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Compal to boost its notebook PC output by 25% next year

Compal Electronics Inc (仁寶電腦), the world's second-largest maker of notebook computers, plans to boost production by a quarter next year on stronger demand from Dell Computer Corp and other customers.

Compal said it will increase output to five million laptops from four million this year and shift manufacturing to China, where production will rise to 70 percent of total output from 50 percent. The shift will improve per-unit gross margins, or sales minus costs of production, by about 2 percentage points, it said.

The move comes as Compal and bigger rival Quanta Computer Inc (廣達電腦) try to preserve profit margins in the face of falling sales prices. It may not convince some investors.

"US demand is poor, and there's an oversupply problem," said Darwin Chang (張達文), who manages a NT$500 million (US$14 million) equity fund at Reliance Securities Investment Trust Co (德信投信).

Chang says he's lowering his stakes in makers of personal computers, flat-panel displays and computer components.

Compal shares fell 2.6 percent to NT$37.5 in Taipei. Quanta shares fell 3.3 percent to NT$58.5.

Quanta and Compal both supply Dell and Hewlett Packard Co, the world's largest personal computer suppliers.

The two Taiwan companies made more than half of the nation's output of notebook computers this year and plan to lift production next year to 12.5 million units from 9.5 million, a local newspaper reported.

Taiwan companies will account for more than two-thirds of the world's notebook PC production this year, according to the government-funded Market Intelligence Center.

"Sliding notebook computer prices have forced brand-name companies to cut costs," said Charles Chou, an analyst at the center. "Taiwan companies' margins will continue to be under pressure, based on the severe supply glut."

Global shipments of laptops will increase to 34.3 million units next year from 29.3 million units in 2002, according to Austin, Texas-based DisplaySearch, which tracks shipments of flat-panel displays used in notebook PCs. Shipments reached 25 million units last year, it said.
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