MediaTek Doubles Down on AI ASIC Ambitions, Lifts 2027 TAM to $80 Billion as Second-Generation Chip Progresses Toward 2028 Production
Q2 2026 earnings call, July 31, 2026
MediaTek used its second-quarter print to deliver one of its most consequential updates yet on its data center ambitions, raising its 2027 total addressable market estimate for AI accelerator ASICs to $80 billion and lifting its own share target to 15% to 20%, up from the 10% to 15% range guided just one quarter earlier. The move signals growing confidence from management that its custom silicon business, still in its early innings, is scaling faster and with a larger opportunity set than previously communicated.
CEO Rick Tsai told analysts that MediaTek has "successfully built our first AI accelerator ASIC with leading performance," with production scheduled to begin in the fourth quarter of this year. The company now expects data center revenue to exceed $2 billion in 2026, before scaling "substantially" in 2027. CFO David Ku confirmed that figure is tied to a single project for now, with additional NRE contribution potentially layering on top as other engagements mature.
Second-Generation ASIC and the Path to 2028
Perhaps the most notable disclosure was the progress update on MediaTek's second AI accelerator ASIC, which Tsai described as featuring "a meaningful upgrade in compute performance" and further optimized total cost of ownership. Management guided to early 2028 for mass production, with Tsai noting that design and tape-out milestones remain on track. Importantly, Tsai indicated the company expects both the first and second ASICs to be in production simultaneously in 2028, a dynamic he said "certainly will enhance our market share... in a very significant manner." MediaTek declined to quantify the 2028 TAM, but Tsai said the company is "confident our 2028 TAM will be quite a bit higher than 2027," a data point that investors will likely use to extrapolate long-term revenue potential even without hard numbers.
On the sensitive question of whether MediaTek could become the majority source of silicon for its largest customer, Tsai deflected specifics, saying the company would not "go into this because we know there are a lot of, shall we say, reports in the market," instead emphasizing execution and trust-building with customers as the path to "better than fair share."
Packaging Technology Validation: EMIB-T Gains Credibility
A key overhang for investors has been the reliability of Intel's EMIB-T advanced packaging technology, given its centrality to MediaTek's ASIC roadmap. UBS analyst Sunny Lin pressed management on whether the technology is maturing, noting that Taiwanese substrate maker Unimicron had also sounded incrementally more constructive this week. Tsai's response was unusually direct: "Yes, in short, yes, you can," confirming that EMIB-T yield rates and technology maturity are progressing toward high-volume production readiness in 2028. This is a meaningful de-risking data point given how much of the bull case for MediaTek's ASIC scale-up depends on packaging execution outside its direct control.
$5 Billion Discretionary Financing Budget
The board approved a $5 billion discretionary financing budget, which Ku was careful to frame as optionality rather than a signal of balance sheet stress, noting the company already holds over $7 billion in cash. The budget appears aimed at securing supply chain capacity and potentially supporting key suppliers' expansion plans amid what Ku called a fast-moving industry backdrop, both in supply chain dynamics and evolving AI ASIC business models. When asked directly whether the facility could be used to help suppliers expand capacity to serve MediaTek's roadmap, both Tsai and Ku confirmed, "Yes, yes."
Smartphone Business Remains Structurally Weak
Away from the ASIC story, the smartphone segment continued to underperform, with mobile phone revenue down 14% quarter-over-quarter and 20% year-over-year, driven by rising bill-of-materials costs pressuring end demand. MediaTek reiterated its expectation for a 15% decline in global smartphone unit shipments this year. Management is responding with pricing actions across the portfolio to pass through rising supply chain costs, though Ku was explicit that the intent is cost-sharing rather than margin expansion: "We are not trying to actually increase the price to increase the gross margin... the goal is really to pass through the cost pressure and share with our customers."
A 2-nanometer flagship SoC launching in the third quarter is expected to partially offset continued weakness elsewhere, with management guiding mobile phone revenue to be flat to down mid-single-digits sequentially next quarter.
Smart Edge Platforms Carrying the Growth Load
The Smart Edge platforms segment, now 53% of total revenue, grew 19% quarter-over-quarter and 26% year-over-year, driven by share gains in connectivity, computing, and automotive, along with DRAM content contribution in TV SoCs. The NVIDIA partnership on RTX Spark, a new class of Windows PCs designed for agentic AI workloads, was highlighted as validation of MediaTek's ability to move beyond its traditional mobile-centric identity into high-performance computing system integration, with products shipping in time for the holiday season.
Margin Mechanics: Scale Over Rate
On profitability, Ku offered a clear-eyed framework for how investors should model the ASIC ramp: gross margins on successive ASIC generations will be "similar" generation to generation, not expanding, and will remain "slightly dilutive" to corporate average gross margin. The offset comes on the operating margin line, where Ku said scale would be "accretive meaningfully and sizeably" as the operating expense ratio comes down even as absolute R&D dollar spend continues rising to fund new technologies like CPO, 3.5D packaging, and next-generation SerDes. Management said it would provide more concrete operating margin accretion guidance by the third-quarter call.
Overall, the print reinforces a narrative already gaining traction among sell-side desks, MediaTek's transformation from a mobile-first chip designer into a credible, multi-generational player in custom AI silicon, with tangible TAM upgrades, packaging technology de-risking, and balance sheet flexibility now backing up what had previously been more aspirational commentary.