Largan Precision stock faces margin pressure as optics expansion advances

Largan Precision is facing weaker smartphone-lens economics while investing in a second growth avenue in optical communications. The Taipei Times reported on October 9 that the company’s third-quarter gross margin fell to 42.21 percent, its lowest level in 13 years, as lower yields for new camera-lens products and higher green-energy costs weighed on profitability.

Lens yields weigh on earnings

Revenue for the July-to-September quarter declined 11.47 percent from a year earlier to NT$15.65 billion, while net profit fell 27.65 percent to NT$5.18 billion, according to the Taipei Times. Earnings per share decreased to NT$39.62 from NT$53.05 a year earlier.

Chairman Adam Lin said the margin outlook would depend largely on improving yields for new lens products. Smartphone-lens factory utilization is expected to remain full this quarter, but shipment momentum is weakening after the peak season. The company also expects customers to test upgraded camera modules and new periscope lenses for next year’s models.

Fiber arrays extend the growth plan

Largan is using its precision-optics expertise to enter copackaged optics for data centers. The company has completed a trial automated production line for fiber arrays after receiving customer certification, and plans to complete its first fiber-array-unit production line by the middle of next year. Volume shipments are targeted for the second half of next year, with construction tied to the expansion expected to run through 2030.

Capital expenditure reached NT$8.18 billion in the quarter, primarily for land and factory purchases in Taichung. The investment raises execution risk because future returns will depend on customer adoption, manufacturing yields and the timing of volume production.

Optical specialist with Asian rivals

Largan manufactures optical components, including plastic aspherical lenses used in smartphone cameras, and also serves automotive, digital-camera and extended-reality applications. The company is headquartered in Taichung, Taiwan, and supplies high-end handset lenses to global brands including Apple and Samsung, according to its Morningstar company profile. Morningstar describes Largan as the largest handset-lens maker by value. Its named competitors include Sunny Optical Technology, Q Technology and AAC Technologies, which compete across Asian optical-component markets with different product and regional emphases.