Sat, May 17, 2003 - Page 11 News List

Compeq expects Q2 loss on cellphone slump, SARS

BLOOMBERG , TAIPEI

Compeq Manufacturing Co (華通電子), a maker of mobile-phone parts for Nokia Oyj, Siemens AG and their Asian rivals, expects to post a seventh consecutive quarterly loss in the April-June period because SARS is hurting demand in China.

"Shipments will fall, and prices will probably go the same way," vice president Tong Chia-ching (童家慶) said. "We're expecting a decline in June shipments because of SARS."

Compeq previously expected demand for mobile phones to rise, helped by the introduction of new models with color screens. The company said inventories in China, the world's largest cell-phone market by users, have probably built up to 15 million handsets.

"There's probably a month's worth of inventory in China," said Debbie Wu (吳岱玲), an analyst with Yuanta Core Pacific Securities Co (元大京華證券), who said shoppers in China are staying at home to avoid SARS.

"People expected good handset sales in China and started building inventories before the SARS outbreak," she said.

Compeq's shipments next month may fall by about a fifth from this month, during a season when demand usually rises, Tong said. He declined to say how large the second-quarter loss will be.

The company's second-quarter use of production capacity will fall as low as 70 percent from about 80 percent in the first, Tong said. Compeq's first-quarter loss widened to NT$1.3 billion (US$37.5 million) from NT$101.4 million in the same period last year.

Compeq makes printed circuit boards that connect semiconductors and other parts in handsets. The company also makes circuit boards for customers such as Cisco Systems Inc, the world's largest maker of equipment to direct Internet traffic.

"The amount of business from Cisco is starting to increase gradually," Tong said. "They've reduced suppliers, so that's good news for us."

Compaq, whose shares have declined about 78 percent the past year, moved production capacity to China from the US last year. It has also focused on increasing sales to Chinese phone makers after the failure of Internet startups wrecked orders from Cisco and other computer-network companies.

Compeq now has 40 percent of its production capacity in China, Tong said.

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