Tue, Aug 31, 2004 - Page 10 News List

Camera makers may get boost from price war in China


Taiwanese contract digital camera makers, including Altek Corp (華晶科技), are expected to get a much-needed boost as international brands increase outsourcing to the country to brace for stiffer price competition in the Chinese market, a research house said yesterday.

As more electronics makers such as Hewlett-Packard Co gear up to tap the fast-growing Chinese market, the price war could intensify, said the Chinese Information and Communication Technology Co (CICT, 中華資通) yesterday.

"That will be a boon for Taiwanese contract makers as these industry entrants may place more orders to local companies to lower costs," CICT president Vincent Huang (黃富琮) said at a briefing in Taipei.

Huang expects prices of digital cameras to drop further in the third quarter after a drastic drop of 20 percent in the first half.

Chinese consumers are expected to buy twice as many digital cameras this year, reaching 2.67 million units, compared to 1.35 million sold last year, according to CICT's projection.

Helen Chen (陳佩君), an analyst with Polaris Securities Co (寶來證券), agreed with Huang's assessment, saying that the orders, if secured, would give a boost to struggling local companies.

HP, which maintains close ties with Taiwanese contract computer makers, is close to making a decision on its manufacturing partner. Taiwan's No. 2 digital camera maker Altek and its bigger rival Premier Image Technology Corp (普立爾) are on HP's shortlist, Chen said.

"HP's orders will give leeway for those companies to stay in the market. But the deal will not improve the already thin gross margin. Taiwanese digital cameras companies are under heavy pressure to maintain profitability," Chen said.

Altek reported a dramatic 60 percent decline in earnings to NT$170.9 million during the first six months, from NT$401.1 million a year ago and didn't gain much help from major customer Eastman Kodak Co. As such, earnings per share also fell sharply to NT$0.9 from NT$1.93.

Kodak made significant progress in the Chinese market last quarter, grabbing a 16 percent share to become the third-largest camera vendor in China, according to CICT's statistics. Last year, Kodak only garnered a 9 percent market share, the researcher said.

In the second quarter, sales of digital cameras in China slid 6.2 percent to 666,900 units from three months earlier due to seasonal factors, CICT's Huang said.

Worth noting was Samsung Techwin Co, a digital-camera affiliate of Samsung Electronics, which doubled its market share to 6.31 percent last quarter, he added.

"Taiwan's Ability Enterprise Co (佳能), which will start supplying Techwin this month, should take big profits from the quick expansion.

That will help Ability increase its high-margin original design manufacturing (ODM) products to 10 to 15 percent of sales versus nothing before," Chen of Polaris said.

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