Casetek Holding Ltd (鎧勝), Pegatron Corp’s (和碩) metal casings subsidiary, is expected to enter the supply chain for Apple Inc’s iPhones next year, after years of preparation, a source said yesterday.
“Pegatron’s strong capability to assemble ‘thousands’ of components and integrate systems will help Casetek to deliver handset casing that combine glass and aluminum alloys,” a person familiar with the matter told a small group of reporters on condition of anonymity.
Casetek supplies metal casings for Apple’s iPads and MacBooks. It has expressed interest in expanding its presence in the Apple supply chain for years.
The source said Casetek’s orders came after the US company’s metal casing suppliers encountered harder-than-expected issues with production this year after Apple changed its casing materials, using glass for the front and back covers with an aluminum alloy to support the frame of the casing.
The dissatisfying yield of casings delayed the shipments of partly assembled iPhones to Pegatron for final assembly, which had a major impact on the iPhone assembler, the source said.
“Pegatron expanded its production capacity and increased its workforce 30 percent for the iPhones this year... The delayed shipments from the casing suppliers really affected the company,” the source said.
Pegatron has announced capital expenditure of between US$400 million and US$450 million for this year, more than double the US$200 million it spent last year.
The firm on Nov. 9 unexpectedly reported a 32.4 percent annual decline in net profit for last quarter to NT$3.63 billion (US$120.96 million), citing component shortages and surging labor costs.
Pegatron chief financial officer Charles Lin (林秋炭) told investors that the disruption to the supply of components caused workers to remain idle when the firm was scheduled to ramp up production of a new communications product.
Due to the unexpected drop in earnings, Pegatron’s net profits in the first three quarters fell 18.7 percent year-on-year to NT$10.95 billion, company data showed.
Hon Hai Precision Industry Co’s (鴻海精密) metal casing arm Foxconn Technology Co (鴻準) also faced a similar challenge, but Hon Hai’s strong electronics manufacturing service gave significant support to Foxconn Technology and improved its yield rate, the source said.
Pegatron chairman Tung Tzu-hsien (童子賢) yesterday declined to confirm the iPhone casing orders, saying that the company does not comment on anything related to a specific product or client.
“It is true that Pegatron’s earnings performance was weaker than our expectation, but that is just one of the risks of doing business in this industry,” Tung said at the opening of the IT Month exhibition at Taipei World Trade Center.
Pegatron believes that the weak performance this year is only a temporary setback and the management team still has positive outlook for next year, Tung said.
“We do not see any factors that would make us have a pessimistic outlook for next year,” he said.
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