MediaTek Bets $5 Billion On AI Data Center Chips To Take On Rivals
Smartphone sales are hitting a wall, so MediaTek is betting big on a completely different (albeit red-hot) market segment. The Taiwanese chipmaker just approved a flexible $5 billion discretionary financing framework aimed at expanding its footprint in AI data center hardware.
It is a timely pivot for sure. Hyperscalers are spending heavily on custom AI silicon, and MediaTek wants a bigger piece of the ASIC pie. During an earnings call to discuss MediaTek's second-quarter results, Chief Executive Rick Tsai bumped the company's 2027 market share target for data center AI accelerators to 15-20%, up from a previous estimate of 10-15%.
"To secure supply chain capacity and fuel our strategic expansion from AI ASIC chips to full-scale systems
and platforms, the Board has approved a discretionary US $5 billion financing budget today. This flexible
framework provides us with the optionality, when needed, to agilely support our long-term growth and
capitalize on massive data center opportunities," Tsai said.
MediaTek's first custom AI chip is on track to enter volume production in the fourth quarter of this year. The company projects its data center business will rake in over $2 billion in revenue by the end of 2026, and a second-generation custom chip is already on the roadmap for 2028.
Committing to a $5 billion financing reserve gives MediaTek's decision makers the flexibility to lock down advanced packaging capacity, secure wafer allocation with foundry partners like TSMC, and scale up enterprise hardware development as demand dictates.
The push into high-margin data center chips comes at a crucial time. MediaTek's core mobile phone business was hammered in the second quarter, dropping 20% year-over-year as rising supply chain component costs and weaker global handset demand negatively impacted margins.
It's a good time to pivot, and not just because smartphone-related sales are slumping. Even with softer handset silicon sales, MediaTek's revenue still topped expectations at NT$152.2 billion (around $4.7 billion in U.S. currency), fueled in part by its Smart Edge platform that saw a 19% sequential surge on strong connectivity and computing chip sales.
