March 23, 2015 / 10:59 AM / in 2 years

Assembler Pegatron's record 2014 profit puts Apple reliance in spotlight

A picture illustration shows Apple Inc's logo reflected in a person's eye in Zenica, March 13, 2015. REUTERS/Dado Ruvic

TAIPEI (Reuters) - Strong iPhone 6 sales lifted annual net profit at Pegatron Corp, the Taiwanese assembler of Apple Inc, to a record high, as its chief executive questioned the company’s reliance on smartphones to generate revenue.

Pegatron on Monday said 2014 net profit rose 53.4 percent from the previous year to T$14.66 billion ($466.8 million).

Fourth-quarter net profit also surged 68 percent to a record T$5.68 billion, as revenue from its communication devices business grew to account for just under two-thirds of its overall revenue, up from 30 percent in the same year-ago period.

Asked about Pegatron’s reliance on smartphones, Chief Executive Jason Cheng told an earnings briefing Pegatron was taking advantage of a good business opportunity.

But he added: “It’s definitely not a good thing to be too concentrated on just a few clients. But you can’t avoid the fact that mobile phones have been fast sellers. When good business comes your way, how can you not take it?”

Apple sold more than expected iPhones over the year-end holiday season.

Last month, a labor rights group said low costs helped Pegatron win business from Apple, which allegedly moved some orders from rival Hon Hai Precision Industry Co Ltd after an increase in labor costs aimed at addressing a spate of worker suicides in 2010.

Pegatron’s strong communication device revenue contrasts with weaker sales of most of the other tech products it assembles: computers’ contribution to revenue fell 38 percent, while consumer devices, which includes tablets and video game consoles, dropped 17 percent, it said.

“They should be careful about their reliance on Apple,” said Fubon Securities analyst Arthur Liao, who estimates Apple products contributed as much as 59 percent to Pegatron’s revenue last year.

Pegatron rival Hon Hai has struck several deals to diversify away from contract manufacturing, including buying a stake in a Taiwanese telecom provider. On Monday, it said it was teaming up with Chinese social networking firm Tencent Holdings Ltd to develop opportunities related to electric vehicles.

Reporting by Michael Gold; Editing by Miral Fahmy

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