PC firms face challenges from forex volatility

Jan 26, 2005 Ι Industry In-Focus Ι Electronics and Computers Ι By Ben, CENS
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Taipei, Jan. 26, 2005 (CENS)--Taiwan's makers of personal computers will face the challenges from volatile foreign exchange rates this year, said J.T. Wang, chairman of Acer Inc., one of Taiwan's leading PC brands.

Wang noted the weakening U.S. greenback will soon come to an end as the U.S. dollar has recently rebounded significantly.

Since the end of last year, the New Taiwan dollar has been sharply rising against the U.S. greenback, which has adversely affected the operations of domestic PC firms concentrating on exports. It is expected domestic PC firms would encounter widening losses in forex in the fourth quarter of last year.

Even those focusing on own-brand operations would be adversely affected by the volatility of forex in the fourth quarter of last year, which has forced them to hold conservative projection on this year's sales performance. Some anticipated the change of forex would have an impact on 7% of the total sales of domestic electronics industry.

Acer formerly believed it would challenge NT$300 billion (US$9.43 billion at US$1:NT$31.8) in combined sales this year. After taking into consideration the weakening U.S. dollar, Acer slightly slashed the projection goal to NT$280 billion (US$8.8 billion), indicating the forex change would cut Acer's annual sales by NT$20 billion (US$628.93 million) this year. The company readjusted this year's financial projection based on the exchange of NT$31.5:US$1.

Wang said the U.S. dollar recently stabilized at around US$1.31 to one euro recently, although it has once depreciated to US$1.39 to one euro, saying the weakening U.S. dollar trend will come to an end.

The big forex change has adversely affected the operation of domestic IT and electronics industries as they are bearing the burden of slim operating profits. For instance, Acer boasted 2% profit margin on sales of PCs, but the N.T. dollar has risen by 6% over the past two weeks.

Wang said his company has never thought of profiteering from forex change. To avoid the impact of forex change, Acer has to reassess the pricing of its PCs per month. He called for domestic PC firms not to dream of profiteering from forex change because they can only make thin profits in core business.
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