updated 12:15 pm EST, Wed November 10, 2010
Currency shifts blamed
Apple suppliers based in Taiwan may be forced to raise their prices, says Bloomberg. The Taiwanese dollar has grown 2.5 percent against the US dollar during the last month, and by 7.2 percent during the last year. One supplier, Wintek, is estimating that a 1 percent increase in the exchange rate cuts 0.5 percent off its gross profit margin.
"A lot of the technology firms in Taiwan are export-oriented, so if the strong currency continues we might have to think about raising prices," says Wintek CFO Jay Huang. The executive suggests that if the Taiwanese dollar rises over $30 NT versus the US, the company "will be seriously hurt." Some 90 percent of its sales are claimed to be dependent on the relationship.
Largan Precision, which supplies camera lenses to Apple, could lose 2.3 percent from its net income this year with a 1 percent increase in the exchange rate. Apple's largest manufacturing partner, Hon Hai -- better known under the Foxconn brand -- would lose 0.7 percent under the same scenario, says a Yuanata Securities analyst.
Apple recently warned investors that its own gross margins could be hurt by component costs. At the same time, however, Largan CFO Charles Chiu observes that prices may not increase too much. "It’d be great if we could raise prices but it’s difficult because of the competition," he remarks. "There’s no doubt the appreciation of the Taiwan dollar is hurting the company’s business."