Largan Precision Co (大立光), Taiwan’s leading maker of handset lenses, posted a record low in gross margins last year, because the purchase of other makers’ voice coil motors (VCM) affected profitability because of higher costs.
The company — whose customers include Apple Inc, Research in Motion Ltd and HTC Corp (宏達電) — posted 43.8 percent in gross margins last year, the lowest level since the company went public in 2001. Gross margins in 2008 were 53.5 percent.
The company sourced VCMs, one of the three auto focus actuator technologies used in camera lenses, from outside makers and then assembled them with its own lenses. That drove up the production costs and affected margins, chairman Scott Lin (林耀英) told an investors’ conference.
The company is in the process of manufacturing its own VCMs, but there will be a smaller ramp up of in-house production this year and the company still has to purchase most components from outsiders, Lin said.
The market value of auto focus actuators was estimated to be about US$300 million last year, roughly half the size of the camera lens market, Nomura Equity Research said.
In light of accelerating resolution migration to 3 megapixels and the growth of smartphones, auto focus actuators will penetrate the handset market. Higher-resolution cameras usually require an auto focus function to achieve desired image quality, Nomura said.
Largan reported a 9 percent growth in revenues to NT$8.2 billion (US$247 million) last year, while net income was down 23 percent to NT$2.5 billion, or NT$18.7 per share, from NT$3.2 billion, or NT$24.4 a share, in 2008.
Sales of handset lenses, which contribute more than 90 percent to Largan’s total sales, increased 16 percent last year, while revenues for digital camera lenses and multifunctional projector lenses dropped 15 percent and 45 percent respectively, the company said.
Looking forward, Lin said first quarter prospects would be better compared with the same period last year, with revenues forecast to decline more than 10 percent from the fourth quarter because of seasonal factors.
While 2-megapixel and 3-megapixel lenses accounted for Largan’s major shipments last year, 3-megapixel and 5-megapixel lenses will take center stage this year, Lin said. The company has also started to deliver 8-megapixel lenses.
The migration to higher lens resolution will help the company sustain its margins, because there is a technology barrier to catch up to for makers to produce such lenses, he said.
Meanwhile, Largan said it was facing a labor shortage in its Chinese factories, which has affected order deliveries to clients.
The company is set to build a new factory in Taichung in the third quarter to cope with rising production capacity.
Largan’s shares closed up 1.35 percent to NT$413 on the Taiwan Stock Exchange yesterday before the earnings announcement, while the benchmark TAIEX slid 1.26 percent.
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