Longcheer Technology sees Q1 profit plunging 90% on weak demand

Longcheer Technology (09611.HK) forecast a 90 percent plunge in first-quarter profit, signaling a deepening downturn in the consumer electronics market that has seen demand for personal computers and smartphones evaporate.

In a profit warning issued to the Hong Kong Stock Exchange, the company said it expects net profit for the three months ended March to be approximately RMB 15.4 million. This represents a sharp decline from the RMB 154 million recorded in the same period last year. The company did not disclose its revenue forecast for the quarter.

Longcheer attributed the steep drop to "weaker demand in the consumer electronics terminal market," which reduced revenue. The company also pointed to increased investment in new business areas such as AI-enabled personal computers and automotive electronics, which resulted in higher costs. Unfavorable foreign exchange fluctuations also contributed to higher finance costs.

The announcement reflects a broader contraction across the electronics supply chain. Factory orders for PC components have fallen by 40 to 50 percent, while manufacturers of tablets and notebooks are reporting order reductions of up to 30 percent, according to a recent industry report from Syntech, a component distributor. This industry-wide slowdown is squeezing manufacturer margins already under pressure from rising material and labor costs.

The profit warning from Longcheer, a major designer and manufacturer for many global smartphone brands, suggests that inventory adjustments are ongoing and that a recovery in the consumer electronics sector remains distant. The company's stock was trading down 3.87 percent at HK$23.86 in Hong Kong.

The guidance implies a significant margin contraction as the company navigates both falling orders and the high cost of entering new, competitive markets like automotive electronics. Investors will be watching for the full quarterly results in May for details on segment performance and management's outlook for the second half of the year.

This article is for informational purposes only and does not constitute investment advice.