Accton Technology Corp (智邦科技) on Wednesday said it expects effects from the US-China trade war to be limited and projects a strong deployment demand when it ramps up production of 400 gigabit (400G) switches next year, as the local maker of computer networking equipment sought to reassure investors following a 13.21 percent drop in its stock price this year.
Washington’s latest 10 percent tariffs on US$200 billion of Chinese imports — including networking equipment, such as routers and switches, produced by Accton in China — are to take effect today and the levies are to rise to 25 percent in January next year if Beijing refuses to make concessions on trade.
“There are no significant changes in orders from the company’s North American clients due to the US-China trade war. As a result, the company is not worried about the impact of the tariffs on product demand,” Accton president C.C. Lee (李志強) told an investors’ conference in Taipei on Wednesday.
Shipments of Chinese-made products to the US account for up to 35 percent of the company’s total sales, but it is considering expanding its capacity in Taiwan if the trade war escalates further, Lee said.
Accton has 20 surface-mount technology (SMT) production lines in Shenzhen in China’s Guangdong Province and three high-speed SMT lines at the Hsinchu Science Park, documents posted on its Web site following the conference said.
“Clients are expected to subsidize the company’s spending on the 10 percent tariffs, but Accton needs to relocate capacity back to Taiwan before the 25 percent tariffs become effective,” Capital Investment Management Corp (群益投顧) said in a note on Thursday.
“Under time pressure, the company’s capacity utilization might be affected. The US-China trade war could become a major variable affecting Accton’s production,” it said.
Lee told the conference that demand for switches used in data centers and for enterprise network solutions is relatively stable.
Regarding the company’s progress on its new 400 gigabit switch products after their launch in March, which drew investors’ attention, Lee said for the first time that mass production and shipment of the new products are to commence in the second half of next year.
“Strong deployment demand for 400G switches is not expected to emerge until the second half of 2019, as the 400G optical fiber modules are not ready yet,” Lee said, adding that the supply of 400G switch chips is unstable and mass production is likely to begin by the end of this year.
Accton posted record sales of NT$4.32 billion (US$140.64 million) last month, up 39.34 percent year-on-year, thanks to a shipment that was delayed from the first half of the year due to a components squeeze.
In the first eight months of the year, cumulative sales increased 13.66 percent from the same period last year to NT$26.24 billion.
The company reported NT$1.32 billion in net profit in the first half, up 2.7 percent from NT$1.28 billion in the same period last year, with earnings per share rising from NT$2.36 to NT$2.38.
Due to higher component prices, gross margin fell 1.98 percentage points to 18.17 percent and operating margin declined 1.85 percentage points to 7.43 percent, the company said.
Despite seasonal factors and the trade war, Capital Investment said it forecast Accton’s sales would increase to NT$40.09 billion this year, with net profit growing 6.06 percent to NT$2.71 billion, or NT$4.88 per share.
Shares in Accton closed at NT$92 in Taipei trading on Friday, down 5.54 percent for the week.
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