Quanta may get cellphone order

The high possibility that Quanta Computer Inc (廣達電腦) will receive handset orders from Nokia Oyj is expected to paint a rosy picture for the contract manufacturer, which is facing a squeeze in its profits from the competitive notebook market, analysts said yesterday.

"Nokia is the world's largest cellphone company," said Grace Chen (陳星嘉), an electronic industry analyst at Insight Pacific (月涵投顧). "The partnership with Nokia is a good start and it may enable Quanta to gain a considerable number of handset orders in the future."

Local Chinese-language media reported yesterday that Nokia, the world's No. 1 handset maker with a 38 percent market share, has decided to place an order to buy handsets from Quanta.

The report said that Quanta is expected to ship two Nokia handset models beginning in the first half of 2004. The Taiwanese company has recently negotiated with component suppliers to purchase the materials to make 10 million units for each model, it said.

Quanta spokesman Tim Li (李杜榮) neither denied nor confirmed the report. Li said only that his company would not comment on any reports involving its clients.

Shares of Quanta rose NT$2, or 2.8 percent, to close at NT$72 at the TAIEX yesterday following the report.

According to analysts, the market had late last year speculated that Nokia, known for its in-house production, was in close talks with several Taiwanese electronics makers to manufacture its cellphones, including such companies as BenQ Corp (明基), Compal Electronics Inc (仁寶) and Quanta.

Hon Hai Precision Industries Co (鴻海精密), the nation's largest computer parts maker, also produces cellphone casings and printed circuits for Nokia.

Quanta, which shipped out some 2.5 million handsets for Siemens and Panasonic last year, "is highly likely to link up with Nokia, as BenQ and Compal have already been designated as close production partners for rival Motorola," Chen said.

The deal is helpful in upgrading Quanta's slim profits, another analyst said.

"Compared with the manufacture of other electronic products, profit margins for manufacturing handsets [on a contract basis] are more pleasant," said Teng Ko-hsin (鄧可欣), an analyst at SinoPac Securities Corp (建華證券).

The margin for making notebooks is around 8 percent, while contract makers have a 15 percent margin from producing handsets on average, Teng said.

Quanta, Taiwan's biggest notebook PC maker, reported more than 90 percent of its NT$142 billion sales last year came from notebook production, while its handset department only contributed about 2 percent of the company's sales, according to Insight Pacific's Chen. The company estimates that figure may rise to 6 percent this year.

Analysts said Nokia orders, in the short term, can only bring limited help.

"It always takes about six to nine months to officially produce new handset models, therefore the money won't go into Quanta's pocket until next year," Teng said.

Since the final order quantity will be modified along with market reaction, "It's too early to predict if Quanta will ship out 20 million units for Nokia," Chen said.