Demand for feature phones has experienced a rebound recently, which will help boost sales of 2.5G/2.75G handset solutions for suppliers such as MediaTek and MStar Semiconductor in February and March, according to industry sources.
Orders for feature phones slowed down during the fourth quarter of 2011, which brought negative impact on revenues at the major suppliers of 2.5G/2.75G chips, the sources indicated. MediaTek, for instance, saw its fourth-quarter consolidated sales slightly miss its guidance range.
The slowing in orders was mainly due to falling demand in China, which began to see growth in the penetration rates for 3G smartphones, the sources observed. Despite weaker demand for feature phones in China, emerging markets including Middle East, South America, India, Russia and Eastern Europe continue to show brisk demand for 2.5G/2.75G handsets, the sources said.
The unexpected decline in demand for feature phones in China during the fourth quarter had led to excessive inventories, but chip suppliers began to see their clients step up the pace of orders after the Lunar New Year, the sources noted. The recent pick-up in orders could imply that channel inventory is back to normal levels, the sources said.
In addition, new feature phones targeting emerging markets are set for launch starting the second quarter, prompting companies to rebuild their chip stockpiles, the sources pointed out.
MediaTek has forecast that the company will post a revenue decrease of 10-15% sequentially in the first quarter of 2012, while rival MStar expects sales to decline 8-13% on quarter.