High Tech sees 3G networks maturing next year

High Tech Computer Co (宏達電子), an original design manufacturer of handheld-computers, expects the market for smartphones to expand as third-generation (3G) networks mature next year, a company official said yesterday.

"We foresee that the infrastructure and technology of 3G networks may be much more mature next year or even late this year," Martin Lau (劉在武), High Tech's spokesman, told investors at an annual technology conference held by Merrill Lynch.

"We foresee the opportunity and we can provide very good products to download e-mails very quickly, to access the Internet quickly and which are convenient for end-users," Lau said of his company's smartphones and PDA phones.

High Tech, established in 1997, specializes in handheld devices based on Microsoft's Windows CE operating system. Its successful launch of Compaq's iPaq series in 2000 made itself the world's largest developer and manufacturer of Windows CE-based devices in the PDA sector.

High Tech marched into the smartphone sector using Microsoft's operating system in the fourth quarter of 2002 and the two parties established a research and development center in China last year to tap the fast-growing market there.

Wireless products made up 38 percent of their sales last year, up from 25 percent in 2002, with a gross margin of 20 percent, Lau said.

"Shipments of smartphones accounted for only 2 percent of the global handset industry last year, totalling about 5 million to 10 million units," Lau said, adding that there is huge potential for the product.

But investors are not so optimistic about the outlook for smartphones, saying that the infrastructure for 3G networks worldwide is not expected to be completed until 2006.

"The provision of 3G networks dose not seem necessarily to help boost demand for smartphones," said Chou Chi-shian (周奇賢), an analyst with SinoPac Securities Corp (建華證券).

Another analyst agreed, saying while operators will develop 3G infrastructure during the next two years, the relationship between 3G services and smartphones was not definite.

"It is for sure that the smartphone market will grow in these two years, but it won't be an `explosive' growth as some people expect," said Ann Liang (梁嘉鈴) at Gartner Inc in Taipei.

Global shipments of smartphones amounted to 8.5 million units last year, according to Gartner. It estimates shipments to reach 20.6 million sets this year and 84 million in 2007.

Merrill Lynch expects High Tech to have more clients this year, including Audiovox of the US, which is introducing a PDA phone, and Motorola, its first OEM customer.

Sales this year are expected to rise by up to 30 percent from last year, with half of this coming from high-margin wireless products. The company's sales were NT$21.8 billion last year, according to Merrill Lynch, which rated the company as worth buying.