Compenent shortages knock compal for six

Notebook manufacturing giant reveals it won’t be able to meet orders during the fourth quarter following shortfall in several component lines

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By  Published  October 31, 2006

Asian notebook manufacturer Compal Electronics has warned the market that it will be unable to fulfill some of its customer orders during the fourth quarter due to current product shortages.

According to reports in the Asian press, the company has experienced a tough time getting hold of memory, LCD panels and CPUs, prompting president and CEO Ray Chen to tell investors that it would be unable to meet orders.

“Although demand in the fourth quarter is hot, component shortages, especially for batteries, will affect our output this quarter,” he said.

As a result, Compal — which supplies to the world’s two largest PC producers, Dell and HP, expects to ship significantly less notebooks this quarter.

Initial forecasts from the Taiwanese company suggest output levels are now likely to be in the region of 4.6 million units, down from earlier projections of five million.

That should mean that by the end of the year, the company will have built around 14 million units — one million less than it originally anticipated.

However, Chen remains optimistic that Compal is in a strong position to recover.

He is forecasting that the company will smash this year’s output levels by building as many as 18.5 million notebooks next year.

“I think 2007 will be a strong year,” he said.

“The component shortfall in the fourth quarter will push demand to the first quarter next year.”

The announcement that Compal would miss its 2006 targets — which came as the company revealed third quarter net profit slipped 2% year-onyear to $69m — saw its share price drop by 2.4%.

Adding to Compal’s anxiety is the increasing speculation in Asia that rival notebook manufacturer Quanta and electronic components giant Foxconn could combine forces in the future.

“The merger does not necessarily have to be a very negative thing for us,” claimed Chen.

“If the two were to merge, this would definitely create pricing pressure in the market, but by putting too many eggs in one basket, those companies will have to source everything from a single maker.

Compal has held various simulations and is able to tackle the challenge if the Quanta- Foxconn marriage materialised,” he said.

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