Compal Electronics Inc (仁寶), the world’s second-largest contract notebook computer maker, has secured assembly orders from Austrian crystal and jewelry company Swarovski AG to make its smartwatches and is to begin large-scale production next quarter, people familiar with the matter said.
“That will help Compal to expand its presence in the global smartwatch industry and improve its profitability this year after it tapped into the smartwatch segment by shipping nearly 600,000 smartwatches for Fossil Group Inc last year,” said the people, who asked not to be named as the matter involves Compal’s clients.
The Taipei-based company produces a wide range of electronics, including all-in-one computers, tablet computers, smartphones, servers and LCD TVs.
The products are to be produced at the company’s factory in Kunshan, China, the people said, adding that Swarovski would design the smartwatch and supply diamonds and other jewels for them.
Compal’s income for assembling the products is to be almost 50 percent of the market price, which would be of significant benefit to its revenue, because the products are likely to be priced at nearly 1 million euros (US$1.07 million), the sources said.
Swarovski is to unveil its own Android Wear smartwatch at the Baselworld Watch and Jewelery Show in Switzerland in March, with the product running Qualcomm Inc’s Snapdragon chipset, Qualcomm said at the Consumer Electronics Show in Las Vegas, Nevada, this month.
The sources said Compal is also in talks with luxury brands Gucci, Louis Vuitton, Prada and Michael Kors to develop smartwatches this year.
Taiwanese contract manufacturers have been developing their assembly businesses for smart devices, including wearables, in an effort to offset weakness in the PC and smartphone industries in the past two years.
Quanta Computer Inc (廣達), which makes MacBooks for Apple Inc, became the sole assembler of the Apple Watch series in 2015, while Inventec Corp (英業達) entered the supply chain of Fitbit Inc’s wearable devices last year.
Unlike its Taiwanese peers that focus on wearables that feature healthcare and fitness functions, Compal’s strategy is to mainly collaborate with high-end brands in the fashion industry, because the products have higher margins, company officials said.
The gross margin for notebooks is usually between 3 and 4 percent — less than 4 percent for the Apple Watch — while gross margin for Swarovski smartwatches could exceed 10 percent, the officials said.
Compal president Ray Chen (陳瑞聰) on Jan. 13 told reporters that the company’s growth momentum this year is expected to be driven by Internet of Things (IoT) applications, including smartwatches and home devices.
Shipments of IoT devices are estimated to climb from 5.4 million last year to between 10 million and 12 million units this year, of which smartwatches are to account for 1.2 million units this year, Chen said.
Chen said revenue contribution from Compal’s non-notebook products are to reach more than 30 percent of the firm’s total revenue this year, up from last year’s 26 percent.
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