Contract electronics maker Compal Electronics Inc (仁寶) yesterday reported that its gross margin increased to 5 percent in the second quarter this year, the best in more than a decade, thanks to product mix improvements and efficient optimization of operations.
Coupled with better-than-expected sales in the quarter due to more shipments of PCs and non-PC products such as mobile phones, wearable devices and servers, along with declining exposure to low-margin products, earnings per share hit the highest level since the fourth quarter of 2021, company data showed.
Compal said it would continue to develop high-value businesses and lower dependency on low-margin electronics manufacturing businesses for non-PC products to improve its bottom line.
Photo: Fang Wei-chieh, Taipei Times
It hopes to reduce its PC revenue to 60 percent and increase non-PC revenue to 40 percent by 2026, the company said.
Compal reported consolidated revenue of NT$237.21 billion (US$7.31 billion) in the April-to-June quarter, down 3 percent annually, but up 19 percent quarterly. In the first half of the year, overall revenue decreased 4 percent year-on-year to NT$436.78 billion.
PC revenue contributed 73 percent of the company’s total revenue in the second quarter, with non-PC revenue accounting for the remaining 27 percent — of which 22 percent came from mobile devices, smart devices and tablets, while 5 percent was from servers, automotive electronics, 5G applications, medical and industrial products — the company said at an investors’ conference in Taipei.
Compal is a relative latecomer in the server business compared with its local peers and focuses on so-called “level 6 servers” — server racks integrated with motherboards and chassis parts, but without components such as central processing units, memory modules, hard drives and networking cards.
Last quarter, server revenue contributed just 2 percent to the company’s overall revenue, while artificial intelligence (AI)-enabled servers accounted for less than 10 percent of its overall server revenue, the company said.
In light of growing data and computing needs, the company plans to continue expanding its server business and is optimistic that server revenue would increase 20 percent this year compared with last year, it said.
In addition, the company’s AI server business would target the enterprise market, with the goal of gaining orders from major cloud service providers, it added.
The company said it expects high single-digit percentage growth in its automotive electronics business this year, but a flat performance in its PC business amid small volume AI PC shipments and stable notebook computer demand.
Compal said AI PCs equipped with Qualcomm Inc chips are in mass production, while those equipped with Intel Corp and Advanced Micro Devices Inc chips will be launched successively in the second half of this year, which the company believes will drive replacement demand next year.
In the second quarter, net profit rose 38 percent year-on-year to NT$2.88 billion. On a quarterly basis, net profit surged 52 percent, company data showed.
Earnings per share (EPS) rose to NT$0.66 in the quarter, compared with NT$0.48 a year earlier, while gross margin improved to 5 percent from 4.3 percent in the same period last year, the data showed.
Net profit in the first half of the year increased 37 percent to NT$4.77 billion from the same period a year earlier, the data showed.
EPS in the first half rose to NT$1.1 from NT$0.8 a year earlier, while gross margin increased to 5 percent from 4.4 percent in the same period last year, the data showed.
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