Tue, Nov 12, 2013 - Page 13 News List

Pegatron reports significant Q3 profit

BUSINESS STRATEGY:Pegatron Corp announced its plans to merge with subsidiary Unihan Corp, which designs Wi-Fi modules, in a bid to integrate its enterprise resources

By Helen Ku  /  Staff reporter

Pegatron Corp (和碩), an assembler of Apple Inc’s iPhone 5C and iPad Mini, yesterday reported that third-quarter net profit grew 52.5 percent year-on-year to NT$2.47 billion (US$83.77 million), or NT$1.08 per share, on strong demand for consumer electronics.

Net profit expanded 77.9 percent from NT$1.39 billion last quarter, the company said at an investors’ conference.

However, Pegatron chief executive officer Jason Cheng (程建中) declined to answer whether Apple has cut orders of its lower-priced iPhone 5C, citing a confidentiality agreement with the US client.

“It’s common to see intense competition in any industry, but we have absolute confidence we will remain competitive in the market and continue supplying satisfactory products and services to clients,” Cheng said.

Asked to comment on Apple’s plan to diversify its supply chain, Cheng said Pegatron is an experienced assembler of various electronics products.

“While we believe our clients always make rational decisions when selecting industry partners, Pegatron is also seeking to explore its own path in response to the market’s changes,” he said.

To complete growing orders for mobile devices, Pegatron this year deployed automation equipment at its assembly lines to trim labor force.

With installation of automation equipment, the total cost of operating each assembly line can be reduced by 10 to 15 percent at most, Chang said.

“The biggest concern remains the company’s huge labor cost at each assembly line,” Pegatron chief financial officer Charles Lin (林秋炭) said.

Currently, most of Pegatron’s assembly lines are in Shanghai, with up to 100,000 Chinese workers assembling Apple’s iPhone 5C and iPad Mini each day, Pegatron said.

The company also has factories in Vietnam and the US.

Asked whether Pegatron would follow its rival Hon Hai Precision Industry Co (鴻海) and establish a plant in the US to complete “made-in-USA” orders, Cheng said: “That is doable, but challenging.”

“The reality is that it remains difficult for contract PC makers to offer a large number of assembling jobs in the US,” Cheng said.

“Our goal is to reduce our reliance on labor, and we will keep moving to achieve our goal year after year,” he added.

Regarding wearable devices, Cheng said he believes the rise of wearable gadgets is “stimulating a revolution.”

However, based on the performance of smart-watch or smart-glasses developed so far, Cheng forecast it might take up to 5 more years before wearable devices replace smartphones and tablets and become Pegatron’s sales driver.

For this quarter, Pegatron forecast its motherboard, laptop, desktop and non-computing product shipments would increase at a single-digit rate.

Last quarter, on a quarterly basis, Pegatron saw its communication product sales grow by 89 percent and account for 42 percent of its total product shipments.

Sales of computing products, including laptops and desktops, dropped 18 percent quarter-on-quarter and accounted for 31 percent of Pegatron’s total shipments, while consumer product sales grew 22 percent quarter-on-quarter and accounted for 27 percent of the company’s total shipments.

To integrate enterprise resources, Pegatron yesterday announced plans to merge with subsidiary Unihan Corp (永碩), which designs and manufactures mobile Wi-Fi modules for telecom operators.

The move is crucial to the company’s future business strategy, Lin said, citing mobile Internet access as key to new product development.

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