Compal Electronics Inc (仁寶), the world’s No. 2 contract notebook computer maker, yesterday said it expects notebook shipments to decline 20 percent annually this year, matching an industry slump, as corporations cut spending amid a progressing economic slowdown.
Corporate demand at the beginning of this year was considered a lifesaver to the PC industry, when demand dipped after students returned to school and consumers were cautioned on spending after surging energy and food costs weakened purchasing power.
“Corporations have begun to worry about inflation and a recession, leading to a slowdown in hiring and corporate spending, which is affecting commercial PCs,” Compal president Martin Wong (翁宗斌) told investors during a teleconference.
Photo: Fang Wei-chieh, Taipei Times
“The situation looks more severe in the second half than we had thought,” he added.
Because of slumping demand, entire PC supply chains have entered an inventory correction period, Wong said, adding that it might take four to five months for the industry to clear excessive inventory.
“Some customers have drastically slashed shipment targets for this year,” he said.
Compal saw inventory — mostly raw materials — rise 25 percent year-over-year to NT$148.46 billion (US$4.95 billion) as of June 30.
Compal expects PC shipments this quarter to drop a low single-digit percentage from the previous quarter.
However, non-PC shipments — such as automotive, 5G-related and medical devices — should grow by double-digit percentages, benefiting from seasonal demand, Wong said.
The notebook computer maker expects a moderate recovery in the fourth quarter for PC and non-PC product shipments, as some customers overreacted to the inventory-driven slowdown and were extremely cautious about ordering.
Compal said this year should be much different from past years, as PC shipments in the second half are expected to be almost equal to that of the first half, it said.
Second-half shipments usually comprise about 55 percent of whole-year shipments, as the third and fourth quarters are a high season for the PC industry, it said.
PCs accounted for 71 percent of the company’s revenue of NT$265.65 billion last quarter.
Compal said that global notebook shipments would drop slightly next year, following a 20-percent annual reduction this year.
Net profits contracted 18 percent year-over-year to NT$2.02 billion last quarter, compared with NT$2.47 billion, it said, adding that net profits fell 6 percent quarterly from NT$2.16 billion.
In the first two quarters of this year, net profits declined 18 percent annually to NT$4.18 billion from NT$5.09 billion. Earnings per share fell to NT$0.96 from NT$1.17.
Gross margin improved to 3.6 percent in the first half from 3.5 percent in the prior year, boosted by a favorable foreign exchange rate.
Operating expenses jumped 17 percent annually to NT$14.63 billion from NT$12.55 billion, due to higher logistics spending and extra spending from China’s COVID-19 lockdowns in the second quarter.
Compal is accelerating its pace to shift production out of China due to its COVID-19 policies, as per customers’ requests, Wong said, adding that rising labor costs in China are also a major factor for the relocation.
China remains the company’s manufacturing hub, accounting for about 75 percent of its total production.
Compal is expanding manufacturing capacity in Vietnam and in the US, it said.
Quanta Computer Inc (廣達), the world’s largest contract notebook computer maker, yesterday reported a net profit that almost halved to NT$3.96 billion last quarter, compared with NT$7.90 billion in the second quarter last year.
That was a quarterly decline of 41.3 percent from NT$6.75 billion.
Earnings per share dropped to NT$1.03 last quarter from NT$2.05 a year earlier and NT$1.75 a quarter earlier.
Quanta saw its inventory climb to NT$254.33 billion as of June 30, compared with NT$249.84 billion at the end of March.
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