Local contract makers may be better off in the second quarter as higher US interest rates and, in turn, a stronger US dollar look set to eliminate the foreign exchange losses that some of the makers have been suffering, analysts said yesterday.
"We do not expect serious foreign exchange losses to affect Taiwan's contract makers in the second quarter as they did in the first quarter," said Vincent Chen (
"The US dollar is expected to strengthen, on the likelihood that the US Federal Reserve Board (Fed) will raise interest rates in the near future," Chen said.
He predicts that the NT dollar will hover at around NT$33 against its US counterpart in the second quarter.
Fed Chairman Alan Greenspan told the US Senate this week that deflation no longer appears to be a threat, citing restored pricing power. Greenspan's comments prompted market watchers to speculate that the US central bank may raise rates as soon as June if consumer prices keep rising and a recent spurt in job creation is sustained.
This could provide good news to Taiwanese export-oriented contract computer makers, who suffered unexpected foreign-currency exchange losses in the first quarter because of the NT dollar's appreciation, analysts said.
With US$1.2 billion cash on hand, the world's No. 2 laptop maker, Compal Electronics Inc (
The loss ate into Compal's income, which came in at NT$1.6 billion, a slide of 54 percent from the previous quarter and 30 percent from a year earlier. The company posted earnings per share (EPS) of NT$0.53 in the first quarter, a dip of 29 percent from the previous quarter.
Compal's president, Ray Chen (
Compal was not the only laptop maker to suffer foreign exchange losses in the first quarter. Quanta Computer Inc (
"We estimate that Quanta suffered a smaller foreign exchange loss than Compal, at something more than NT$200 million in the first quarter," said Stephanie Chien (
Quanta shipped 2.19 million laptops to its clients, with an estimated gross margin of 7 percent, and generated NT$65.2 billion of consolidated revenue in the first quarter, down 28 percent from the previous quarter but 18 percent up on the year, with an estimated EPS of NT$1, Vincent Chen said.
Both Vincent Chen and Chien said Inventec Corp (
"Considering Inventec's low gross margin of around 6 percent and its relatively high expenditures on research and development and management, its financial statement may not look good if it encounters foreign-exchange losses as high as Compal's," Chen said.
Inventec shipped between 530,000 and 540,000 laptops in the first quarter and brought in revenue of NT$27.6 billion, up 20 percent from the previous quarter and 45.6 percent year-on-year, thanks to mass shipments to Hewlett-Packard Co.
The company's EPS came in at between NT$0.10 and NT$0.20, according to figures provided by the Taiwan Securities Investment Advisory.
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