Tue, Aug 21, 2007 - Page 12 News List

Handset makers face slowdown in Q3, Q4

By Jason Tan  /  STAFF REPORTER

The nation's cellphone contract manufacturers are expected to face a bleaker outlook as consumers may curtail spending in the wake of US subprime mortgage problems, Citigroup said in a report released yesterday.

"Global handset sales will slow until the first quarter next year as the subprime mortgage issue will impact consumers' spending power," Dale Gai, an analyst with Citigroup Research, said in the report.

The overall production utility rate of the handset supply chain has dropped to 70 percent to 80 percent, Gai said.

He said that this echoed Nokia Oyj's earlier projection of a quiet third quarter, which is expected to see only marginal growth or see demand remain at the same level as the second quarter.

The slow growth will further impact Taiwanese makers, which experienced a lackluster first half.

Compal Communications Inc (華寶通訊), the nation's top handset contract manufacturer, saw revenues last month dip 28 percent from a year earlier to NT$3.5 billion (US$106 million). Cumulative sales from January to last month decreased 26 percent to NT$30 billion.

Compal Communications said it shipped 11 million handsets in the quarter that ended in June while first-half shipments reached 25.3 million units.

The company, which sells nearly 90 percent of its products to troubled Motorola Inc, announced in May that it would cut its shipment goal for this year to 55 million units, down from its previous projection of 75 million.

The adjusted figure represents a 20 percent decrease from the 68.8 million units it shipped last year.

"This will be a rock-bottom year for Compal Communications. But with more smartphone models rolling off production lines next year, our volumes will grow," Compal Electronics Inc (仁寶電腦) president Ray Chen (陳瑞聰) said at an investor conference last week.

Compal Electronics is the parent company of Compal Communications.

Arima Communications Corp (華冠通訊), which makes phones for Sony Ericsson and other companies, saw sales rise 4 percent to NT$1.2 billion last month, while the figure for the first seven months of the year plunged 57 percent to NT$7.4 billion.

SinoPac Securities Corp (永豐金證券) holds a more upbeat outlook on the handset industry and predicted upward momentum in the third quarter, especially next month, as new models begin to ship.

However, in a research note issued yesterday, Sinopac gave a "hold" rating for both makers.

"The strategy of Motorola's low-end models is unclear for the time being; we still need to observe how it contributes to Compal in terms of shipments and delivery times. Arima shipments are falling behind schedule and this has affected its sales and profitability," Sinopac said.

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