Microsoft-Nokia deal to help local supply chain: brokerages
CNATAIPEI -- Microsoft Corp.'s acquisition of Nokia Oyj's handset unit will likely benefit several Taiwanese suppliers in the long term because of the rising outsourcing orders from Nokia that will result, according to analysts from two brokerage firms.
September 6, 2013, 12:47 am TWN
In a Sept. 3 announcement that surprised the technology industry, Microsoft said it had agreed to acquire the Finnish phone maker's devices and services business for 5.44 billion euros (US$7.2 billion). The deal is expected to be completed in the first quarter of 2014.
While the news will have limited financial impact on Nokia's supply chain in the short term as most component makers have reduced their exposure to Nokia to under 10 percent, some Taiwanese firms are poised to win more outsourcing orders, said Morgan Stanley analyst Jasmine Lu.
“We believe that Microsoft, as a software rather than hardware company, might not value in-house production as much as Nokia does, which in the long term could create more outsourcing opportunities,” Lu wrote in a note to clients on Wednesday.
Based on this assumption, she said, Microsoft's electronic manufacturing service (EMS) partners in Taiwan, including Hon Hai Precision Industry Co., Pegatron Corp. and Wistron Corp., are likely to be better positioned to win orders from Nokia.
Robert Cheng, a Taipei-based analyst at Bank of America Merrill Lynch, agreed that the deal will make Microsoft a much bigger hardware firm and open up more opportunities for the Taiwanese supply chain, particularly for firms with competitive advantages.
Among Nokia's major suppliers, Cheng rated “buy” on shares of Hong Kong-listed FIH Mobile Ltd., a subsidiary of Hon Hai, and Taiwan-based smartphone camera lens supplier Largan Precision Co.
“As Nokia smartphones and Windows OS now have only a small share of the handset market (3 percent and 4 percent, respectively), the deal should be of only minimal impact to the smartphone ecosystem,” he said in a report dated Sept. 3. “However, it may be more positive for the Taiwanese supply chain, which has worked closely with Microsoft for years on tech business,” the analyst noted.