MediaTek lines up $5B war chest for AI datacenter push

Taiwanese semiconductor company MediaTek is preparing a $5 billion investment to enter the AI datacenter sector, aiming to carve out a significant share of a market projected to reach up to $80 billion by next year. While primarily recognized for its Arm-based smartphone and Chromebook components, MediaTek is now focusing on application-specific integrated circuits (ASICs) to cater to the surging demand for AI and agentic AI compute power.

The company anticipates capturing 15-20 percent of the market. MediaTek's board has authorized $5 billion for supply chain capacity and expansion in AI ASIC chips and full-scale systems. CEO Dr Rick Tsai highlighted the growing demand for increasingly capable AI models and the transition towards agentic AI as a key driver of compute demand, both in cloud and edge AI.

MediaTek's first ASIC family is being co-developed with major US cloud service providers and set to begin production in Q4, 2023. A second ASIC is also advancing, targeting enhanced compute performance. The company expects AI datacenter ASIC revenue to surpass $2 billion in 2026 and grow substantially in the following year, driven by customer demand for optimized performance in terms of total cost of ownership and performance per watt.

However, MediaTek faces competition from established players like Broadcom and Marvell, as well as Google, which plans to sell its custom tensor processing units (TPUs) to select customers. The AI ASIC market, according to a Bloomberg Intelligence report, is expected to grow at a 27 percent compound annual rate, reaching $118 billion by 2033, and expanding from 8 percent to 19 percent of the total AI accelerator market by 2033.

MediaTek's Q2 revenue was NT$152.18 billion ($4.68 billion), a 1.2 percent year-on-year increase, but operating income fell by 22 percent to NT$22.87 billion ($705 million).