Asustek Computer Inc (華碩) yesterday said escalating US-China trade tensions and a supply crunch for Intel Corp’s microprocessors continues to weigh on its operations this quarter and would continue to do so.
The computer maker reported a 43 percent annual decline in net profits for last quarter totaling NT$3.34 billion (US$108.08 million), compared with NT$5.84 billion for the same period last year.
Gross margin fell to 11.7 percent from 14.4 percent last year.
An improvement in foreign- exchange losses helped Asustek notch quarterly growth of 1.5 times from NT$1.33 billion.
Foreign-exchange losses were reduced to NT$279 million last quarter from NT$1.4 billion in the second quarter.
“The visibility for the company’s fourth-quarter operation is the lowest in history. Business visibility only reaches 20 percent, rather than more than 50 percent as usual,” chief executive officer Jerry Shen (沉振來) told investors during a teleconference.
The US-China trade dispute has caused a devaluation of the Chinese yuan, and currencies in Russia and Indonesia as well as other emerging countries against the US dollar, which increases hedging costs against foreign-exchange volatility for Asustek, Shen said.
The US tariffs on US$250 billion of Chinese goods would also have a significant impact on Asustek’s products, especially motherboards, he said.
Asustek is pondering reallocation production from China, and Taiwan, Vietnam and India are on its shortlist, Shen said.
Asustek already has manufacturing sites in those nations.
The supply crunch for Intel microprocessors is worsening this quarter and the problem will continue to be a headache even in the second quarter next year, Shen said.
Due to those factors, Asustek expects PC shipments to remain flat this quarter from last quarter.
Shipments of mobile phones could rise 5 percent quarter-over-quarter, while it might see a 5 percent quarterly reduction in component shipment as demand for cryptocurrency mining tools reduced dramatically, the company said.
PCs accounted for 62 percent of Asustek’s revenue last quarter, or NT$93.77 billion, while components took an 18 percent share and cellphones 16 percent.
Asustek began to shrink its struggling mobile phone business last quarter to focus on niche segments like gaming handsets, Shen said.
The company has exited China’s highly competitive mobile phone market and would no longer supply handsets to telecom carriers there, he said.
Asustek expects to see the restructuring efforts to yield good results in the second half of next year, pinning its hope on new products to gain traction following the annual launches.
It also said it would stick to its plan to distribute a cash dividend of NT$15 per share next year and would not rule out the possibility of launching share buyback plans to safeguard shareholders’ interests.
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