Sequentially, gross margins improved to 10.2% from 9.7%. SG&A and R&D expenses as a percentage of sales decreased to 4.5% in the quarter compared to 5.4% last year. Cash from operations was $26 million.

Year-to-date, Nam Tai's net sales were up 16.4% to $640.5 million, operating income was up 18.3% to $45.1 million, and net Income rose 11.6% to $43.1 million.

In a statement, the company said it would actively seek opportunities for further business diversification, including vertical integration of certain telecommunication component subassemblies.

The vertical integration of its flexible printed circuit business is on schedule, and trial production has begun.

Recent program wins included module assembly services for Qualcomm MEMS Technologies, and an order for 1.3 MP CMOS image sensor modules for notebook computers with built-in camera functions.

The company is going ahead with plans for a factory in Shenzhen and another in Wuxi. Expansion projects are expected to commence in the summer of 2007.

Chief executive and CFO Patinda Lei said, "While the company is implementing a series of strategies to improve profitability, Nam Tai is still confident to achieve sales growth for year 2006 of approximately 10% as compared to the sales level in 2005, and annual sales growth of 12% in 2007 and 2008. With aggressive expansion plans in place and orders from both existing and new customers continuing, the company is optimistic about its long-term prospects."