Benq Corp (明電), which makes mobile phones for Motorola Inc, said first-half net income will exceed its forecast, rising by more than half after demand increased for its phones and flat-panel displays.
"For the first half of this year, sales should grow by more than 50 percent," President Lee Kun-yao (李錕燿) said in an interview. "Net income growth will be higher than that."
Lee, who said the company originally expected revenue to rise by 30 percent in the first six months, forecasts profit in the first quarter will more than quadruple from NT$350 million (US$10 million) a year ago.
Lee's estimate underscores Benq's success at providing low-cost manufacturing to customers such as Motorola, which are trying to cut costs by farming out more production to suppliers in Asia.
Benq's expectations may also signal a recovery in the demand for consumer electronics, which touched an all-time low last year.
"All of Benq's units are moving in a positive direction," said Pedro Tai, who manages US$120 million in equities at ABN-Amro Asset Management Taiwan Ltd and is planning to buy Benq shares.
Benq will continue to win orders from multinational mobile-phone makers trying to expand in the China market, he said.
Sales to Motorola, the second-largest mobile-phone seller, and other smaller companies, including some in China, are rising, Lee said. Demand for liquid-crystal displays, which the company buys from unit AU Optronics Corp (友達光電) and turns into personal-computer monitors, is also growing as prices of the flat screens decline, he said.
A 50 percent increase in first-half net income from a year ago would boost Benq's profit to NT$1.6 billion.
Taipei-based Benq, which made 6.8 million phones last year, or about 2 percent of total world shipments, expects to double output this year, helped by production from a new plant in Suzhou, China.
Benq earlier said it will make about a third of its phones this year in Suzhou, where production costs are lower than in Taiwan.
Many of the largest mobile-phone companies, including Motorola, Nokia Oyj and Ericsson AB are shifting production to China, which last year became the largest mobile-phone market, overtaking the US.
"Some companies are still expanding in China," Lee said. "Maybe they will close down their operations in Europe and shift to China."
Benq, which changed its name from Acer Communications & Multimedia Inc in December, owns 21 percent of AU Optronics, Taiwan's largest maker of flat-panel displays and the world's third-largest maker of LCDs. AU Optronics posted a loss of NT$6.7 billion last year after prices fell below the cost of production.
"Last year the LCD industry was in oversupply," Lee said. "We lost almost NT$1 per share from AU Optronics. This year, we will not have such a burden."
AU Optronics will turn to a profit in the first half this year as demand and prices for liquid-crystal displays (LCDs) are rising, Lee said.
Benq, which buys LCDs from AU Optronics, expects to double sales of the personal-computer monitors that it makes from the screens.
"Because we have improved our economic scale, we're enjoying profits," Lee said.
Benq, which broke ground for its Suzhou facility in 1993, chose China to tap the market in the most populous nation and take advantage of its low costs for exports to the rest of the world.
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