Contract electronics maker Inventec Corp (英業達) yesterday said revenue would be flat this year, as unresolved US-China trade tensions and Intel Corp’s chip drought would exacerbate stagnation in PC and server demand.
The overall industry environment is very challenging, Inventec president Maurice Wu (巫永財) told investors in a teleconference yesterday.
In addition to fundamental weakness in PCs and servers, the US-China trade spat sabotages the world economy and electronics consumption, Wu said.
“There is almost zero growth for the two [PC and server] segments. This is a fundamental issue,” Wu said. “Intel’s CPU constraints is the second headache.”
It remains to be seen how fast Intel’s CPU supply would catch up with demand in the rest of this year, Wu said, echoing the CPU supply concern of bigger rival Compal Electronics Inc (仁寶) on Friday last week.
“We are conservative about this year’s revenue [outlook]. It should be flat,” Wu said.
Last year, Inventec posted revenue growth of 8 percent annually to NT$506.88 billion (US$16.44 billion), an all-time high.
PC and servers together accounted for 81 percent of Inventec’s total revenue last quarter, up from 77 percent a year earlier.
Smart devices made up 18 percent of revenue last quarter, down from 20 percent in the same period a year earlier.
Inventec suffered a dip in gross margin, which last quarter hit a six-year low at 4.1 percent, compared with 4.7 percent in the same period in 2017, attributable to better-than-expected PC demand, the company said.
THIN MARGIN
PCs have a thinner margin than the company’s two other major products, servers and smart devices, it said.
Another issue was a trough in terms of gross margin, the company said, adding that it expects a pickup this quarter, thanks to “decent” growth in revenue on an annual basis.
To improve gross margin, Inventec Appliance Corp (IAC, 英華達) plans to start operations at a new manufacturing site in Nanchang City, Jinangxi Province, to make new-generation products for a US client, given lower labor costs in China.
The company can save 70 percent on labor costs by allocating production to the Nanchang fab from its manufacturing base in Shanghai, the company said earlier this year.
IAC, a smart device manufacturing arm of Inventec, supplies AirPod earbuds for Apple Inc.
With new products from a client hitting the stores lately, Inventec expects a boost to its revenue, IAC chief executive officer David Ho (何代水) told investors.
Inventec yesterday said net profit fell 1.3 percent year-on-year to NT$5.6 billion last year, after reporting a 0.9 percent annual increase in net profit for the fourth quarter to NT$1.56 billion.
Inventec attributed last quarter’s growth to significant improvement in financial losses at its solar subsidiary.
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