The Computex trade show seemed well-attended with most Taiwanese ODM / OEM showcasing new netbooks and CULV notebooks which are in various launch stages. Upgraded netbooks garnered the most interest and presented impressive overall build quality and specs. Dell and HP did not have a presence at the show.
A recent visit to Taiwan to attend Computex by a leading investment bank reveals some valuable insight in one segment of the technology supply chain.
During their attendance, members of Deutsche Bank met with various members of the PC supply chain including OEMs, original design manufacturer (ODM), electronics distributors and component suppliers. In general, it was found that near-term manufacturing / demand is tracking modestly below expectation with month of May sales slightly below plan. In their report, of which excerpts follow, the bank believes this was caused by the combination of 3 things.
First, end demand remains muted as incremental softness in Europe is somewhat offset by better China demand. Second, there were reports of specific component shortages in LCD (14″ and 15″) and optical drives which are impacting build schedules. And finally, there were some isolated reports of order / new project pushouts from May into June and / or Q3. Dell and HP demand sounded relatively consistent with weakness being attributed to other PC vendors.
Overall, commercial PC demand was said to remain weak but relatively stable while consumer PC demand was better due to low-end China consumer demand (stimulus driven). Motherboard demand was cited as more stable than notebook. Most supply chain vendors pointed to expectations of normal seasonality in Q3, while indicating visibility remains poor. Deutsche Bank’s report goes on to say the bank believe most companies are pointing to ‘normal seasonal’ expectations because they lack the visibility to suggest anything else.
Except for a few isolated components, lead-times are short for most components. Industry contacts indicated that major OEMs (Dell and HP) are maintaining caution with respect to inventory levels and they are keeping a tight rein on their inventory exposure. There was no talk of ‘rush orders’ and a few industry contacts indicated “that’s now a thing of the past”. Its believed that manufacturing trends are now tracking close to end demand, and the inventory restock of March / April has largely run its course.
The trend to lower-end product configurations continues as low-end consumer notebooks and netbooks appeared to be the healthiest sub-sector within the PC market while corporate demand remains tepid according to Deutsche Bank. The report continues by indicating the bank believes this is being driven by relative strength in China and the continued ‘trade-down’ trend in already developed consumer markets.
Netbooks continue to be generally healthy, although competition is heating up in this category (Samsung). Many in industry expect total netbook shipments to double this year to about 25 million units. Netbooks seem to be driving or accelerating the migration to lower-end traditional notebook configurations as consumers realize lower specs are ‘good enough’ to meet basic computing tasks of web-browsing and email, for example. One attending distributor at Computex highlighted the combination of this shift in the mix, combined with some near-term upward component average selling price pressure (memory, LCD) creating continued margin pressure on PC OEMs.
Deutsche Bank noted it believes Acer, HP, Asus and Dell each have strong new product pipelines slated for release for the back-to-school and holiday selling season. The new projects garnering the most
fanfare are netbooks and HP’s CULV. For example, one supply chain contact indicated that HP has an aggressive new project schedule for Q3, particularly for CULV and netbooks.
Dell also appears to have a relatively healthy new project ramp slated for Q3 with a few industry contacts pointing to a seasonally stronger order book for Q3.
Nearly every supply chain contact the bank met with pointed to the expectation of normal Q3 seasonality driven by these new project ramps, while admitting that visibility remains low in aggregate. In general, Deutsche Bank left Taiwan thinking the near-term Taiwan electronics demand picture is slightly softer on the margin as mixed US trends and weaker European demand was not completely offset by healthy China consumer demand. Having said this, no one completely threw in the towel on June or the hope for normal seasonal trends in Q3.
VentureOutsource.com, June 2009
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