Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

<ul>
<li>We contacted Mediatek management in regards to the latest Arm restrictions for China; Mediatek doesn't expect to be impacted.</li>
<li>Mediatek's latest chipsets are competing well against Qualcomm, and its China competition has been stunted by U.S. restrictions in our view.</li>
<li>We have established our financial model for the company - We believe the shares should be held or accumulated on a value-basis.</li>
</ul>


We contacted Mediatek management in regards to the latest Arm restrictions for China; Mediatek doesn't expect to be impacted.
Mediatek's latest chipsets are competing well against Qualcomm, and its China competition has been stunted by U.S. restrictions in our view.
We have established our financial model for the company - We believe the shares should be held or accumulated on a value-basis.


Mediatek: We Contacted Management Re: Latest Arm Restrictions, Accumulate

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

<a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a> is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: <a href="https://www.smartkarma.com/insights/screening-for-gems-june-2021" target="_blank" data-smartkarma-citation="insights:52406" rel="noopener">Screening for GEMs: June 2021</a>.

Mediatek Inc (2454 TT) is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: Screening for GEMs: June 2021.

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

Tracking developments across tech supply chains, Tech Supply Chain Tracker

Tech Supply Chain Tracker

Tracking developments across tech supply chains

<ul>
<li>Microsoft's China AI teams relocate due to US rules, focusing on Wi-Fi 7 development for improved connectivity and performance.</li>
<li>Amazon's stake in Alchip suggests potential synergy in AI tech and expanded market reach, while Kymco launches eco-friendly e-scooter.</li>
<li>Tencent Cloud partners with BRI and Hi Cloud Indo for banking innovation, while Veolia opens first regeneration plant in China for sustainable water treatment. Tron Future secures funding for counter-drone tech.</li>
</ul>


Microsoft's China AI teams relocate due to US rules, focusing on Wi-Fi 7 development for improved connectivity and performance.
Amazon's stake in Alchip suggests potential synergy in AI tech and expanded market reach, while Kymco launches eco-friendly e-scooter.
Tencent Cloud partners with BRI and Hi Cloud Indo for banking innovation, while Veolia opens first regeneration plant in China for sustainable water treatment. Tron Future secures funding for counter-drone tech.


Tech Supply Chain Tracker (17-May-2024): Microsoft China AI teams may relocate due to US restrictions.

Taiwan Tech Focused Senior Analyst

Patrick Liao

<ul>
<li>MediaTek's 4Q23F revenue guidance falls in line with our prior expectation. The general outlook is for double-digit growth in 2024F.</li>
<li>MediaTek believes that the 3nm SoC will certainly perform differently in 2H24F.  </li>
<li>MediaTek will pay NT$24 DPS for 1H23 earnings, and the dividend will be paid on 1/31, 2024F.</li>
</ul>


MediaTek's 4Q23F revenue guidance falls in line with our prior expectation. The general outlook is for double-digit growth in 2024F.
MediaTek believes that the 3nm SoC will certainly perform differently in 2H24F.  
MediaTek will pay NT$24 DPS for 1H23 earnings, and the dividend will be paid on 1/31, 2024F.


MediaTek (2454.TT): 4Q23F Results in Line, 2024F Smartphone Outlook Can Grow a Double Digits.

<ul>
<li>We change our stance to be a bit bullish for <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>.</li>
<li>In 4Q23F, MediaTek's outlook is getting a bit stronger upside.</li>
<li>The Smartphone market is turning positive, but it's too early to claim a fully rebound.</li>
</ul>


We change our stance to be a bit bullish for Mediatek Inc (2454 TT).
In 4Q23F, MediaTek's outlook is getting a bit stronger upside.
The Smartphone market is turning positive, but it's too early to claim a fully rebound.


MediaTek (2454.TT): Smartphone Is Turning a Bit Stronger

Taiwan

MediaTek Inc. is a fabless semiconductor company for wireless communications and digital multimedia solutions. The company provides SOC system solutions for wireless communications, high-definition TV, optical storage, DVD and Blu-ray products.

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Mediatek Inc (2454 TT)

Mediatek: We Contacted Management Re: Latest Arm Restrictions, Accumulate

We have established our financial model for the company - We believe the shares should be held or accumulated on a value-basis.

Vincent Fernando, CFA

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

MediaTek, the world’s 4th largest global fabless semiconductor company with a leading market share, should benefit from technology upgrades to 5G,...

Wium Malan, CFA

Tech Supply Chain Tracker (17-May-2024): Microsoft China AI teams may relocate due to US restrictions.

Microsoft AI teams relocating, Wi-Fi 7 advancements, Amazon's stake in Alchip, Kymco e-scooter launch, Tencent Cloud partnership, Veolia's...

Tech Supply Chain Tracker

MediaTek (2454.TT): 4Q23F Results in Line, 2024F Smartphone Outlook Can Grow a Double Digits.

MediaTek's 4Q23F revenue guidance falls in line with our prior expectation. The general outlook is for double-digit growth in 2024F. The 3nm SoC...

Patrick Liao

MediaTek (2454.TT): Smartphone Is Turning a Bit Stronger

We change our stance to be slightly bullish for MediaTek. In 4Q23F, MediaTek's outlook is becoming stronger. The smartphone market is turning...

Patrick Liao

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