ASUS may experience weaker Q2 2017 earnings

Component shortages, exchange rates creating concerns for revenue

According to the latest Far East reports, Asustek is expected to experience a weak second quarter due to difficulties with its next-generation smartphones entering mass production, along with component shortages that continue to create rising cost pressure.

The company has released twelve smartphones so far this year, including the ZenFone AR and ZenFone 3 Zoom, though it is currently having difficulties gathering enough components to begin production on next-generation devices in June. In addition, exchange rate fluctuations are also expected to create concerns for the company’s revenue performance.

Despite drops in first quarter revenues, market performance still met market expectations. However, the company realizes more revenue potential from its gaming and ultra-thin notebook lines and has been adjusting its product mix to increase shipments in this category respectively.

On the positive site, ASUS motherboard, graphics and monitor businesses have all contributed to stable profits. In the third quarter fiscal year 2016, the company’s revenues increased 14 percent over the previous quarter to $ 3.4 billion. Operating profit slipped by 15 percent to $ 122.7 million, though remained much stronger than those in 2015.

PC demand in Europe and China declines

Last year marked the fifth consecutive year of worldwide PC shipment declines, when fourth quarter shipments were down 3.7 percent from 2015. Over the past two years, motherboard players including MSI, ECS and Biostar saw shipments decline as a result of weak visibility and poor channel sales, leading to a tendency to switch focus to notebook sales. ASUS notebook shipments in Q1 have been down year-over-year, though the company’s smartphone shipments have remained flat over the same period. It will be interesting to note the progression of marketing focus back to smartphones as the company prepares to enter mass production in just a couple of months.