If the reports are true, a deal for Hon Hai Precision Industry Co (鴻海精密) and Asustek Computer Inc (華碩) to make Japan-based Sony Corp's next generation of games consoles would help boost the Taiwanese companies' revenues, analysts said yesterday.
Hon Hai and Asustek began making Sony's Play Station 2 game consoles last year. A local Chinese-language newspaper has reported that Sony had placed orders with the two companies to make its latest PSX game console. The first consoles are expected to be shipped in the next quarter, the paper said.
"We heard about the contract from Asustek's component suppliers. As they are already doing samples for Sony's new PSX game machines, I believe product shipments will come very soon," said George Wu (吳裕良), an analyst at Primasia Securities Co.
The Taiwanese motherboard maker has had to diversify into new business areas such as notebook computers, game consoles and mobile phones in a bid to maintain profitability, Wu said.
Though the margin for assembling game consoles will be as low as 6 percent, the increase in shipments will offset the low margin, said Chou Chin-chung (
"I hold a positive view about Asustek's expansion into the game-console sector. The company has got to find new areas to grow and to counter falling margins," Chou said.
According to Asustek, sales from game consoles accounted for about one-fifth of its NT$200 billion sales last year. The core motherboard business contributed 30 percent.
With significant expansion in the motherboard and notebook computer areas, the company is forecast to earn NT$13.67 billion, or NT$5.99 per share, this year, 14 percent up from last year, Chou said.
But one analyst said the deal would do little to help the profit margins of the companies.
"It's no surprise to see more orders for Hon Hai and Asustek," said Grace Chen (陳星嘉), an analyst at Insight Pacific Investment Research (月涵投顧). "But I doubt they can get a better deal as Sony needs stricter cost controls to maintain price competitiveness over rival Microsoft Corp."
Asustek and Hon Hai declined to comment on the reports.
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