From mobile chips to automotive ecosystem: MediaTek and DENSO collaborate, can Cai Lixing drive valuation upgrades?

MediaTek (2454) recently announced a strategic partnership with Japan’s leading automotive component supplier DENSO to jointly develop customized system-on-chips (SoCs) for advanced driver-assistance systems (ADAS) and intelligent cockpit solutions. This move marks the company’s acceleration from a sole focus on the smartphone market toward diversification into multiple fields. Despite recent stock price fluctuations within the 1,380 to 1,460 NT dollar range due to year-end position adjustments and broader market volatility, the long-term valuation re-rating logic has gradually emerged.

Why is the collaboration between MediaTek and DENSO worth noting?

For a long time, investor assessments of MediaTek have been heavily influenced by its performance in the smartphone market. Whenever the global smartphone upgrade cycle slows, MediaTek’s stock price tends to fluctuate accordingly. This reliance on a single business segment has been a major factor suppressing its valuation.

The partnership driven by MediaTek CEO Cai Lixing changes this dynamic. DENSO, as one of the world’s largest automotive parts suppliers, possesses vehicle-grade safety certifications, system integration expertise, and deep relationships with automakers. Meanwhile, MediaTek contributes its high-performance computing and AI technologies developed on the Dimensity Auto platform.

The combined advantages of both parties are reflected in three key areas:

Vehicle-grade safety certification as a market passport
The chips developed through this collaboration will adhere to ISO 26262 functional safety standards, aiming for ASIL-B/D levels. This is not only a technical benchmark but also an essential requirement for entering the supply chains of mainstream global automakers. Traditional mobile chipmakers often lack this domain expertise, but MediaTek can leverage DENSO’s verification systems to quickly address this shortcoming.

Enhanced multi-sensor fusion for autonomous driving accuracy
The new generation of chips adopts a heterogeneous computing architecture, integrating AI/NPU accelerators and advanced image signal processors (ISP), supporting multi-sensor fusion from cameras, radar, and LiDAR. This technology is highly attractive to traditional automakers and new entrants eager to gain an edge in the electric vehicle race.

Pre-verified platform to shorten time-to-market
By utilizing pre-verified automotive-grade IP and AUTOSAR-compliant development tools, both parties are creating a “ready-for-mass-production” platform. For automakers eager to accelerate new vehicle launches, this rapid deployment capability is a key differentiator.

Performance turning point in 2026

A set of figures disclosed by Cai Lixing during the earnings presentation is rewriting MediaTek’s growth story. The company expects its AI ASIC business to contribute approximately USD 1 billion (about NT$320 billion) in annual revenue by 2026. This is not marginal improvement but a fundamental shift in business structure.

Currently, MediaTek’s P/E ratio stands at 20.74, which already reflects a premium compared to pure smartphone chipmakers. However, compared to ASIC peers like Broadcom and Sigm-KY, with P/E ratios of 25 to 30, there is still significant room for upward revision.

In the automotive sector, Cai anticipates sequential growth in 2025. Although large-scale production of high-end chips like the N1X series will only significantly ramp up after 2026, the collaboration with DENSO has effectively secured long-term contracts with major global automakers, ensuring stable future revenue streams.

From dilemma to breakthrough

MediaTek faces clear short-term challenges: market anticipation for flagship smartphone chips in early 2026, year-end portfolio adjustments, and broader market fluctuations at high levels have led to technical pullbacks and a short-term sideways consolidation pattern.

However, this situation is unlikely to last. As the AI ASIC deployment takes shape and the DENSO partnership materializes, the negative perception of MediaTek’s “over-reliance on smartphones” will gradually diminish.

By 2026, MediaTek will present a new face: smartphone chips providing profit foundation, automotive electronics offering stable long-term revenue support, and AI ASICs delivering explosive profit growth. This multi-engine business model is sufficient to break through the current valuation ceiling.

As long as the USD 1 billion ASIC target progresses ahead of schedule, MediaTek’s stock price is highly likely to break out of the current sideways range and initiate a new wave of valuation re-rating.