Compal Electronics Co (仁寶電腦), the world’s No. 2 contract laptop computer maker, yesterday said it is negotiating with its clients to raise prices in an attempt to offset a 15 percent year-on-year increase in labor costs in China.
Wage growth in China was unexpectedly high this year, putting significant pressure on Compal and its peers, the company said.
There had been cases of worker shortages in eastern and central China this year, which has increased the company’s personnel costs and cut its gross margin last quarter, Compal president Ray Chen (陳瑞聰) told investors in October.
“The wage cost issue affects a company’s innovation, research and development, and poses a negative impact on the industry’s long-term development,” Compal investor relations official Tina Chang (張妍婷) said by telephone.
Chang said Compal is communicating individually with its clients over a price increase, adding that the potential range of the hike is yet to be determined.
Compal expects global notebook shipments to be flat or decline next year, but the company said it is confident it will outperform its peers, citing stable orders from its clients.
The revenue contribution of Compal’s non-notebook segment is expected to rise to more than 30 percent next year from this year’s 25 percent, the firm said.
Shipments of smartphones could double next year and its tablet business will also perform better than this year, it said.
Although global shipments of tablets dropped heavily this year, Compal has secured its position in a US brand’s supply chain, and the firm expects tablet shipments to grow in tandem with the client, the company said.
Separately, Chang said Compal is open to a potential sale of its stake in Lienpal Ltd (聯寶), a PC manufacturing joint venture with Chinese PC brand Lenovo Group (聯想), if Lenovo wants to purchase the firm’s stake.
Lienpal makes notebooks, all-in-one personal computers and related components.
“When we established the joint venture with Lenovo in 2011, the contract included a term that Lenovo could purchase Compal’s 49 percent stake in Lienpal after October 2017,” Chang said, adding that “we welcome the idea if Lenovo wants to make the purchase beforehand.”
“However, the two companies are not currently engaged in negotiations over the stake in Lienpal,” Chang added.
The potential Lienpal transaction will not affect Compal and Lenovo’s relationship, Chang said, adding that the company would make a decision based on its shareholders’ best interests.
Compal shares fell 1.12 percent to close at NT$22.05 in Taipei yesterday, underperforming the TAIEX, which declined 0.3 percent.
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