Increased orders from Nokia Oyj this year will pose a mixed blessing for local handset component suppliers Largan Precision Co (大立光), Silitech Technology Corp (閎暉) and Unimicron Technology Corp (欣興電子), Merrill Lynch said.
These companies are likely to benefit from increased Nokia orders to meet rising demand in China, but the persistent pricing pressure from the Finnish company will no doubt cut into local suppliers’ margins and erode their profits, Merrill Lynch said in a client note on Wednesday.
Largan Precision Co (大立光) is the nation’s leading maker of camera phone lenses and Silitech Technology Corp (閎暉) is the world’s fourth-largest maker of mobile-phone keypads.
Taoyuan-based circuit board maker Unimicron Technology Corp (欣興電子), meanwhile, has merged with Phoenix Precision Technology Corp (全懋精密) to expand its market share.
Of all the global brand name vendors, Nokia could be the handset-maker to benefit most from China’s plan to subsidize electronics purchases by rural consumers, Merrill Lynch said.
Nokia takes up roughly 35 percent of China’s mobile phone market.
Against this backdrop, Largan, Silitech and Unimicron are seeing signs of bottoming out and expect sales growth to continue this month and next, Taipei-based Merrill Lynch analyst Laura Chen (陳佳儀) said in the note. However, order visibility remains low at 4 weeks amid persistent margin pressure, she said.
Chen was not alone in offering a cautious outlook for local handset component makers.
On Monday, Citigroup Global Markets analyst Kevin Chang (張凱偉) said in a report that these suppliers are facing challenges of “low revenue visibility and high margin pressure” and Citigroup “found it difficult to turn positive on the Taiwan handset food chain,” despite expected sales growth of between 15 percent and 20 percent in the second quarter from the current quarter.
Unimicron and Largan traded up 3.59 percent and 3.14 percent respectively yesterday to NT$20.2 and NT$296. Silitech closed down 0.80 percent to NT$62.
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