Quanta Computer Inc (廣達) expects its gross margin to further improve on stable demand for Apple Watches, after reporting a gross margin of 5.08 percent last quarter, its best quarterly performance in five years.
As shipments of the product have grown significantly this month, the Apple Watch will start to make a significant revenue contribution to Quanta in the next quarter, a Quanta employee said on Thursday.
“Let’s wait and see how sales affect Quanta’s gross margin,” said the employee, who is familiar with the matter, but declined to be named, following Quanta’s annual general meeting.
The company assembles Apple Inc’s 12-inch MacBook and Apple Watch. It attributed its improved margin last quarter to lower operating costs, a better product mix and the strength of its cloud-computing business.
“Stable demand for the Apple Watch is important to Quanta’s gross margin,” the employee said. “If demand fluctuates from month to month, the Apple Watch might have a negative impact on Quanta.”
Commenting on the sales of Apple Watches, the Quanta employee said that the first batch of smartwatches it produced have been cleared through sales channels, indicating strong demand for the product.
On the sidelines of the meeting, Quanta vice chairman C.C. Leung (梁次震) told reporters that the company has increased its capacity to produce Apple Watches in a bid to meet Apple’s demand for the second phase of the product’s launch.
Asked if the supply chain for the smartwatches is under pressure, Leung said “there is no problem on that issue.”
Credit Suisse AG said in a note on May 15 that Quanta might ship 2 million Apple Watches this quarter and the figure would grow significantly in the second half of this year to a total annual shipment of 17 million units.
The Quanta source said the company sees strong business potential in smartwatches because among all Internet of Things applications, it is the only item that ordinary consumers might want to purchase.
“Not everyone needs a pair of smart glasses or a smart smoke detector at home,” the official said.
Last week, Quanta recorded a drop in net income of 21.5 percent year-on-year and 32.1 percent quarterly to NT$3.67 billion (US$119.3 million) last quarter, or NT$0.95 per share, mainly hit by a foreign exchange loss of NT$152 million.
Quanta shares closed at NT$70.4 on the local bourse on Thursday, up 0.57 percent from Wednesday.
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