Revenues of $3.4 billion, down 26% QoQ and 25% YoY for MediaTek‘s Q4 2022. The total revenue for 2022 was $18.7 billion, an increase of 6% year over year. Powered by 5G SoCs, MediaTek produced a good H1 2022, but a disappointing H2 2022 as a result of macroeconomic headwinds and customer inventory adjustments.

Why MediaTek’s revenue is dropping?

The sluggish consumer demand, the slow China market, and inventory adjustments by smartphone OEMs were the causes of the QoQ fall. Due to aggressive inventory adjustments by clients, the revenue for the mobile phone segment fell by 25% YoY and 30% QoQ. In Q4 2022, the Taiwanese chip giant derived 52% of its revenue from this category.

MediaTek's revenues will continue to drop in Q1 2023

Due to order reductions from telecommunication operators for inventory adjustment, the smart edge segment, which generated 42% of the company’s sales in the fourth quarter, experienced a sequential fall of 18%. Due to the rising popularity of these devices in the US and Europe, enterprise ASIC and automotive revenue both increased.

A small portion of MediaTek’s revenue, or 6%, came from the power IC market, which saw a 37% QoQ decline in Q4 due to sluggish demand from consumer electronics like smartphones. But in Q4 there was a rise in demand for power ICs from commercial and industrial applications.

MediaTek revised its outlook from the previous quarter’s estimate, lowering Q1 2023 revenues to the range of $3.0-$3.4 billion, a decrease of 35–40% year over year and 3-12% quarter over quarter. A 47.5% gross margin and a 33% operating expense ratio are anticipated for Q1 2023. The majority of smartphone OEMs will keep their inventory cautiously. The first quarter will see a small uptick in demand for Wi-Fi and smart TV. Along with Bullitt Group, MediaTek unveiled satellite-based connectivity solutions that will go on sale in Q1 2023. After Apple and Qualcomm, MediaTek is the third company to provide satellite-based connectivity options.

By the end of H1 2023, MediaTek directed the inventory levels to return to normal. This is consistent with our opinion. MediaTek anticipates a sales increase in the second half of 2023. By the end of Q1 2023, Chinese smartphone OEMs’ inventory levels will drop to 2-2.5 months from the current 3-3.5 months.

MediaTek shipments have decreased, according to Counterpoint Research’s Smartphone AP/SoC Shipment Tracker, as a result of continuous inventory adjustments, the state of the global economy, and a sluggish China market. In Q4 2022, LTE SoCs saw a greater drop than 5G SoCs.

MediaTek provided generally unreliable Q1 2023 guidance. Inventory adjustment and macroeconomic concerns will make the first half of 2023 challenging. We anticipate that the market will recover and that inventory levels will return to normal in the second half. In 2023, we anticipate a stagnation in the global shipment of smartphones. Therefore, despite the second-half growth, it’s predicted that shipments of AP SoCs for smartphones would decline in 2023.