135 to 145 million predicted for Q4 2016. Regarding the rest of the year, the company does expect a increase of 4% to 6% in global smartphone shipments, something that should help the company maintain its numbers for the rest of the quarters, though this will largely depend on markets such as China and India where the majority of growth is expected.
With increasing competition from the likes of Samsung, Qualcomm and even Huawei’s mobile chipsets, it’s no surprise that MediaTek is finding it harder to sell its components. This, along with the fact that smartphone manufacturers are constantly trying to drive down the cost of components in order to better compete in the saturated market, is no doubt taking its toll on MediaTek’s overall sales. MediaTek’s smartphone chips have historically been cheaper than those sold by rivals, specifically Qualcomm, though with the latter’s newer chips and added features, it’s no surprise that even MediaTek’s most loyal chinese customers are starting to look elsewhere for components.