Audio electronics maker Merry Electronics Co Ltd (美律), a speaker supplier for Apple Inc’s iPhones, yesterday issued a cautiously optimistic outlook for the fourth quarter after it posted a net profit of NT$890.07 million (US$29.09 million) for last quarter, a 14.66 percent quarter-on-quarter increase.

The Taichung-based company posted revenue of NT$10.1 billion for last quarter, up from NT$10.06 billion the previous quarter, as it benefited from growing orders for smartphone speakers, Merry president Allen Huang (黃朝豊) said at an earnings conference in Taipei.

Orders should remain steady throughout this quarter as new smartphone models hit the market, he said.

Gross margin, while within the company’s expectations, dipped to 14 percent last quarter from 16 percent in the second quarter due to a higher proportion of sales being speakers, which yield a lower gross margin, he added.

Sales of speakers for smartphones made up 41 percent of Merry’s revenue last quarter, surpassing the company’s forecast of 30 percent, Huang said.

Sales of headsets used in entertainment devices decreased from 68 percent of revenue in the second quarter to 56 percent last quarter, partly due to customers ordering earlier this year ahead of proposed US tariffs on Chinese-made goods, he said.

Facing a global economic slowdown exacerbated by the US-China trade dispute, the company expects revenue to decline slightly this quarter, but to recover next year as Merry is already negotiating orders for its true wireless stereo headphones, which would significantly contribute to revenue next year, he added.

Huang expressed confidence in the potential of high-end true wireless stereo headphones as more smartphone manufacturers and audio equipment makers begin offering the option.

However, the company is facing a battery shortage for the headphones from its European suppliers, Huang said, adding that it is looking for possible replacements in China as it aims to overcome the obstacle by the first quarter next year.

The company is aiming to increase shipments from its plant in Thailand, which only contributed a single-digit percentage to overall revenue last quarter, Huang said, adding that it aims to increase that to 20 percent by the end of next year.