According to Digitimes MediaTek saw its first-quarter revenues fall 9.4 percent sequentially to US$1.73 billion, with gross margin reaching a record low of 38.1 per cent.

MediaTek expects to report revenues of $2.16-$2.30 billion for the second quarter, while combined shipments of its smartphone and tablet chips will reach 135-140 million units.

MediatTek president CJ Hsieh said last week that handset subsidies from telecom operators in China are key to boosting the company's revenues and shipments during the quarter.

Despite higher shipments and revenues, MediaTek's gross margin will likely fall to 33.5-36.5 per cent in the second quarter due to poor smartphone-chip prices as well as lower-margin models China's telecom carriers are mainly subsidizing, Hsieh said.

MediaTek also cut its gross margin outlook for all of 2016 to 35-38 per cent  but has maintained its revenue target at 10 per cent growth.

The compan yexpects to grow its Helio line of smartphone chips for mid-range and high-end smartphones as a proportion of the company's total shipments to more than 15% in the second quarter, Hsieh noted.

Hsieh also disclosed that volume production of MediaTek's 10nm chips will begin at end of first-quarter 2017. The company also plans to roll out its 7nm products in the second half of 2017 with volume production scheduled for 2018.

The Helio line of smartphone chips is expected to grow as a proportion of company shipments to more than 20 per cent in 2016. Last year they made only  eight percent of Mediatek's shipments.