Largan Precision Co (大立光), the nation’s leading camera lens manufacturer, saw its gross margin slide to 65.6 percent last quarter, from 68.6 percent a quarter earlier, after a major client canceled its orders, chief executive officer Adam Lin (林恩平) said yesterday.
“The client directly canceled all of its orders last month, which lowered our gross margin, as the client had requested high-specification orders with higher profit margin,” Lin told investors at an online earnings conference.
Lin did not name the client, while market speculation was that it was Chinese telecom equipment provider Huawei Technologies Co (華為), whose manufacturing has been disrupted by a US’ ban, demanding suppliers to stop shipping to Huawei if their products contain US technology.
Photo: Chen Mei-ying, Taipei Times
Largan has been talking with other clients to inquire if they are interested in placing more orders, but it would be “highly unlikely” that any new orders would be large enough to fill in for the allocations that were previously saved for the client, Lin said.
As a result, there is a chance that the firm’s capacity utilization rate would drop in the fourth quarter, Lin said.
The firm, which provides lenses for Apple Inc’s iPhone as well as Android phone vendors such as Samsung Electronics Co, declined to reveal how much Huawei’s orders had contributed to its previous revenue reports.
Lin expected the firm’s shipping momentum, which depends on the sales performance of its clients, to remain flat this month from last month, he said.
“Although our clients often update their forecast, there is still a high uncertainty, as it is unpredictable how their new mobile phones will sell,” Lin said.
The third-quarter gross margin of 65.6 percent was the lowest after 64.24 percent recorded in the first quarter last year, company data showed.
Largan would continue focusing on high-end lenses for premium smartphones, Lin said.
Many handset vendors increasingly favor mid-range and low-end smartphones, which has increased pressure on the firm to compete with other lens suppliers, he said.
“There is a figure for gross margin in my mind, and we will not accept orders with gross margins lower than that, although I cannot tell you how high this number is,” Lin said to investors.
Largan’s third-quarter net income plunged 30 percent year-on-year to NT$5.86 billion (US$202.31 million), due to an unfavorable product portfolio and foreign exchange losses of NT$710 million with the New Taiwan dollar strengthening against the US dollar, Lin said.
Its earnings per share were NT$43.74 in the third quarter, while in the first three quarters they totaled NT$131.
Although Largan’s stock price has dropped to a relatively low level, the company has no plan to buy back its shares, Lin said.
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