Apple Supplier’s Earnings Boost Could Spell Good News for iPhone 5C

Source: Apple.com

Apple (NASDAQ:AAPL) supplier Pegatron posted a 22 percent increase in its fourth-quarter earnings and beat many analyst expectations, reports The Wall Street Journal. The Taiwan-based manufacturer said earnings grew to approximately $110 million in the December quarter from about $90 million in the previous year.

Pegatron is believed to be a major manufacturer of Apple’s iPhone 5C and iPad mini, and the earnings boost may indicate an increased consumer demand for Apple’s lower-cost iOS devices. According to the Journal, Pegatron recorded strong growth in its mobile products segment, while its personal computer business continued to stagnate.

“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,” said Pegatron Chief Executive Jason Cheng at an investor conference, according to the publication. Pegatron noted that revenue from smartphones, tablets, and game consoles grew 20 percent year-over-year, while revenue from PCs and TVs declined compared to last year.

Besides possibly being a sign of increased Apple product sales, Pegatron’s earnings boost may also simply reflect the company’s improved abilities to make various new products for Apple and other customers. “It usually takes a year or two of learning time to improve your efficiency,” said Pegatron CFO Charles Lin to The Wall Street Journal. Besides reporting an increase in its fourth-quarter earnings, Pegatron also forecast a 15 to 20 percent decline in smartphone, tablet, and video game console shipments in the current quarter. But this is not unusual, since contract electronics manufacturers typically see a seasonal slowdown in orders during the first quarter.

The Wall Street Journal reports that KGI Securities analyst Angela Hsiang estimated that Pegatron acquires approximately 40 percent of its revenue from Apple. However, like most Apple suppliers, Pegatron refused to reveal details of its business with the California-based company. According to Apple’s 2014 supplier list, the iPhone maker currently uses eight separate Pegatron facilities to manufacture its iOS devices. All of the facilities are based in the Chinese cities of Shanghai and Jiangsu.

According to an unconfirmed report from the China Times, Pegatron has already been tapped as a supplier for the so-called “iPhone 6.” The 4.7-inch iPhone will supposedly be manufactured at Pegatron’s Kunshan plant in Jiangsu during the second quarter.

Last year, Pegatron’s labor practices came under scrutiny when nonprofit organization China Labor Watch reported that a 15-year-old employee died of pneumonia at one of the company’s Shanghai-based factories. However, an independent team of medical experts later sent by Apple found that the worker’s death was unrelated to his work, reports Reuters. According to The Wall Street Journal, Pegatron began using face-recognition technology last year in an effort to screen out underage workers.

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