Asustek experiences a 23% decrease in its net profit
Asustek Computer Inc Faces Challenges Due to US Tariff Uncertainties and Exchange Rate Fluctuations
In the second quarter of 2021, Asustek Computer Inc experienced a decline in net profit and a contraction in operating margin, primarily due to uncertainties surrounding US tariffs and exchange rate volatility.
The US tariff uncertainties increased cost pressures and introduced uncertainty in supply chain and pricing strategies. This was compounded by exchange rate fluctuations, which caused volatility in translating foreign revenue and expenses, impacting profit metrics adversely.
Though quantified figures for Q2 2021 net profit and operating margin changes directly attributable to these factors are not detailed, the broader context indicates that these challenges commonly hurt Taiwanese exporters like Asustek during that timeframe by raising operating costs and compressing margins.
Despite the setbacks, Asustek remains optimistic. The company is confident that the effects of US tariffs and exchange rate fluctuations will ease significantly next quarter. Moreover, Asustek expects PC revenue this quarter to grow 5 to 10% from last quarter.
Last quarter, the US market contributed a low to mid-teens percentage of Asustek's revenue. AI PCs accounted for about 10% of Asustek's total PC revenue, or about 20% when excluding gaming PCs. Asustek's server sales were fueled by shipments of AI servers powered by Nvidia Corp's GB200 chips.
Asustek has been proactive in addressing these challenges. The company increased investment to improve supply chain resilience due to US tariff uncertainties. Additionally, 90% of Asustek's motherboard and PC production has been shifted to Thailand, Vietnam, and Indonesia. Asustek launched a US server assembly line in the fourth quarter last year to diversify its production base.
In terms of financials, Asustek reported a 23% sequential slump in net profit for Q2 2021, with net profit dropping to NT$9.8 billion, compared with NT$12.79 billion in the previous quarter. The gross margin last quarter was 12.4%, down 3.1 percentage points from the previous quarter and 5.9 percentage points from a year earlier. Operating margin plummeted to 3.4% from the previous quarter and 7.8% in the second quarter last year. Earnings per share decreased to NT$13.2.
In the face of these challenges, Asustek is confident that full-year operating margin would rebound to 4 to 5%. The company expects overall revenue in the second half to account for 45 to 48% of the total for the year, with the first half contributing 52 to 55%. Shipments of advanced gaming products, including handheld Xbox devices, are expected to continue driving growth in the second half.
In conclusion, Asustek Computer Inc faced significant challenges in Q2 2021 due to US tariff uncertainties and exchange rate fluctuations. These factors increased cost pressures, created uncertainty in supply chain and pricing strategies, and caused volatility in translating foreign revenue and expenses, impacting profit metrics. However, Asustek remains optimistic about the future, expecting the effects of these challenges to ease and revenue to grow in the coming quarters.
Technology-related challenges, such as US tariffs and exchange rate fluctuations, impacted Asustek Computer Inc's financial performance in the second quarter of 2021, causing a decline in net profit and a contraction in operating margin.
Asustek incorporated technology-driven strategies to overcome these challenges, including investing in supply chain resilience, shifting production to foreign countries, and launching a US server assembly line.
