Citigroup Inc suggested investors sell Asustek Computer Inc (華碩電腦) stock in the upcoming quarter because of sluggish demand for Asustek computers and margin decline amid intensifying competition.
Citigroup set the target price of the Taipei-based Asustek, which sells the low-cost Eee PC series, at NT$76 for the next 12 months, implying an almost 4 percent decline from the stock’s closing price of NT$79 on Friday.
Increasing margin risk and slowing growth for Asustek’s major products — notebook computers and motherboards — are the main reasons, a Citigroup report dated Aug. 1 said.
Asustek may say net income dropped 18 percent quarter-on-quarter, or declined 14 percent year-on-year, to NT$5.92 billion in the second quarter, Citigroup predicted. The company is scheduled to release its second-quarter earnings on Wednesday.
“The intensifying competition could lead to margin pressure for Eee PCs, as most of the components are becoming standardized,” Citigroup analyst Eve Jung said in the report.
Asustek may report gross margin fell to 19.4 percent in the second quarter and to 19.8 percent this quarter, from 21.5 percent in the first three months of the year, Jung said.
The company is seeing greater competition from bigger rivals including Dell Inc, the world’s second-largest PC maker, which planned to sell an entry-level laptop in the current quarter at prices as low as US$299 each to compete with Asustek’s Eee PC series, the report said.
Japanese PC makers are expected to launch their low-cost models next year, following in the footsteps of Hewlett Packard Co and Acer Inc, which debut their low-cost laptops in the second quarter, the report said.
Asustek may fail to make its target of selling 5 million Eee PC notebooks this year because of supply constraint for plastic casings, after missing the goal of selling 1 million units in the second quarter, Jung said.
On Thursday, however, the company said that the goal was achievable, as a shortage of batteries would ease.
Because of slowing end-demand in China and Europe, Asustek missed its notebook shipment target in the second quarter by selling 1.2 million notebooks, fewer than the 1.4 million units the company had estimated, the report said.
“We believe the slower-than-expected NB shipments were due to the slowing demand for high-end models and weakening demand in Asia,” Jung said.
Europe and Asia accounted for 54 percent and 36 percent of its branded revenues last year.
Jung expects Asustek to miss its notebook shipment target of 6.6 million units for this year. Notebooks account for half of the company’s branded revenues.
In addition, motherboard shipments also declined by 14 percent quarter on quarter because of slower-than-expected demand from the clone market, the report said. Motherboards made up about 20 percent of Austek’s branded revenues.
However, on the momentum and valuation fronts, Asustek ranks higher than its peers in Taiwan, as well as in the tech hardware and equipment sector, the report said.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in