Inventec Corp (英業達) yesterday said it is prioritizing margin improvement as it expands production capacity and aims for growth.
The company is building new plants and expanding capacity in Shanghai and Nanjing, as it has decided to fight back against Chinese rivals.
“We have turned to the offense and will begin to offer lower pricing to match Chinese rivals,” Inventec Appliance Corp (英華達) CEO David Ho (何代水) told an investors’ conference in Taipei.
Ho said he is confident that the company’s expertise in advanced manufacturing would help it outperform peers in mass production efficiency, adding that Inventec has formed a solid research and development background over its 30 years operating in Shanghai.
However, margin improvement would be slower in the transition period before its expanded capacity goes online next year, he said.
An escalating US-China trade war has not deterred the company’s long-term transition plans, Ho said.
The company is ready to ship half-finished products from Shanghai to elsewhere to avoid US President Donald Trump’s third wave of tariffs, which would cover electronics, he said.
Ho gave guidance of single-digit percentage growth for total sales this year with the arrival of the cyclical peak season for smart devices in the second half.
Inventec reported that net income in the second quarter of this year rose 16.21 percent annually to NT$2.24 billion (US$72.71 million), or earnings per share of NT$0.62, with sales gaining 14 percent year-on-year to NT$126.9 billion.
In the second quarter, gross margin dropped to 5 percent, compared with 5.4 percent a year earlier, while operating margin fell from 1.9 percent to 1.7 percent, the Taipei-based company said.
In related news, Hon Hai Precision Industry Co (鴻海精密) on Monday reported across-the-board declines in operating performance for last quarter.
The world’s largest contract electronics manufacturer reported that net income in the April-to-June quarter fell 2.18 percent annually and 27.37 percent quarterly to NT$17.49 billion, or earnings per share of NT$1.01, with sales gaining 17.03 percent annually and 4.95 percent quarterly to NT$1.08 trillion.
Gross profit fell 3.16 percent annually and 4.53 percent quarterly to NT$60.78 billion, while gross profit margin also dipped to 5.63 percent, compared with 6.81 percent a year earlier and 6.19 percent at the end of March, company data showed.
Operating income also fell 36.52 percent annually and 35.77 percent quarterly to NT$15.84 billion, with operating margin dipping to 1.47 percent, down from 2.71 percent in the same period last year and 2.4 percent in the first quarter, the data showed.
Net margin also fell to 1.62 percent, compared with 1.94 percent a year earlier and 1.39 percent in the prior quarter, the company reported.
Hon Hai is on Oct. 25 to carry out plans to reduce capital by 20 percent, or NT$34.66 billion. On Oct. 26, shareholders would be paid NT$2,000 for each 1,000-share lot.
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