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Tech firm hopes to tune into profit with wireless LAN

Microelectronics Technology Inc (台揚科技), one of the nation's oldest telecom equipment makers, is hoping to reap a windfall from the booming wireless local area network (LAN) market, but analysts say they better make it snappy.

"We've showcased our wireless access point prototype in Cebit in March and expect to have mass production by early next year," Chi Huei-ling (季惠霖), a Microelectronics spokesperson said yesterday.

She said the company's strategy to diversify is a must since market development for its core-business is "not as bright as it used to be."

Telecom-industry pundits say Microelectronics' diversification into manufacturing access points is on the right track.

"The market potential for wireless LAN equipment is considerable, especially the access point sector," said Nathan Lin (林宗賢), an analyst at SinoPac Securities Corp (建華證券).

In a wireless LAN environment, an access point is a station that transmits and receives data as well as connecting users to other users.

According to Industrial Technology Intelligence Service, a government-fund research center, global demand of wireless LAN equipment is estimated to reach US$5,208 million in 2005 or a 47 percent growth from US$3,524 million this year.

"The current profit margin in manufacturing access points is about 40 percent ? almost triple the margin in making wireless LAN cards," Lin said.

However, Microelectronics better move fast before profits become slim, another analyst said.

"Several Taiwanese as well as South Korean manufactures are also preparing to ship out access point within next 12 months," said Yen Ming-chih (顏銘志), an analyst at KGI Securities Corp (中信證券).

As competition heats up, profit margins are expected to drop to 30 percent next year, he said.

Microelectronics hopes to generate NT$4.06 billion in sales this year, up 11 percent over last year. After cutting operational costs, the company is expecting to see a 122 percent jump in profit this year to NT$151 million.

Established in 1982, Microelectronics is the largest base-station transceiver supplier to Lucent Tech-nologies Inc. The company reported skyward sales in late 1990s when global demand for wireless communications was soaring.

"Over the last two years the company's bottomline was hurt as global communication's equipment demand dropped during the economic downturn," Chi said.

Microelectronics reported revenue of NT$3.66 billion last year, down 22 percent from NT$4.67 billion in 2001.

In an effort to cut costs, Chi yesterday confirmed that the company laid off nearly 100 employees earlier this month, mostly assembly-line workers. The retrenchment is expected to save several million NT dollar per year in labor costs.

Microelectronics employees topped 1,000 in 2000, to settle at 760 recently.
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