MediaTek's First AI ASIC to Mass Produce in Q4! Data Center Revenue to Surpass $2 Billion by 2026, Market Share Target Raised to 15%-20% by 2027

MediaTek is entering a revenue ramp-up phase in the AI data center market. At today’s (31st) earnings call, MediaTek (2454) Vice Chairman and CEO Ming-Kai Tsai announced that the first AI accelerator ASIC, co-developed with a major U.S. cloud service provider, is scheduled for mass production in the fourth quarter of this year. This will push data center revenue beyond $2 billion in 2026—approximately NT$64 billion at current exchange rates based on third-quarter guidance. Due to strong anticipated demand, the company has raised its 2027 data center market share target from the previously stated 10%–15% to 15%–20%.

First AI ASIC to enter mass production by year-end; data center revenue to exceed $2 billion in 2026

Tsai noted that as cutting-edge AI models continue to advance and Agentic AI rapidly develops, AI systems must execute a series of tasks—planning, reasoning, execution, and self-correction—further increasing computational loads in data centers.

To reduce large-scale deployment costs, cloud service providers are increasingly demanding customized AI chips, placing particular emphasis on performance per total cost of ownership (Performance per TCO) and performance per watt (Performance per Watt).

MediaTek has completed development of its first AI accelerator ASIC with a major U.S. cloud service provider and plans to begin mass production in Q4. CFO David Ku confirmed during the Q&A session that the 2026 data center revenue target of over $2 billion will be primarily driven by this first AI ASIC project.

Regarding production capacity for mass production, Ku stated that the company has already reviewed foundry, substrate, memory, and customer demand, and is confident in securing supply chain capacity for 2026 and 2027.

2027 market size projected at $80 billion; market share target further upgraded

With the first AI ASIC ramping up, MediaTek expects significant growth in data center revenue by 2027 and has raised its serviceable addressable market (SAM) valuation for AI accelerators to $80 billion—approximately NT$2.56 trillion.

Ku explained that the $80 billion valuation currently covers only AI accelerators, excluding CPUs, network switches, or other data center chips, reflecting MediaTek’s current focus on the custom AI accelerator market.

Based on the first ASIC’s performance, TCO advantages, and customer demand, MediaTek has upgraded its 2027 data center market share target from the previous 10%–15% to 15%–20%.

Tsai emphasized that MediaTek does not comment on market rumors about supplier allocation ratios. The top priority now is fulfilling commitments to customers and building trust through continued collaboration. “We aim to achieve a market share higher than our fair share,” he said.

Second ASIC to enter mass production by early 2028; two generations to contribute revenue in the same year

In addition to the first product, MediaTek’s second AI accelerator ASIC is progressing as planned, with significant improvements in computing performance and further optimization of customer TCO.

Tsai noted that the second ASIC’s design, yield, and reliability are on track with development timelines. The company and its customer have also accumulated collaboration experience from the first project, enabling clearer understanding of how to leverage both parties’ capabilities to complete complex chip designs on schedule.

Regarding the production timeline, Tsai indicated during Q&A that the second ASIC could be assumed to begin mass production in early 2028. At that point, both first- and second-generation products will contribute to revenue, and the 2028 SAM is expected to be “significantly higher” than the 2027 level of $80 billion, offering further room for MediaTek to increase its market share.

Advanced packaging technology for the second ASIC is also a key to mass production. Tsai stated that MediaTek is working closely with suppliers to address substrate yield, packaging capacity, and production cycles. While technically challenging, these technologies are critical foundations for enhancing chip performance and improving customer TCO.

Multiple customer projects underway; moving beyond reliance on a single CSP

Beyond the existing major cloud customer, MediaTek has begun discussions with other clients on potential data center ASIC collaborations, aiming to replicate the silicon IP, chip design, advanced packaging, and supply chain integration capabilities gained from the first project across more data center customers.

Tsai stated that MediaTek is deepening cooperation with multiple customers and, leveraging IP in memory, I/O, and connectivity technologies, as well as large-die and advanced process design capabilities, has the opportunity to secure more data center ASIC design wins.

However, Ku emphasized that these projects are still ongoing and declined to disclose whether the clients are major cloud providers, tier-two cloud operators, or enterprise customers. He also did not provide timelines for mass production or revenue contribution from these new projects.

AI ASIC gross margin slightly below company average; scale to boost operating profit

The rapid expansion of AI ASIC revenue will also reshape MediaTek’s profit structure. Ku noted that the second ASIC’s gross margin is roughly on par with the first, with no significant improvement expected across generations, though the second product will have higher unit price, revenue, and market scale.

Compared to MediaTek’s current average gross margin, AI ASIC margins remain slightly lower, potentially diluting overall margins slightly in the short term. However, as shipment volumes grow, they are expected to make a significant positive contribution to operating margin.

MediaTek will continue to increase R&D investment in AI and data center areas, and absolute operating expenses may rise slightly. However, Ku expects operating expense ratio to decline significantly as data center revenue scales.

With the first product entering mass production in Q4, the second ASIC expected to follow in early 2028, and multiple new customer projects advancing in parallel, MediaTek is transforming its accumulated expertise in advanced processes, system integration, and low-power design from smartphones and edge devices into competitive advantages in the data center AI ASIC market.