Emerging market income equity: can MediaTek turn innovation into income?

From challenger to global chip leader

MediaTek’s integrated circuits (ICs) power more than two billion devices every year, in smartphones, smart homes and autonomous vehicles. 

The Taiwan-based firm began designing mobile device chipsets in the early 2000s, competing directly with Qualcomm. Within two decades, it had reshaped the competitive landscape. Its Dimensity series of processors helped it overtake Qualcomm in global smartphone chipset shipments in 2020 [1], and the two companies have traded the top spot ever since. MediaTek now leads the market for 5G smartphone chipsets, supported by its ongoing push into more advanced products. [2]

These pricing gains have strengthened revenue quality and helped the business maintain a healthy level of profitability through changing market cycles.

Beyond smartphones: AI creates new engines of growth

Smartphones still account for just over half of the company’s revenue, but the market is maturing. [3]  The next major growth wave is coming from chips that power AI.

MediaTek is investing heavily in application specific integrated circuits (ASICs), customised chips that run AI workloads more efficiently. Companies building large scale data infrastructure increasingly want faster, more power efficient hardware, and these AI focused chips offer exactly that. CEO Rick Tsai has described this dynamic driving a ‘virtuous cycle for long-term AI growth’, and the company believes it is still early in this trend. [4]

Another emerging opportunity is automotive technology. As cars become more like sophisticated electronic devices, they require more computing power for navigation, safety and in car entertainment. MediaTek, working with Nvidia, has developed the Dimensity Auto Cockpit platform to deliver an upgraded in vehicle experience. As demand grows for these high performance systems, it should broaden MediaTek’s customer base and support pricing over time.

Innovation that drives long term advantage

MediaTek’s ability to compete – and win – in fast moving technology markets depends on constant innovation. In fact, it has achieved a level of scale and efficiency in research and development (R&D) that is difficult to emulate. This acts as an important barrier to entry for any potential competitor. MediaTek has invested more than NT$100 billion (US$3.2 billion) in R&D over the past three years and continues to expand its capabilities. [5]  For example, it has opened research centres in Cambridge and at the National Taiwan University to accelerate progress in AI and machine learning.

This commitment to innovation has closed the perceived quality gap that once existed between MediaTek and ‘higher end’ competitors. Today, it is widely recognised as a leading designer of powerful, efficient chipsets across several product categories. A strategic partnership with TSMC, the world’s No.1 semiconductor manufacturer, means a next generation chip – a 2 nanometre node – is scheduled for mass production in 2026. 

Importantly, the company funds its innovation while maintaining strong cash generation, a key attraction for income focused investors.

A business model built for cash flow and dividends

MediaTek’s capital light model is a major part of its appeal. Because it designs chips but does not manufacture them, it avoids the heavy capital costs associated with building fabrication plants. Its spending is focused mainly on R&D, which is meaningful but far less demanding than running large-scale production operations.

This model allows the company to convert revenue into cash at a higher rate than many global technology peers. With limited debt and consistent cash generation, MediaTek can reinvest for growth while maintaining a strong dividend profile.

We first invested in MediaTek in 2021. Since then, it has continued to increase dividends, supported by rising profitability and a disciplined balance sheet. A combination of regular and special dividends, from September 2021 to January 2026, has delivered an impressive 31% cumulative yield. Cashflow strength means MediaTek can sustain payments through market volatility – a valuable capability for income strategies.

Why MediaTek matters for investors today

Several factors make MediaTek a standout holding for an emerging markets equity income strategy:

Despite these strengths, we believe the current share price does not fully reflect the long term benefits of AI adoption or MediaTek’s expanding role in next generation computing.

Innovation + income = long term opportunity

MediaTek has repeatedly exceeded expectations, evolving from a challenger in mobile chips to a global leader with a growing presence in AI and automotive technology. Its combination of scale, innovation and capital efficient operations provides a strong foundation for future growth and, crucially, supports resilient dividends for investors.

In a world where technology continues to reshape economies and investment opportunities, MediaTek stands out as a company that can deliver both growth exposure to AI and reliable income, making it an important contributor to any emerging markets equity income strategy.

Company selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.