Apple supplier Pegatron margins squeezed by iPhone 5c launch

Pegatron, a large contract equipment manufacturer, has been used by Apple to diversify its supplier base beyond Hon Hai.

Pegatron, an Apple supplier that manufactures the iPhone 5c and iPad mini, saw revenue surge, but profit margins were squeezed.

The company, a large contract equipment manufacturer, has been used by Apple to diversify its supplier base beyond Hon Hai. As a result, Pegatron ramped up its production and third quarter revenue surged 11.3 percent from a year ago. The catch is that Pegatron's operating margin was 1.5 percent, below the 1.8 percent analysts were expecting.

pegatron q3

 

In its presentation, Pegatron noted that its growth was driven by a "new product launch in the communications segment."

Morgan Stanley analyst Grace Chen said the Pegatron results were mixed. She added that Pegatron will also see iPhone 5c order cuts going forward. As a result, Pegatron is going to closely manage its labor costs and factory utilization.

As noted by the Wall Street Journal, Apple will continue to broaden its supplier base and add players such as Compal and Wistron. Apple brings big volume, but not-so-hot profit margins for suppliers.

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