DESPITE a stark profits warning from Taiwan's Lite-On earlier this week, technology analysts were surprised to hear the company would drastically reduce its Scottish operations just a year after increasing production, writes Kristy Dorsey.
Mr Andrew Phillips, of Dataquest in London, was taken aback by the news despite a recent prediction by Lite-On that its full-year profits for 1998 would be down by one-third to some #13m. The projection was based on a first-quarter performance which saw profits plunge 83% compared to the same period a year earlier.
''I'm surprised, frankly, because the trend for the past several years has all been the other way, with Asian manufacturers setting up over here to cut their shipping costs,'' Phillips said.
''Perhaps it's just too much of an overhead, given their current financial position, and they've had to scale back.''
Lite-On's difficulties stem from a variety of sources, one of which emanates from its doorstep. The steep depreciation of the currency in neighbouring South Korea has been a blow, as Taiwan's main competitor in monitor manufacture has been forced to ship out goods at drastically reduced prices.
Although this does not directly affect Lite-On's new European operation, such harsh competition in its local markets has at least temporarily weakened the company's overall health.
In spite of this, the commercial attache in the Taipai Representative Office in London insisted Lite-On was an ''isolated case'' among Taiwan's electronics manufacturers. However, he added that he had not heard about the company's plans to scale back in Scotland.
''Taiwan is not affected by the so-called Asian crisis,'' he said. ''This is nothing to do with the macro-economy of Taiwan.''
Indeed, the issue cited most often by technology companies releasing wave after wave of profits warnings in recent months has been over-capacity and the resulting slump in prices. The impact has been felt by nearly everyone in the sector, including the world's leading PC manufacturer.
Compaq had to cut prices on many of its products by up to 25% during the first quarter of this year to clear a massive inventory glut, leading to a substantial cut in earnings.
''The rapidly-falling price of PCs must make component suppliers and peripheral suppliers think very carefully about where they supply from. And when it comes to manufacturing in the UK, the strength of the pound can't be helping them any,'' Mr David Trehearne, of stockbroker Williams de Broe, said.
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