Largan may face margin pressure: US brokerage

With its new plant in Taichung in central Taiwan having begun production in October 2012, Largan is expected to become more “proactive” in manufacturing lower resolution products to fill up its spare capacity amid weaker iPhone 5 demand, Morgan Stanley said.

This is evidenced by Largan's aggressive attitude toward price-sensitive customers in South Korea and its growing interest in 8-megapixel (MP) lens products, which are mainly used in mid-range and entry-level mobile devices, the brokerage said in a note to clients.

“This implies potential downside risks to consensus margins if customers' forecasts fail to live up to original plans — which we gauge as key risks in 2013, especially after recent Apple/Samsung results and guidance,” Morgan Stanley analyst Jasmine Lu said.

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