Quanta Computer Expects Wearable Device Shipments to Grow Triple-Digits in 2015 Amid Capacity Expansion in China

While expanding output of wearable electronics in China to meet customers' demand, Taiwan-headquartered Quanta Computer Inc., world's largest ODM (original design manufacturer) of laptops by shipment, optimistically expects shipments of such products to grow triple-digits in 2015.

The optimism set the tone for Quanta Computer's investor conference held earlier, when the chairman, Barry Lam, and vice chairman, C.C. Leung, both stressed that the company's contract manufacturing business of wearable device is very likely to prosper and surge beginning next year.

On market outlooks, Lam commented that wearable electronics will surely become  mainstream in the line in the future, even though related applied technologies and applications still need time for development for the moment. To stay a step ahead of competitors in the emerging segment, the chairman said the firm may aggressively boost output to meet customers' demand.

Industry insiders said Quanta Computer's optimism and ambition toward wearable electronics hinge on the launch of Apple Watch, deemed as the game-changer in the market. The device has stirred news reports for some time, with the Taiwanese firm reported as Apple Inc.'s contractor but so far yet to be confirmed by the maker.

Quanta Computer has expanded the workforce at its assembly plant in Changshu, a southeastern city in China's Jiangsu Province, where the company plans to employ 20,000 workers by the end of the year and then recruit 10,000-20,000 more next year, mainly to  mass produce iWatch.

Further indications of the contract is that insiders have confirmed Quanta Computer's   orders placed with suppliers recently to stock up on related parts and components. The company is widely believed to start delivery of iWatch by the end of next February to drive growth of  shipments of wearable devices.

While forecasting Quanta Computer's wearable electronic shipments to grow triple-digits next year at the investor conference, Leung confirmed that the  company will likely further expand the Changshu factory in the year, pending discussion by board members later.

The company reported revenue of NT$244.33 billion (US$8.14 billion) for Q3, up 13.9% quarter-on-quarter (QoQ), or 10.9% year-on-year (YoY), with net profits of NT$4.73 billion (US$157.67 million), up 16.4% QoQ or 1.7% YoY, and EPS (earnings per share) of NT$1.23 (US$0.04).

Notably the firm's gross profit rate and operating margin both declined 0.43 and 0.52 percentage points QoQ, respectively, to 4.5% and 1.49%, which institutional investors generally think resulted from its increased spending on  fine-tuning production process and reducing defects of iWatch.

As for its laptop business, the company confidently projects annual shipment to reach its goal of 41 million units, with that in Q3 estimated to have dropped  several percentage points compared to Q2. (SC)

Quanta Computer's Profits by Quarter
	Q2, 2013	Q3, 2013	Q4, 2013	Q1, 2014	Q2, 2014	Q3, 2014
Net Profits	NT$4.023 Bn.	NT$4.653 Bn.	NT$5.487 Bn.	NT$4.675 Bn.	NT$4.067 Bn.	NT$4.732 Bn.
EPS	NT$1.05	NT$1.21	NT$1.43	NT$1.21	NT$1.05	NT$1.23

Source: Market Observation Post System