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May 30, 2017

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Quanta may become key assembler of Apple's new iWatch: Morgan Stanley

TAIPEI -- Taiwan-based Quanta Computer Inc., an Apple Inc. supplier for MacBook laptop lines, could become the main assembler of Apple's rumored wearable device, the "iWatch," according to U.S. brokerage Morgan Stanley.

The iWatch, which is expected to be launched in the fourth quarter of this year, is expected to contribute more than 10 percent of Quanta's sales in the October-December period on shipments of 10 million units, Morgan Stanley said.

The long-anticipated wearable device could also make up over 10 percent of Quanta's sales in 2015 on shipments of 40 million units, the brokerage firm added.

"This enables Quanta to be a key supplier for both cloud data centers and cloud end-devices," Grace Chen, a Morgan Stanley analyst in Taipei, wrote in a research note to clients dated June 18.

Chen forecast that Quanta's data center hardware sales will enjoy a strong compound annual growth rate of 30 to 40 percent from 2014 to 2016, as the company expands its customers from the public cloud to the enterprise cloud and its product offerings from servers and storage to switches.

"Quanta's progress in expanding its data center customers and product lineup has beaten our expectations. We expect data center hardware and wearables (iWatch) to exceed 50 percent of (Quanta's) operating profit by 2016," Chen said.

Taking these factors into account, Chen lifted her price target for Quanta to NT$99 (US$3.3) from NT$80 and held her "overweight" rating on the stock.

Shares in Quanta fell 0.6 percent to close at NT$83.5 Friday in Taipei trading.

Quanta, the world's largest contract manufacturer of laptops, said during an annual general meeting on June 19 that the company's notebook computer shipments for the third quarter are expected to rise more than 10 percent from the second quarter, as the global PC business has continued to recover.

Further, Quanta Vice Chairman C.C. Leung told shareholders that wearable devices are expected to begin making a meaningful contribution to the company's sales in the second quarter of this year, without offering details on customers or products.

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