Cheng Uei Enjoys Strong Shipments of Headphones and Wearable Electronics

Following extended efforts on diversification, Cheng Uei Precision Industry Co., Ltd., a major Taiwanese supplier of connectors, is seeing increasingly strong shipments of headphones and wearable electronics, and aims to double revenue to NT$20 billion (US$666.67 million) next year from this year.

Apple Inc.'s recent buyout of Beats, an American headphone brand, for US$3 billion to lift its street cred is perhaps the biggest windfall for Cheng Uei in its headphone manufacturing business.

At an investor conference held earlier, T.C. Gou, Cheng Uei's chairman, noted gleefully that his company is very likely to benefit from Apple's acquisition of Beats, which commands 60% of the global market for high-end headphones, given that both the U.S. brands are Cheng Uei's major customers.

If Apple includes Beats headphones in its iPhone and iPad accessories after the acquisition, Gou stated that Cheng Uei's headphone shipments will notably increase in the future, from the current NT$1 billion (US$3.33 million) a month.

Another factor driving Gou's optimism about stronger Beats headphone shipments is that Cheng Uei is licensed by Apple to operate the reseller chain, Studio A, in Taiwan, China, Hong Kong, Korea, and other Asian nations.

On another front, Cheng Uei has been busy developing business for wearable electronics over the past two years, having tapped supply chains of globally known brands including Nike and Sony. Among wearable devices contract manufactured by Cheng Uei that are on sale  now include hot-selling Pebble smart watch and Sony's Smartband wristband.

Gou said that currently wearable electronics are mostly used in sports and healthcare, and will have more features including heart rate and blood pressure monitoring, diet control, sleep analysis etc. as a growing trend. This, the chairman furthered, will broaden application of such products to greatly enhance growth potential of the emerging segment.

Cheng Uei's revenue of headphones and wearable electronics as a whole may exceed NT$10 billion this year, and double next year.

Although prospects of Cheng Uei's headphone and wearable device businesses are getting bright, the firm, however, hasn't been spared from seasonal downturn with declining sales recently.

Mainly dampened by low season, along with exchange losses of around NT$1, billion, Cheng Uei witnessed consolidated revenue and net profits plummet 12.07% and 55.14% year-on-year, respectively, to NT$23.783 billion (US$792.76 million) and NT$250 million (US$8.33 million) in the first quarter of this year, with the gross profit rate and operating margin hitting nadirs of 9.6% and 1.19% since the third quarter of 2012, according to the firm's latest financial report.

After experiencing a 7% monthly drop in its consolidated revenue NT$5.845 billion (US$194.83 million) in May, Cheng Uei, Gou stressed, will likely see performance turn around in June, when seasonal booms hit the industry. (SC)