Taipei, Aug. 22 (CNA) Two foreign brokerages have lowered their target prices on shares of Taiwan-based integrated circuit designer MediaTek Inc., citing Washington's decision to tighten sanctions against Chinese telecom equipment giant Huawei Technologies Inc., one of the major clients of the Taiwanese chip supplier.
In a research note, an American brokerage said the tighter U.S. restrictions against Huawei are expected to slow down MediaTek's smartphone chip shipments, dealing a big blow to the IC designer.
The securities house said it was therefore cutting its target price on MediaTek shares to NT$750 (US$25.42) from NT$825.
The brokerage, however, maintained its "buy" rating on MediaTek shares, saying the company is expected to benefit from its improving product mix.
In an earlier forecast, before the U.S. tightened its sanctions against Huawei, the brokerage had projected that Huawei would account for 24 percent of MediaTek's 5G chip shipments in 2020, and 35 percent in 2021.
In a recent interview on Fox Business news channel, U.S. Commerce Secretary Wilbur Ross said the earlier ban imposed by the U.S in May to prevent the use of American technology in Huawei-designed chips had led to some "evasive measures."
"They were going through third parties," he said. "The new rule makes it clear that any use of American software or American fabrication equipment to produce things for Huawei is banned and requires a license."
MediaTek, a company that uses American technology in its chip designs, was one of those third parties, and has now been barred from supplying chips to Huawei.
After the U.S. on Monday announced a widening of the ban, MediaTek shares dropped 17.5 percent between Tuesday and Thursday before rebounding 6.90 percent to close at NT$604.00 on Friday.
Meanwhile, a European brokerage has also lowered its target price on MediaTek shares, to NT$720 from NT$800, and downgraded its recommendation from "outperform" to "neutral," citing Washington's stricter restrictions against Huawei.
The brokerage also cut its forecast for MediaTek's earnings per share by 6 percent to NT$19.5 for 2020, and by 12.2 percent for 2021 to NT$28.73.
Another U.S. brokerage, however, said it was maintaining its "overweight" rating and a target price of NT$880 on MedidaTek shares, citing the company's efforts to develop 5G solutions and the likelihood of other clients offsetting the impact of the loss of business from Huawei.
The Link LonkAugust 22, 2020 at 07:25PM
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Brokerages cut MediaTek target prices on tighter Huawei sanctions - Focus Taiwan News Channel
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