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Largan Precision posts record Q1 2017 revenues

by on17 April 2017

Competition for high-margin component orders heats up

Largan Precision, the world’s leading camera supplier for smartphones and lens supplier for Apple products, reported record high gross margins for the first quarter of 2017, showing the company’s strong competitive edge against a backdrop of component orders dominated by Foxconn and Pegatron.

For the January to March period, the camera lens company posted gross margins – or the difference between revenue and cost of goods – of 70.90 percent. The achievement has been attributed to an improvement in lens component yield rates, while its bottom line has been affected by a stronger Taiwanese dollar.

Company CEO Adam Lin told a group of investors during a recent conference that there is further room for the company to increase yield rates, though he did not give additional details about the assessment. Regarding the company’s outlook for the rest of the month, Lin says that the order outlook is “turning out better than expected” due to a series of unanticipated requests.

Previously in the year ending in December, Largan posted margins well over 10 times Foxconn’s Q4 earnings reports, giving little room for doubt that it has now secured a large chunk of orders from Apple for the production of upcoming iPhone and iPad series units.

“The fourth quarter's gross margin surprised the market,” said Tom Tang, an analyst at MasterLink Securities. “It seems that investors were wrong to cut their holdings today before the release of the results.”

Taiwanese dollar strength aids Largan’s profitability

In Taiwan, a six percent stronger dollar contributed to Largan’s ability to generate 35 percent higher net profits in Q1 than in the same period last year. However, a slow season effect combined with some foreign exchange losses dragged down the company’s profitability to NT$4.88 billion ($161 million). Earnings per share also fell to NT$36.41 ($1.2) from NT$63.06 ($2.08) in Q3

In a teleconference, company special assistant Josephine Huang added that the NTD’s appreciation and Largan’s product mix last quarter were negative facters, “but better yields helped the company sustain its gross margin”.

Largan and Samsung still at odds after patent dispute

In late October, Largan settled a three-year long patent dispute with Samsung over claims that the latter had infringed eight patents covering lenses on the Galaxy Note and Galaxy S series units. In a four page filing, the parties agreed to drop all claims and counterclaims, with each company bearing its own costs and attorney’s fees. When asked about the possibility of receiving new orders from Samsung now that the dust has settled, Lin says there has been “no progress on a potential collaboration” at the moment.

For now, the company admits that protecting its patent rights will produce a barrier to competitors in the smartphone lens market, but also says it “will not rule out” the possibility of licensing patents if they generate a positive return on investment.

Last modified on 17 April 2017
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