Dependence on the general development of the mobile phone market
Approximately 95% of Salcomp’s sales are derived from mobile phone chargers, with sales volumes closely following the number of new mobile phones sold. The mobile phone market trend over the last few years has been favorable, and research institutes expect this positive trend to continue.
Competition in the mobile phone market
Competition in the mobile phone market is fierce, and Salcomp’s global competitors also include large enterprises. New companies with greater resources than those of Salcomp may also enter the market. Salcomp’s most significant competitive factors include product quality, cost-efficiency, product development, global operations and logistics, as well as flexibility.
Standardization of charger technology
The standardization of mobile phone chargers, including USB-type chargers, could, in the future, lead to a development where the charger is not always necessarily included in the mobile phone sales package. This could have an impact on Salcomp’s current business model. Salcomp also manufactures chargers based on the USB charger standard. These include Salcomp’s own Cosmo charger platform products, as well as customer-specific USB chargers. Further information on the standardization of the charger technology can be found on page 15 of the Annual Report.
Dependence on key customers
Salcomp’s customer base is concentrated and deterioration in the financial position of a major customer may have a negative impact on Salcomp’s sales and profitability. Although Salcomp’s biggest customer’s share of the Group’s net sales is below 40%, the few major customers together account for over 95% of net sales. In addition, Salcomp is relatively small compared to its main customers. However, Salcomp’s management believes that Salcomp is well poised to improve its position as a key supplier to its current customers. Switching to a new supplier would result in significant transfer costs to the customer and would take some time because of the need to ramp up the capacity required to replace Salcomp.
Operations in the developing market
Salcomp has production operations in the developing markets of China, Brazil and India. Additional risks are involved when operating in these market areas, possibly causing extra expenses that are difficult to predict, or otherwise weakening the company’s financial position. Such risks include changes made by the authorities to the regulations governing operations in the industry, interpretations placed on these regulations, exchange rate variations, unexpected changes to customs or trading regulations, energy availability, possible strikes, as well as political and financial instability.
Raw material and component price development
In the future, there may be an over-demand for some raw materials and components required for mobile phone chargers, or it may be that some materials can only be ordered from a limited number of suppliers. Salcomp aims to limit the risks related to the availability of raw material components by using at least two different suppliers for each component.
Dependence on professional management and personnel
Salcomp’s success is largely dependent on the skills and contribution of its key personnel. The Group’s future success is also dependent on its ability to strengthen the organization through the recruitment of new personnel. In each country, Salcomp aims to be an attractive employer and by various ways to encourage a low turnover of personnel.
Risks and uncertainties in the near future can be found from Interim Reports.