Consumers may soon be able to buy an Olympus digital camera manufactured by Hon Hai Precision Industry Co's (鴻海精密) Chinese factories, after the Taiwanese company announced last week it would acquire the nation's top camera maker, Premier Image Technology Corp (普立爾).
The NT$30 billion (US$9.2 million) deal attracted widespread attention despite a wave of mergers and acquisitions in the local electronics sector.
The deal would help Hon Hai chairman Terry Gou (郭台銘) keep his promise of raising revenues by 30 percent per year for the next five years, but would make it harder for Premier's rivals to battle the electronics giant, analysts said.
"The Premier acquisition will be good for Hon Hai, as it is seeking new consumer electronic gadgets to replace computers as a new growth driver," said Lu Chia-lin (呂家霖), an analyst with Yuanta Core Pacific Securities (元大京華證券).
The acquisition would increase Hon Hai's earnings by about 5 percent this year, Lu said.
Hon Hai, which assembles iPods for Apple Computer and PlayStation game consoles for Sony Corp, last year earned NT$43.97 billion, or NT$10.21 a share, on NT$911.77 billion in revenues, according to the company's filing with the Taiwan Stock Exchange.
"I fear for Hon Hai's competitors. The deal will lead to a huge change in the nation's digital camera landscape," said Simon Yang (楊勝帆), who tracks the consumer electronics industry for the Taipei-based researcher Topology Research Institute (拓墣產業研究所).
Shares in Premier's rivals Ability Enterprise Co (佳能) and Altek Corp (華晶科技) fell 4.08 percent and 6 percent, respectively, on the Taiwan Stock Exchange last Tuesday after the Hon Hai-Permier deal was announced before the market opened.
To safeguard its profitability, Premier made it a policy not to produce cameras with a gross margin lower than 10 percent, but that strategy might be ended once the Hon Hai deal takes effect in December, Yang said.
With its strong cost-saving abilities, Hon Hai would be able to undercut competitors, Yang said. More than 50 percent of Ability's sales are made to Japan's Casio, while Altek has US-based Eastman Kodak Co as its largest client, he said.
Premier currently supplies cameras to major camera brands, including Olympus and Sony.
Hon Hai has gained fame for making money through economies of scale -- shipping huge volumes of lower-margin goods by sourcing cheap components, he said.
That strategy could improve Premier's outlook, since the camera industry is slumping due to growing competition from camera phones and the slowing pace of replacement for traditional film cameras, Yang said.
Ability and Altek would not be the only companies at risk, since the Premier-Hon Hai combo would also exert great influence on manufacturers of camera lenses for the mobile phone industry.
"We are downgrading Largan Precision Co (大立光) from `buy' to `under perform' and cutting the 2006 [earnings] forecast by 2 percent and 2007 by 12 percent, owing to potential competition from the Hon Hai and Premier merger," said Vincent Chen (陳豊丰), a hardware analyst at CLSA Ltd.
Premier now ships up to 1.5 million handset camera lenses per quarter, compared to the more than 10 million that Largan ships, he said.
He said the new Hon Hai could launch a price war to grab customers, backed by its phone camera lens manufacturing affiliate, Altus Technology In (
In the long term, Hon Hai would be a threat to handset camera lens makers, including top player Largan, when Premier improves yield and boosts production volume, Chen said.
Lite-On Technology Corp (
Chen lowered his earnings forecast for Lite-On by 11 percent for this year and 13 percent for next year because of the possible impact from Hon Hai's takeover of Premier, along with other factors.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts