Audio and PC peripherals maker Primax Electronics Ltd (致伸科技) is to set up a subsidiary in Thailand to diversify macroeconomic risks amid the US-China trade dispute.

The new unit, Primax Electronics (Thailand) Co Ltd, would cost the company about 299.997 million baht (US$9.71 million), Primax said in a regulatory filing on Thursday after its board of directors approved the resolution earlier that day.

Production at the site in Thailand is expected to start next year, the company said.

The move comes as the company relocates some production lines back to Taiwan from China to produce goods affected by US tariffs, such as computer mice, Primax said last month, adding that it is also expanding its plant in the Czech Republic to produce more audio products.

Primax’s product portfolio includes audio electronics, PC peripherals, compact camera modules, business equipment and automotive cameras.

The company reported net income of NT$413 million (US$13.17 million), or earnings per share of NT$0.93, for the second quarter, up 16.1 percent quarterly from NT$356 million and an increase of 22 percent annually from NT$339 million.

Revenue rose 22.5 percent quarterly and 12.9 percent annually to NT$16.7 billion in the second quarter, it said.

A substantial increase in the sales of low-margin consumer audio products dealt a blow to the company’s profitability, with gross margin falling to 11.2 percent and operating margin declining to 2.4 percent, a statement released after the company’s quarterly earnings conference on July 31 said.

Primax said that for this quarter, it expects “strong top-line growth with improving earnings structure compared with the first half.”

The firm expects continued growth at its Chinese subsidiary, Tymphany Acoustic Technology (Huizhou) Co (惠州迪芬尼聲學科技), buoyed by new headphone projects, as well as revenue contributed by new 3D sensing camera modules for smartphones and new automotive camera projects, it said.

Hua Nan Securities Investment Management Co (華南投顧) said that Primax’s revenue of NT$7.37 billion for last month, up 11.08 monthly and 29.33 percent annually, already reflected the contribution from the audio segment.

“With better economies of scale for its audio segment, this year’s sales of headphones, premium speakers and smart speakers are forecast to increase by 20 to 30 percent from last year,” Hua Nan said in a note on Friday. “Higher-margin headphones will contribute more revenue in the second half of the year.”

Primax’s shares on Friday rose 0.51 percent to close at NT$59.3 in Taipei trading. They have surged 36.48 percent so far this year, outperforming the benchmark TAIEX, which has advanced 7.13 percent over the period.