Inventec Corp (英業達) yesterday said it plans to cope with the intensifying US-China trade war by shifting its labor-intensive module assembling business to factories in Taiwan, Malaysia or Mexico to avoid US tariffs on Chinese imports.
The trade war is the biggest risk facing the electronics industry this year, undermining capacity expansion plans in Shanghai and other cities in China, Inventec said.
“The company expects 10 percent of its revenue to be be affected by the US$250 billion tariff list,” Inventec Appliance Corp (IAC, 英華達) chief executive officer David Ho (何代水) told an investors’ teleconference.
IAC, a smart device manufacturing arm of Inventec, supplies AirPod earbuds for Apple Inc.
If Apple products were not exempted from US tariffs, the impact “would have been as high as 90 percent,” Ho said.
“We are comfortable [about the tariffs’ effects]. However, we are more concerned about the next round of US tariffs, which could include almost all goods” made in China, Ho said. “We want to do everything we can to help reduce costs for our clients.”
The US has announced 10 percent tariffs on US$250 billion of Chinese products and US President Donald Trump has said the tariffs would be increased to 25 percent on Jan. 1.
To avoid the planned tariff hike, IAC is preparing for capacity expansions in its factories in Taiwan and Malaysia that assemble mobile and smart devices for the US market, he said.
IAC is also considering assembling notebook computer and server modules at its Mexico plant, he said.
Due to growing uncertainty about trade tensions and a continuing shortage of Intel Corp microprocessors, Inventec is cautious about the outlook for the current quarter and next year, Inventec president Maurice Wu (巫永財) said.
“We began to see the early effects of the trade war in the third and fourth quarters,” Wu said.
Revenue this quarter will likely retreat from a record NT$141.07 billion (US$4.57 billion) last quarter, and gross margin is also trending down, the company said.
Gross margin dropped to a multiyear low of 4.7 percent last quarter from 5.5 percent a year earlier and 5 percent a quarter earlier.
Net profit last quarter plunged 32 percent annually to NT$1.58 billion from NT$2.33 billion, due mainly to a huge foreign-exchange loss of NT$503 million as the Chinese yuan fell 4 percent against the US dollar in the quarter.
On a quarterly basis, net profit contracted by 30 percent from NT$2.24 billion.
Notebook computers constituted the biggest portion of the company’s revenue last quarter with 45 percent share, the company said.
Servers accounted for 36 percent, while smart devices made up 18 percent.
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