Despite only a slim chance of making money on the US$100 laptops it will manufacture for the Massachusetts Institute of Technology's Media Lab in the first year, Quanta Computer Inc's (廣達電腦) move will be profitable in the long run, analysts said yesterday.
"There are no other Taiwanese laptop makers like Quanta that have the supply-side economies of scale to produce these budget laptops," Simon Yang (
In addition, the world's largest contract notebook maker has advantages in logistics and production processes for key components, he added.
On Wednesday, it was reported that Quanta beat rivals including Compal Computer Inc (
Quanta's shares were up 1.04 percent, or NT$0.50, to close at NT$48.40 yesterday on the Taiwan Stock Exchange.
In January, Nicholas Negroponte, chairman and co-founder of the Massachusetts Institute of Technology's Media Lab, announced the "One Laptop per Child" initiative at the World Economic Forum in Switzerland.
The scheme aims to develop computers priced at US$100, far lower than the current cheap notebooks priced around US$500, in a bid to revolutionize global education for children.
These machines will work on a 500-MHz AMD processor and use flash memory instead of a hard drive.
According to Yang, Quanta will not be able to post margins for the first batch of budget laptops next year, as it is difficult to bring down the component costs to below US$100.
Higher component costs will go to the panels, where the cheapest 7-inch model will cost as high as US$28, with prices for 1GB of NAND flash memory to be around US$10, he said.
Quanta's decision to take part in the scheme is most probably a gesture from the service-minded chairman Barry Lam (
"However, as we see decreasing prices for these component costs in the future, Quanta will be able to make 3 percent margins for these laptops starting in 2007," Yang added.
If Quanta manages to land the contract to produce all of the 150 million units notebooks projected to roll out in 2007, this will translate into a handsome profit, he said.
Quanta, which is expected to churn out around 18 million laptops this year, might record shipment growth of 30 percent next year if the budget laptop project is included, according to Yang's estimates.
Agreeing, another analyst said that Quanta is on the right track to expand its production share.
"The notebook market is growing by 20 percent every year, and Quanta is attempting to find a new market segment to gain a share in the growing pie," said an analyst with CLSA Ltd who requested anonymity.
The project will not boost Quanta's sales tremendously due to low profitability, but the deal will definitely enhance the firm's production scale and cement its position as a leading notebook maker, he added.
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