MADISON, Wis. — China's tablet market is in turmoil, with stagnant growth and fierce competition from phablets featuring cellular network connectivity. Intel and MediaTek are aggressively pursuing the white-box tablet market, forcing the retail price for locally branded seven-inch tablets below $50.
Caught in the middle is Actions Semiconductor in Zhuhai, China. It has been counting on action in the white-box tablet market. Its strategy is to leverage that market to catapult the company from the MP3/MP4 player market where it made its name.
During its second-quarter financial call, Actions reported revenue of $12 million, versus $18.5 million a year earlier. In particular, diminishing gross margin spoke volumes about the bloody tablet battle unfolding in China. Actions reported a gross margin of 18.4% for the second quarter, compared with 23.1% for the first quarter and 32.2% for the second quarter of 2013.
Intel and MediaTek
"Our second-quarter performance reflects unfavorable dynamics in the worldwide tablet market," Actions CEO Zhenyu Zhou said on the call. "Overall growth in the tablet market has slowed much more quickly than anticipated." In discussing tougher competition, he mentioned Intel and MediaTek rapidly carving market shares in the white-box tablet market while putting pressure on prices. He also said the white-box tablet market itself has been flat.
In discussing app processors designed into tablets, Zhou said that a dual-core SoC was at the high end last year but has moved into the mainstream. The price for such a dual-core SoC "is down by 50% compared to a year ago."
Actions' survival now hinges on future products "enabled by 28nm process technology and 64-bit CPU for tablets," according to the CEO. In late June, Actions announced that it had licensed ARM's Cortex-A50 processor family to target the 64-bit tablet market. Because the industrywide transition from 32-bit to 64-bit architecture is still at an early stage and Actions is leading China in that transition, Zhou is hopeful that his company is better positioned to generate revenue and enjoy growth in 2015. It plans to release its first 64-bit product at the end of this year or early next year.
Zhou anticipates Actions' upcoming Bluetooth RF and audio processor integrated single-chip SoC for Bluetooth boom boxes to becoming a revenue driver in the year ahead. He also revealed (as had been reported previously) that the company plans to tailor its new 64-bit product for use in Chrome books.
Dutch auction tender
Separately, in hopes of optimizing the company's capital structure, Actions has been expanding its stock repurchase program. It announced Friday that it will commence a Dutch auction tender offer this month to purchase up to 60 million of its issued and outstanding ordinary shares for cash.