Pegatron Corporation (TPE:4938)’s earnings were up 22% as the primary manufacturer of the iPhone 5C and the iPad Mini. Pegatron’s core personal-computer business continues to fall but its work for Apple Inc. (NASDAQ:AAPL) and its focus on smartphones is starting to show on the company’s bottom line.
Foxconn competition for Apple manufacturing
While Hon Hai Precision Industry Co., Ltd. (TPE:2317), better known as Foxconn Technology Co., Ltd. (TPE:2354), is Apple’s best known supplier, Apple Inc. (NASDAQ:AAPL) has been working tirelessly to seek out additional production partnerships as it expands its lineup of products. To date, the Tawainese company Pegratron has been the biggest beneficiary of this shift away from Foxconn.
“While PCs will still be around, mobile devices are a faster growing sector, and we want an even balance between the different parts of our business,” Pegatron Chief Executive Jason Cheng said to shareholders earlier today at a conference.
Tablets, smartphones, and gaming consoles are the key to growth according to Cheng. The company has seen 20% growth in each of these areas while at the same time seeing less from the TVs and PCs it makes.
While Pegatron Corporation (TPE:4938) has manufactured phones for Apple Inc. (NASDAQ:AAPL) in the past, the 5C was the first time that the company worked as the sole supplier of a new unit. According to Angela Hsiang, an analyst at KGI Securities, Apple represents over 40% of Pegatron’s total revenue.
“It usually takes a year or two of learning time to improve your efficiency,” said Pegatron Chief Financial Officer Charles Lin with regards to new products.
Lowered guidance for the next quarter
Despite these positives, the company lowered its guidance for Q1, suggesting that smartphone, tablets and game consoles will likely fall up to 20% from the Q4 numbers that it recently reported. Additionally PC sales, specifically laptops, are expected to decline by up to 25% in Q4.
This drop in production is natural in the contract electronic manufacturing segment as few products are launched in the early part of the year. For the most part, Apple Inc. (NASDAQ:AAPL) has failed to even have rumored products in the recent pipeline.