What changed in recent results and ASIC guidance?

  • MediaTek raised its fourth-quarter 2026 data-center ASIC revenue guidance to 2.5 billion US dollars. JPMorgan believes the company’s guidance and operational commentary met or exceeded most investors’ expectations, and expects TPUv8 products to account for most of the quarter’s ramp-up.
  • In the third quarter of 2026, the company reported revenue of 168.1 billion New Taiwan dollars, approximately 4% above Bloomberg consensus; operating profit was 27.1 billion New Taiwan dollars, approximately 7% above consensus, with an operating margin of 16.1%.
  • JPMorgan expects data-center ASIC revenue could reach 16 billion US dollars in 2027, with further upside if supply permits.

Can the next-generation product ramp up on schedule?

  • The company confirmed that tape-out for its second-generation ASIC project is proceeding as planned. Some chiplets have already been taped out, and the rest are expected to tape out within weeks; mass production is still planned to begin in the first quarter of 2028. JPMorgan believes the product is TPUv9.
  • Management is confident of securing a higher share for this generation because of its competitive performance per watt and total cost of ownership. JPMorgan expects MediaTek to become the main ASIC supplier for TPUv9, with the average selling price per chip also rising significantly.
  • A key step before mass production is packaging yield. The company said EMIB-T packaging yield is improving and expressed confidence that it will rise substantially over the next few quarters; JPMorgan believes the relevant packaging and substrate suppliers have entered the preparation stage for capacity expansion.

What do the second customer and Nvidia partnership mean?

  • The company confirmed that it has a second non-Chinese data-center ASIC customer, which is expected to begin contributing revenue in 2028; JPMorgan believes the revenue ramp-up may come later that year.
  • MediaTek is reaching more new customers through its NVLink Fusion partnership with Nvidia. JPMorgan believes the partnership can shorten time to market and help close MediaTek’s gap with Broadcom in chip scale-out interconnects.
  • The pace of growth remains constrained: the company has yet to provide clear ASIC revenue guidance for 2028, while market estimates at the time were already in the range of 40 billion to 50 billion US dollars. JPMorgan expects more information in early 2027.

How does ASIC growth affect profit and valuation?

  • The company guided for an overall operating margin of 19% in the fourth quarter of 2026 and above 20% in 2027. JPMorgan forecasts 23% for 2027 and believes the operating margin will improve gradually during the year as ASIC revenue accounts for a larger share.
  • The bank noted that the guidance of above 20% may be slightly below the higher end of some buy-side expectations; nevertheless, based on contributions from ASIC projects and operating leverage, it still expects the market to raise consensus earnings per share estimates for 2027 by 6% to 8%.
  • JPMorgan maintained its Overweight rating and its June 2027 price target of 5600 New Taiwan dollars, equivalent to 24 times earnings, above the average for the past decade and reflecting its assessment of future TPU growth. The bank also cautioned that smartphone SoC gross margins face rising costs and competitive pressure, and that Nvidia’s expanded partnerships with other chipmakers could slow progress in the two companies’ partnership.