SINGAPORE – Surface Mount Technology (Holdings) reported fiscal third-quarter sales fell 17% year-over-year to HK$476 million on higher demand for turnkey business.

Net losses increased 359% to HK$13.3 million for the period ended Dec. 31.

Sequentially, revenue was up 10.2%, although the loss also rose 5.5%.

Industrial controls made up 29% of sales, followed by consumer products (26%), computer peripherals (25%), automotive electronics (17%), office appliances (2%) and telecommunications (1%).

The company, which gets more than half its revenue from Japan, said a severe labor shortage and higher inflation and minimum wages are affecting profits. “In most industrial provinces in China, workers prefer to stay in their hometowns, which are seeing better economic conditions as a result of the huge government stimulus package in 2009. Manufacturing cost is increasing due to inflation and rising minimum wages.”

Component supplies are getting tighter too, the electronics manufacturing services firm said.

The firm said customers are providing firmer and longer forecasts.