The growing popularity of online sales in China is posing mixed challenges for Taiwan’s two major contact lens makers, CIMB Securities Ltd said on Sunday.
Ginko International Co (金可國際), the largest contact lens maker in China, is facing stronger competition as a result of heavy price discounting on the Internet, while St Shine Optical Co (精華光學) might see increasing outsourcing orders from brand-name companies, the Hong Kong-based brokerage said in a research report.
Shares of Ginko increased 1.38 percent to NT$441 yesterday on the over-the-counter market and those of St Shine rose 1.23 percent to NT$659 compared with the GRETAI’s 0.54 percent decline.
CIMB’s latest analysis of statistics compiled by the China E-commerce Research Center shows that China has experienced a fast-growing online retail market for pharmacy and medical products, with sales increasing by a compound annual growth rate of 177 percent from 200 million yuan (US$32.57 million) in 2010 to 4.26 billion yuan last year.
EYEING THE MARKET
As many as one-third of China’s total population is estimated to have vision problems, CIMB said. CIMB expects strong growth in online retail sales for contact lenses in China over the next few years.
In June, JPMorgan Securities Ltd forecast that China’s market might double from the current 3.6 billion yuan in four to five years.
However, the analysis also highlights escalating price competition in the contact lens market, given that branded contact lenses are mostly standardized products.
HOLIDAY HUSTLES
CIMB said some pharmacy retailers tend to offer price cuts of up to 40 percent to attract online traffic, alongside higher discounts during certain special sales seasons like the “Golden Week” holiday next month or the “Singles Day” holiday in November.
Such market structure and retail practices could mean more risks than opportunities to contact lens brands, including Ginko, which operates Formosa Optical (寶島眼鏡) in Taiwan and manufactures Hydron (海昌) brand contact lenses in China, the brokerage said.
“We note that heavy price discounting on the Internet has become the means for attracting online traffic, which we believe has resulted in more irrational price competition, disruption in the existing distribution chain and a potentially higher risk of ‘channel stuffing,’” CIMB Taipei-based analyst Jack Lin wrote.
PRICE WAR
The brokerage’s analysis shows that Ginko is losing its price advantage over international peers due to aggressive discounting.
In China, where it competes with Johnson & Johnson, CIBA Vision and Bausch & Lomb Co, Ginko remains the No. 1 contact lens brand, retaining more than 30 percent market share.
“Based on the product ranking and sales of various retail Web sites, we found that Ginko does not have a leading position in sales or share, which makes us question the sustainability of its overall leading market share going forward,” Lin wrote.
ST SHINE BRIGHT SIDE?
As for St Shine, a maker of Ticon (帝康) brand contact lens products, the company is facing near-term headwinds such as an ongoing inventory digestion from Japanese clients, a lack of new product launches this year and stronger-than-expected competition in Taiwan.
However, it is likely to see a better growth outlook next year, likely benefitting from more orders from Bausch & Lomb given the brand name’s market share gains, CIMB said.
St Shine is the original design manufacturing partner for Bausch & Lomb’s color lenses.
“We also believe increased diversification in contact lens specifications and products will force smaller brand players to outsource, which will likely also benefit St Shine, given its leads in both capacity and expertise,” Lin wrote.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new
RSS