MediaTek Earnings Call: Raises ASIC Market Share Target to 15%-20%, Second-Gen ASIC to Mass Produce in 2028

MediaTek (2454-TW) is aggressively expanding into the AI ASIC market. At today's (31st) earnings call, CEO Ming-Kai Tsai announced an upward revision of the company's 2027 AI ASIC market share target from the original 10%–15% to 15%–20%. Development of the second-generation AI accelerator ASIC is progressing as planned, with mass production expected to begin in early 2028.

MediaTek stated that cloud customers continue to show strong demand for customized AI chips, driven by the pursuit of better performance per total cost of ownership (TCO) and performance per watt.

Through close collaboration with a major U.S. cloud service provider, MediaTek has completed its first AI accelerator ASIC with leading-edge performance. Mass production is set to begin in the fourth quarter of this year, driving data center revenue to exceed $2 billion in 2026, with further accelerated growth expected in 2027.

With increasing customer demand for related solutions, MediaTek now estimates the 2027 serviceable available market (SAM) for AI accelerator ASICs at $80 billion—consistent with last quarter’s estimate—but has raised its market share target from 10%–15% to 15%–20%.

Tsai emphasized that the $80 billion market size currently includes only AI accelerators, excluding data center CPUs, network switches, or other custom chips. This indicates significant room for market expansion if the company extends its business into other XPUs or data center chips in the future.

The development of MediaTek’s second-generation AI accelerator ASIC is also advancing smoothly. Compared to the first-generation product, the second-gen ASIC will deliver significantly improved computing performance and further optimize customers’ total cost of ownership. Through close cooperation with advanced packaging partners, yield and reliability are on track with development milestones, and the company is confident in achieving mass production by early 2028.

With both first- and second-generation ASICs expected to contribute simultaneously in 2028, MediaTek anticipates that the SAM for AI accelerator ASICs in 2028 will be notably higher than in 2027, and its market share will further increase as second-gen volumes ramp up.

In addition to the two existing ASIC projects, MediaTek is deepening data center ASIC collaborations with multiple customers. Tsai noted that several new initiatives and projects are underway, but due to confidentiality agreements, specific customer or project details cannot yet be disclosed and will only be announced upon customer approval.

To expand its ASIC market footprint, MediaTek is transitioning from providing standalone chip designs to offering complete system and platform solutions. The company has established pre-validated subsystems covering memory, input/output (I/O), and high-speed connectivity technologies, reducing design complexity and time-to-market for customers, and enabling them to scale from a single AI ASIC to full system and platform deployment.

In high-speed interconnect technology, MediaTek’s 448G SerDes development is progressing smoothly. Through its Co-Package Copper (CPC) system solution, it delivers high performance and low power consumption, with the IP expected to be ready by the second half of 2027.

Looking beyond 448G, MediaTek believes that even higher-speed chip-to-chip interconnects will likely shift toward optical technologies. The company is currently developing a Co-Packaged Optics (CPO) system solution based on TSMC’s (2330-TW)(TSM-US) COUPE platform to meet next-generation data center high-speed connectivity demands.

Additionally, MediaTek offers an end-to-end 3.5D platform integrating 3.5D silicon IP, packaging technology, and design flows. Through Design-Technology Co-Optimization (DTCO) with TSMC and leveraging 2nm advanced process design experience, it supports customers in developing ultra-large, high-performance ASICs using technologies such as CoWoS and EMIB-T.

Beyond wafer manufacturing and packaging, MediaTek is beginning to integrate key supply chain components such as memory and substrates to help customers reduce execution risks in large-scale AI ASIC projects.

To secure future supply chain capacity and drive its expansion from AI ASIC chips to systems and platforms, MediaTek’s board has approved a flexible $5 billion financing budget. Management stated that the company currently holds over $7 billion in net cash, and the financing facility is primarily intended to preserve funding options for supporting key supplier capacity expansion or strengthening supply chain partnerships as needed.

Financially, while the second-generation ASIC is expected to have significantly higher per-unit value and shipment volume, its gross margin is projected to be roughly in line with the first generation and slightly below the company’s average gross margin.

However, as ASIC revenue scales rapidly, operating expenses will grow at a slower rate than revenue, leading to a significant decline in expense ratios. As a result, the ASIC business is expected to make a substantial positive contribution to MediaTek’s operating margin and operating profit in absolute terms.