GPS gives MiTAC a boost

NEW SEGMENT: The firm said that stronger demand boosted shipments two-fold in the first quarter, and that the trend should continue in the current quarter


Wed, May 25, 2005 - Page 10

MiTAC International Corp (神達電腦), the world's biggest aftermarket automotive global positioning system (GPS) device maker, yesterday said shipments would more than double this year on fast-growing demand for the handheld gadget, primarily in Europe.

"We aim to boost our shipment this year by several times from last year," said MiTAC president Billy Ho (何繼武), adding that shipments of its handheld GPS gadgets already jumped two-fold in the first quarter to exceed 500,000 units.

"We believe the growth momentum will carry into the current quarter. For the full year of 2005, Europe will continue to be a market with the strongest growth," Ho said on the sidelines of a press conference to launch the company's new products.

Last year, MiTAC shipped around 1 million portable GPS units, including pocket computers enabled with GPS functions. Of those, 70 percent were sold to Europe.

MiTAC branched into the high-margin market in November 2003, unveiling its first product under the "Mio" brand as it searched for new growth areas.

Gross margin for the GPS products is around a double-digit percent, Ho said.

This is much better than the 6 percent gross margin earned by local contract computer makers led by Quanta Computer Inc (廣達電腦).

In addition to its brand-name business, MiTAC also makes GPS products for other device vendors, including German GPS giant Medion AG. Contract manufacturing was a strong driver of sales last year.

A bulky 65 percent of sales in the GPS division came from contract manufacturing services last year, Ho said, adding that this would remain unchanged this year.

MiTAC's new GPS business, which made up 15 percent of the company's total revenue of NT$50.5 billion last year, has attracted investor interest.

"Surging GPS volume is bringing MiTAC better margins," said Vincent Chen (陳豊丰), an electronics hardware analyst at CLSA Ltd in Taipei, in a report released on May 16.

The Hong Kong-based research house initially added MiTAC into its list of covered companies in May. It rates the company a "buy," with a 12-month target price of NT$43.1, which represents about 41 percent upside from the closing price of NT$30.5 yesterday.

The global automotive GPS market is expected to expand rapidly, at an annual pace of 38.2 percent for new cars and 30 percent for the aftermarket during the five-year period from 2003 to 2007, Chen said, citing market researcher Gartner Inc's statistics.

Boosted by the resilient demand, MiTAC's shipment are expected to nearly triple to 2.7 million this year, which would boost the company's market position in the aftermarket to 14 percent this year, from 6 percent last year, Chen said.