Asustek to release new cellphone
Jun 15, 2004
The company has fallen behind its rivals in tapping the lucrative handset business but a new model is expected to help boost margins
Asustek Computer Inc, the world's largest supplier of computer motherboards, is set to unveil its second mobile phone today.
The launch of the J101 clamshell phone with embedded 3-megapixel digital camera comes after Asustek released its J100 model last October. The so-called clamshell phones are able to flip open to reveal a larger screen.
Asustek, the nation's third-largest notebook computer maker, has been slow to take advantage of the lucrative handset business compared with its bigger rivals Quanta Computer and Compal Electronics Inc.
"Taiwanese notebook manufacturers are diversifying into new areas outside the computer industry, where gross margins are sliding," said Sean Hsiao, an analyst at Fubon Securities Investment Services Co.
"Asustek's move is not beyond our expectations. Its expansion into cellphone production will certainly boost gross margin in the long run," Hsiao said.
Gross margins for computer manufacturing dropped to around 8 percent or 9 percent, compared to 12 percent for middle-range handset manufacturers, according to Hsiao.
Mobile phones are only a small portion of Asustek's total sales as the company saw around 40 percent of its total revenues generated from motherboard sales and a hefty 30 percent from notebook manufacturing.
Some 15 percent came from assembling PlayStation 2 game consoles for Sony Corp of Japan and another 15 percent from electronics components and other products.
"Asustek, a relative newcomer, is still very promising. I believe it can duplicate its success in the laptop computer business in light of its distribution strength in the clone market and strong product design capabilities," said Chou Chien-chung, an analyst with Grand Cathay Securities Co.
BenQ Corp, the nation's largest handset maker, expects to churn out 16 million handsets this year, up from some 13 million units last year, BenQ vice president Irwin Chen said earlier this month at the Computex trade show.
"Asustek is far from competing with BenQ right now, but it is a potential threat in the near future," Chou said.
Chou said Asustek's earnings for this year should increase to around NT$14.88 billion, or NT$6.5 a share, from NT$11.57 billion last year.
Earlier this month, Asustek told shareholders that it aims to have its brand-name business account for half of the company's sales target of NT$300 billion for this year, chief financial officer David Chang said at a shareholders meeting.
Chou said Asustek will focus on own-brand handsets before jumping into contract manufacturing, following its successful strategy for notebooks.
A Chinese-language newspaper report said yesterday that Asustek is seeking a partnership with Chinese consumer-electronics giant Haier Group.
If Asustek is able to secure orders from Haier, it will be a good start for the company to develop its budding handset business as the gross margin for original-design manufacturing services is quite high, Hsiao said.
Asustek shares were unchanged at NT$77 on the benchmark TAIEX, which lost 2.81 percent to 5,574.08 points yesterday.