MediaTek (2454): Morgan Stanley reiterates Overweight on MediaTek after management rejects a TPU shipment-delay concern

Overview

This update addresses investor concerns that MediaTek's TPUv8 production could be delayed to 2Q27. Morgan Stanley says management's clarification supports its existing TPU revenue forecast and its reiterated Overweight rating.

Core views

MediaTek's September 29 share-price decline of 7.1%, compared with a 0.82% drop in the Taiex, followed press reports raising concerns that TPUv8 production might be delayed to 2Q27. Management told Morgan Stanley that TPU shipments to customers have already started and reiterated guidance for more than US$2 billion of TPU revenue in 4Q26, which the report believes primarily relates to v8. Management also said there are no shipment delays to 2Q27. Morgan Stanley therefore expects TPU revenue to meet its forecasts and reiterates Overweight on MediaTek. On packaging and production capacity, management said Intel EMIB-T substrate output for TPUv9 is tracking MediaTek's plan. The report therefore concludes that TPUv9 does not need TSMC CoWoS support. Management confirmed it has discussed potentially using CoWoS with TSMC for next-generation chips; Morgan Stanley thinks this could refer to v10 IceFish rather than v9. Although management did not comment on the firm's EMIB-T substrate-volume forecast, Morgan Stanley believes its forecast of 3 million HumuFish v9 units in 2028 is achievable based on industry checks. The report also highlights additional ASIC-production requests from global customers, while noting management must weigh project margin profiles and export-control compliance. Morgan Stanley expects Tesla AI6 to remain with Global Unichip Corp and sees MediaTek as potentially considering certain China cloud-service-provider projects, such as ByteDance. Management said it would not rule out China customer projects that comply with US design requirements and TSMC production guidelines. The institution sees a high possibility that MediaTek can win new customers, supporting its positive view. For valuation, Morgan Stanley's MediaTek base case uses a residual income model with a 9.2% cost of equity, 12.0% intermediate growth, and 3.0% terminal growth. The report lists a NT$6,188 target price against a September 29 closing price of NT$4,910, or 26% implied upside. Its positive-case factors include edge AI supporting smartphone replacement, stronger smartphone demand in China and other emerging markets, successful new products and market-share gains, and Google TPU-driven demand. Downside factors include weaker smartphone demand, intensified pricing competition, poor new-product demand and share loss, and greater margin dilution.

Analysis framework

Morgan Stanley first compares the market reaction with management's direct clarification on TPU shipments and 4Q26 revenue. It then evaluates the production path for TPUv9 through Intel EMIB-T availability and the potential timing of TSMC CoWoS adoption, before considering customer opportunities, margins and export-control constraints. The valuation reference is a residual income model.

Methodology notes

• Valuation methodsRIM (Residual Income Model)

  Base-case residual income model

  The report values MediaTek using assumed cost of equity and growth rates, specifically 9.2% cost of equity, 12.0% intermediate growth, and 3.0% terminal growth.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  TPU production and advanced-packaging supply-chain assessment

  The report links TPU shipment timing and output to Intel EMIB-T substrate supply, while treating potential TSMC CoWoS use as relevant to a later-generation TPU.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MediaTek (2454.TW)

  Primary covered company; TPU shipment progress, potential new ASIC customers, and AI-driven demand underpin Morgan Stanley's reiterated Overweight view.

  Strengths

  TPU shipments have begun, management reiterated more than US$2 billion of 4Q26 TPU revenue, and the report sees potential new customer wins.

  Weaknesses

  Project selection must account for margin profiles and export-control compliance.

  Comparison

  MediaTek's shares fell 7.1% on September 29 versus a 0.82% decline in the Taiex.

  Risks

  Weaker China and emerging-market smartphone demand, pricing competition, weak new-product demand, market-share loss, and more severe margin dilution.

• Global Unichip Corp (3443.TW)

  Linked ASIC competitor; Morgan Stanley expects Tesla AI6 to remain with Global Unichip.

  Strengths

  The report expects it to retain the Tesla AI6 assignment.

  Comparison

  MediaTek may consider other global and China CSP ASIC projects rather than the Tesla AI6 program.

  Risks

  AI and other high-growth projects could lose customer traction; inventory correction could last longer than expected; 5nm-and-below ASIC-project contribution could disappoint.

• TSMC

  Potential advanced-packaging supplier for a next-generation MediaTek TPU.

  Strengths

  Management has discussed potentially adopting TSMC CoWoS for next-generation chips.

  Weaknesses

  CoWoS support is not needed for TPUv9 because EMIB-T output is tracking plan.

  Comparison

  Intel EMIB-T is expected to support TPUv9, while CoWoS could be relevant for a subsequent generation.

Key data

• MediaTek share-price move-7.1%September 29 decline, versus -0.82% for the Taiex
• 4Q26 TPU revenue guidance>US$2bnManagement reiterated this guidance and said shipments have started
• TPUv9 HumuFish forecast3mn unitsMorgan Stanley's 2028 forecast, which it considers achievable
• Target priceNT$6,188.0026% upside to the September 29, 2026 closing price of NT$4,910.00
• FY2026E EPSNTS 73.35Morgan Stanley ModelWare/consensus-methodology presentation
• FY2028E EPSNTS 342.37Morgan Stanley ModelWare/consensus-methodology presentation

Impact & implications

Morgan Stanley views management's confirmation as removing the immediate concern over a TPUv8 delay and supporting its forecast for 4Q26 TPU revenue. It sees the absence of a v9 CoWoS requirement as consistent with adequate EMIB-T output, while possible next-generation CoWoS adoption and additional ASIC opportunities could extend the AI opportunity set.

Risks

• Smartphone demand could deteriorate in China and other emerging markets.
• Greater competition could lead to pricing pressure.
• New products could see weak demand and cause market-share loss.
• Margin dilution could be more severe than expected.
• AI and other high-growth projects could lose significant customer traction.
• Customer inventory correction could last longer than expected.
• Contribution from 5nm-and-below ASIC projects could be lower than expected.