TAIPEI -- Taiwan's MediaTek, the world's second largest mobile chip provider after U.S. rival Qualcomm, on Tuesday said it will gain market share in 2018 with chips capable of 3-D sensing technology, artificial intelligence features and better modem technology.
"We will roll out new chipsets next year with two to three vision processing units which can deal with both artificial intelligence and computer vision workloads and support new features such as 3-D sensing technology to address the emerging demand on future smartphones," said Rick Tsai, MediaTek's co-CEO, in an earnings conference call. Such products would definitely help the company regain market share and improve its margin, he added.
The Taiwanese company earlier this year lost market share to its biggest competitor Qualcomm, as it trailed behind in modem technology to support faster data transfers and higher-quality phone calls.
The iPhone X will be the first smartphone to adopt 3-D sensing technology that enables Apple's unique Face ID feature, allowing users to unlock phones and make payments via facial recognition. Most Android handset makers are now planning to roll out devices with similar functions as well.
While MediaTek is not an Apple supplier, its chips are adopted by many major Chinese smartphone brands including Huawei Technologies, Oppo, Vivo, Xiaomi, Meizu and Gionee. It also provides chips for Samsung Electronics' mid-to-low end mobile phones.
"We expect the Android camp to adopt 3-D sensing system from 2018," said David Dai, an analyst at Sanford C. Bernstein, in a research note. "The willingness is strong, but the hardware and software integration and the delay in iPhone X has pushed back these phone makers' adoption to mid-2018."
Shares of MediaTek on Tuesday closed 2.39% higher at NT$342.5 ($11.35) -- a two-year high since July 2015 -- ahead of earnings numbers, after the Wall Street Journal reported earlier in the day that Apple could rely more on Intel and MediaTek for modem chips to slash dependence on Qualcomm.
Modem chips, or baseband chips, allow users to make phone calls and use mobile internet on their mobile devices including smartphones and tablets. Apple's new iPhones use modem chips made by Intel and Qualcomm, with which it has been engaged in a bitter legal battle since January over the American chipmaker's licensing fee model.
Tsai said he had not heard anything related to speculation surrounding Apple orders. But he did not rule out the possibility of selling independent modem chips separately to customers in the future.
Mediatek currently sells chipsets, or systems on chips, that integrate core processors, graphic processors, Wi-fi, and modem chips to smartphone makers. Apple, meanwhile, designs its own core processor chips and buys and integrates either Qualcomm's or Intel's modem to its system.
"We need to look into that, but I don't think that's something too difficult for us," said Tsai, when asked whether MediaTek would be able to sell modem chips separately.
Analysts said it is not very likely that the next iPhone in 2018 will use MediaTek's modems, due to capability concerns and the fact that the Taiwanese company still has not obtained chip qualifications from some major telecom operators in Europe and the U.S. Still, analysts note that MediaTek's margins are likely to improve in the future, thanks to an increase in its market share.
For the current quarter ending in December, MediaTek expects revenue of NT$59.2 billion to NT$64.3 billion, down 6.3% to 13.7% from a year ago. The company projected that its margin would fall between 34.5% and 37.5% in the period.
In the July-September quarter, MediaTek's sales dropped 18.8% on the year to NT$63.65 billion, while its net profit plunged more than 35% to NT$5.06 billion, due to an ongoing price war with Qualcomm. But the company's gross margin of 36.4% in the third quarter was up from 35.2% a year ago, and from the record low of 33.5% in the January-March period.
"For MediaTek, the company will gradually gain share back starting in the fourth quarter this year and deliver strong growth in 2018 as cost-optimized products gather further momentum," said Mark Li, an analyst at Sanford C. Bernstein, adding that the company's progress in the non-smartphone business has also also been better than expected.
Aaron Jeng, an analyst at Nomura Securites, said he expects MediaTek's margin to continue to improve in the current quarter and next year, thanks to a better product mix, so there is still upside for its shares. MediaTek's shares have advanced nearly 60% so far this year.