Largan falls ahead of iPhone launch

GROWTH CONSTRAINTS::The decline reflected investors’ disappointment with slower-than-expected sales growth last month and concern over production yields

By Ted Chen  /  Staff reporter

Fri, Sep 07, 2018 - Page 12

Shares of smartphone camera lens supplier Largan Precision Co (大立光) yesterday took a hit, as investor sentiment cooled ahead of Apple Inc’s iPhone launch on Wednesday next week.

The stock dipped 5.11 percent to close at NT$4,640 in Taipei trading, underperforming the broader market, which slid 0.64 percent to 10,924.30 points.

Other key companies in the Apple supply chain were also affected, including Taiwan Semiconductor Manufacturing Co (台積電), which dropped 1.1 percent to NT$261, and Hon Hai Precision Industry Co (鴻海精密), which declined 1 percent to NT$79.30.

Largan’s bigger pullback reflected its disappointing sales last month.

The company on Wednesday said that revenue last month rose 10 percent annually to NT$5.51 billion (US$178.88 million), bringing aggregate sales in the first eight months of the year to NT$32 billion, 1.26 percent higher compared with a year earlier.

The results fell short of some analysts’ estimates.

Largan gave a conservative outlook for this month, saying it expects sales to hold at current levels, due to production yield challenges and limited capacity.

As the iPhone launch approaches, Largan’s growth prospects could be rocked by a number of developments, local media reported, citing a recent report by Morgan Stanley.

Apple has secured a 10 percent discount on smartphone camera lenses from suppliers, while the US technology giant is expected to slash the retail price of its premium OLED screen models and delay shipments of lower-priced LCD screen models, postponing Largan’s anticipated sales growth spurt, Morgan Stanley said earlier this week.

Other analysts said that as Largan is already producing at capacity, it has little room to take on additional orders from Android phone vendors, such as Huawei Technologies Co (華為) and other Chinese brands, which have been championing the company’s advanced triple-lens design.

Expanding production capacity would be a tall order for the company, which has been working with the government to find land for new plants, Largan has said.

Still, some analysts remain optimistic about Largan’s prospects next year, as the company is well positioned to benefit from aggressive upgrades in smartphone camera specifications.

The rear-facing camera of next year’s iPhones could be upgraded from this year’s 7-megapixel sensor with a four-piece lens to a 12-megapixel sensor with a five-piece lens, Yuanta Securities Investment Consulting Co (元大投顧) said.

Largan’s leading position in smartphone camera technology is further solidified by its seven-piece, periscope lens designs, which are expected to feature in next year’s flagship Android smartphones.

In addition, Huawei has been developing a camera module that utilizes motor control to enable more than two apertures on a single module, Yuanta said, adding that such complex designs would boost Largan’s gross margins.