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Quanta's Q4 profit may nosedive 25%

Quanta Computer Inc may report that profit in the fourth quarter fell by more than 25 percent because Taiwan's largest notebook computer maker was crimped by rising component prices and demands to lower prices.

Net income in the three months to December probably fell 27 percent to NT$2.24 billion (US$64 million), compared with NT$3.07 billion a year earlier. The numbers were derived by subtracting estimates of 18 analysts surveyed by IBES International from the company's profit in the first nine months. Quanta said it tentatively plans to release its 2001 earnings results tomorrow at 2pm Taiwan time.

The personal computer market shrank last year for the first time since 1985, according to market researcher Dataquest Inc.

That forced companies such as Dell Computer Corp and Hewlett-Packard Co to farm out more of their production and also demand discounts to pare costs.

Dell, which accounts for about half of Quanta's sales, asked the Taiwan company in the fourth quarter to lower rates charged for manufacturing notebooks, said a Quanta official, who declined to be named.

The spot price of 128-megabit chips, used as the main memory in personal computers, nearly doubled in the fourth quarter to about US$2.4 from US$1.3 in the previous three months.

"Flat panel and memory-chip prices gained in the fourth quarter and are likely to continue rising in 2002 as supplies are faltering and demand has gradually recovered," said Quanta Chief Financial Officer Tim Li.

Quanta this month said its sales for this year may rise 34 percent to US$5 billion as customers such as Apple Computer Inc. placed new desktop computer orders and Dell increased its orders.

The company targets to ship about 6.5 million notebook computers this year, compared with about 4.4 million last year, company spokeswoman Sherry Yang said.

Quanta, which in 2000 began shifting production to China to tap the country's workforce to lower costs, plans to boost investment on the mainland this year, Yang said. The company plans to set up a research and development center in Taiwan to ensure the island's technological lead over China.

Taiwan restricts advanced technology investments in China on fears it will lose its competitive edge over its political foe.

It also fears that a flood of Taiwanese manufacturers moving to China would stoke an increase in the jobless rate from its record 5.4 percent.

By investing in China, Quanta can contend with competitors, which already own plants on the mainland, and meet clients' needs to lower prices.

Compal Electronics Inc, the second-largest supplier of Dell notebooks in Taiwan, and Acer Inc, which started supplying Dell in late 2001, have both build plants in China to produce parts and assemble notebook computers.
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