MediaTek Inc. plans to begin supplying Samsung with chips for third-generation (3G) mobile phones in first quarter next year. It is now having the chips verified at the South Korean electronics manufacturer.

MediaTek plans to make foray into 3G-chip market by the end of this year after completing the acquisition of Analog Devices Inc.`s (ADI`s) handset-chip unit early this year. It will contract Taiwan Semiconductor Manufacturing Co. (TSMC) by the end of this year to make its wideband code division multiple access (WCDMA) chips using 65-nanometer process for Samsung`s handsets.

Industry watchers estimated that the verification of MediaTek`s 3G chips at TSMC would go as smoothly as expected since ADI has set up partnership ties with TSMC before selling its handset-chip asset to MediaTek. ADI began using TSMC`s 90-nanometer process after rolling out 3G chips in late 2006 and planned to use TSMC`s 65-nm process in late 2007. The plan will soon be resumed by MediaTek.

According to chip-making equipment suppliers, MediaTek`s 3G-chip business has been mainly centered on mainland China`s TD-SCDMA and Europe`s WCDMA markets. Its products for TD-SCDMA phones include its SoftFone-LCR+ chipset, which enables a cell phone to switch between GPRS and TD-SCDMA mode. Phone makers in the greater China region, including ZTE Corp., Inventec Corp., Datang Telecom Technology Co., Wah Lee Industrial Corp., and Longcheer Holdings Ltd., have adopted the chipset.

For WCDMA phone, MediaTek will introduce 65-nm SoftFone-W chipset by the end of this year to support WCDMA/EDGE dual mode. Industry watchers pointed out the chipset has been verified by Samsung.

Some industry insiders felt that MediaTek`s US$350 million acquisition of ADI`s handset-chip business unit was an expensive deal for MediaTek when it announced the acquisition. But today, many of them have changed the idea in light of the bullish prospect for the company`s business. In addition to expected orders from Samsung, MediaTek is already a supplier of LG. Industry watchers estimated the Taiwanese chip design house to make an overwhelming feat in mainland`s 3G-phone market as it has done in its 2G market, where eight of the mainland`s top 10 phone makers are buying its chips.

The company scored after-tax net income of NT$5 billion (US$169 million at US$1:NT$30), or NT$4.93 per share, in the second quarter, and had net income of NT$9.1 billion (US$304 million), or NT$8.83 per share, for the first half of this year. The company projected its revenue for the third quarter to rise 8-10% from the second quarter, but it expected gross margin to remain unchanged at around 53.8% as registered in the second quarter.

The company raked in revenue of NT$22.3 billion (US$743 million) in the second quarter, soaring 15.2% from a quarter earlier and 21.2% year on year. In the first half this year the company had revenue totaling NT$41.6 billion (US$1.3 billion), gaining 25.1% from the same period of last year.

Source:CENS