Tue, Jun 15, 2004 - Page 10 News List

Asustek to release new cellphone

RELATIVE NEWCOMER The company has fallen behind its rivals in tapping the lucrative handset business but a new model is expected to help boost margins

By Lisa Wang  /  STAFF REPORTER

Asustek Computer Inc (華碩), the world’s largest supplier of computer motherboard for computers, is set to unveil its second mobile phone today, which analysts said will help the company make one more step further in its efforts to combat falling margin.

The launch of J101 clamshell with embedded 3-megapixel digital camera arrives some six months after Asustek made its debut with J100 model in the competitive cellphone arena last October.

Asustek, the nation's third-largest notebook computer maker, has been slow to take advantage of the lucrative handset business compared with its bigger rivals Quanta Computer (廣達) and Compal Electronics Inc (仁寶).

"Taiwanese notebook manufacturers are diversifying into new areas outside the computer industry, where gross margins are sliding," said Sean Hsiao (蕭文良), an analyst at Fubon Securities Investment Services Co (富邦投顧).

"Asustek's move is not beyond our expectations. Its expansion into cellphone production will certainly boost gross margin in the long run," Hsiao said.

Gross margins for computer manufacturing dropped to around 8 percent or 9 percent, compared to 12 percent for middle-range handset manufacturers, according to Hsiao.

Mobile phones are only a small portion of Asustek's total sales as the company saw around 40 percent of its total revenues generated from motherboard sales and a hefty 30 percent from notebook manufacturing.

Some 15 percent came from assembling PlayStation 2 game consoles for Sony Corp of Japan and another 15 percent from electronics components and other products.

"Asustek, a relative newcomer, is still very promising. I believe it can duplicate its success in the laptop computer business in light of its distribution strength in the clone market and strong product design capabilities," said Chou Chien-chung (周建忠), an analyst with Grand Cathay Securities Co (大華證券).

BenQ Corp (明基電通), the nation's largest handset maker, expects to churn out 16 million handsets this year, up from some 13 million units last year, BenQ vice president Irwin Chen (陳盛穩) said earlier this month at the Computex trade show.

"Asustek is far from competing with BenQ right now, but it is a potential threat in the near future," Chou said.

Chou said Asustek's earnings for this year should increase to around NT$14.88 billion, or NT$6.5 a share, from NT$11.57 billion last year.

Earlier this month, Asustek told shareholders that it aims to have its brand-name business account for half of the company's sales target of NT$300 billion for this year, chief financial officer David Chang (張偉明) said at a shareholders meeting.

Chou said Asustek will focus on own-brand handsets before jumping into contract manufacturing, following its successful strategy for notebooks.

A Chinese-language newspaper report said yesterday that Asustek is seeking a partnership with Chinese consumer-electronics giant Haier Group (海爾).

If Asustek is able to secure orders from Haier, it will be a good start for the company to develop its budding handset business as the gross margin for original-design manufacturing services is quite high, Hsiao said.

Asustek shares were unchanged at NT$77 on the benchmark TAIEX, which lost 2.81 percent to 5,574.08 points yesterday.

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