Battery supply shortage to hit Compal's shipments

Compal Electronics Inc (仁寶電腦), the world's second-largest contract notebook computer maker, said yesterday that shipments would drop by between 5 percent and 7 percent in the seasonally slack first quarter and it expected a recent battery cell shortage to limit any recovery in the next quarter.

Compal said a fire at battery cell maker LG Chem Ltd, based in South Korea, would cause a 2 percent to 3 percent drop in the global supply of cells used in laptops and would affect its shipments next quarter.

"Before figuring in the impact of the battery cell problem, we forecast shipments would grow 13 percent to 15 percent quarter-on-quarter," company president Ray Chen (陳瑞聰) told an investor conference yesterday.

But now, Chen said, the growth would be 10 percent.

"The battery cell issue has a significant impact on the [notebook computer] industry because only five manufacturers supply the component," Chen said.

Compal shipped 6.5 million notebooks to customers, including Hewlett Packard Co and Dell Inc, in the fourth quarter last year.

Despite weaker-than-expected demand in the US, the computer maker said it would still be able to achieve its shipment target of 32 million units this year as demand in other regions was quite strong.

Compal shares yesterday rose 1.22 percent, or NT$0.35, to NT$29.1 after it reported record high net profits for the fourth quarter last year on Tuesday night.

Net income leapt 60 percent to NT$4.15 billion (US$134 million), or NT$1.09 a share, compared with NT$2.59 billion, or NT$0.69 a share, a year ago, a company statement said.

Gross margin improved to 4.9 percent last quarter from 4.7 percent, it said.

Compal expects to sustain gross margin at current levels this quarter by cutting costs to offset a rising NT dollar and higher labor cost in China, Chen said.

He declined to specify the erosion in foreign exchange losses.

"It is almost impossible for Compal to prevent its gross margin from sliding with an appreciating NT dollar and the rising battery cell price," said Sean Hsiao (蕭文良), who tracks the PC industry for Fubon Securities Investment Services Co (富邦投顧).

Hsiao yesterday cut his first quarter net income forecast for Compal to NT$0.78 per share from his previous estimate of NT$0.82 a share, saying a rising local currency would hurt exporters.