MediaTek: Why MediaTek's ASIC business is protected?

US$50B savings will protect MediaTek's TPU business. Concerned about high capex, negative free cash flow, etc., investors are putting pressure on Google, but Google needs to invest in AI to fend off competition. We estimate by giving TPU v8t to MediaTek vs. Broadcom, Google saves possibly ~US$50B on the project over a span of 1-2 years. This assumes Broadcom's TPU gross margin stays at 60% and may be an overestimate, but in our view, it is clear MediaTek is the most affordable route for Google to compete in AI. We keep our forecast largely unchanged but see clear upside risks. The 2nd ASIC customer isn't in our model for example. Selling pre-validated modules/sub-systems of AI racks is another. Based on MediaTek's competitive position, we think it reasonable to believe MediaTek is in the final shortlist of possible suppliers for Google's TPU v10 generation. 4Q26 GM guidance is supportive, or perhaps even an upside risk too. Our 2028 EPS is NT$362, 25% above consensus. We raise price ta