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Motherboard market improving

Although far from the mother of all recoveries, Taiwan's motherboard makers say the computer industry is showing signs of a slow recovery and should continue to do so through the end of the year.

Motherboards are a necessity in every computer, the cradle on which every chip and component in a computer rests. Since every computer has one, analysts and industry pundits pay close attention to monthly sales reports and company performance in order to gauge PC industry performance -- particularly in Taiwan, where 70 percent of all the world's motherboards are made.

An ailing world economy sent demand for personal computers plummeting from record highs last year, and Taiwan's stock market followed.

Worldwide computer sales estimates have plummeted this year, with market research group International Data Corp (IDC) cutting its 2001 growth estimate for the industry almost in half. The company originally said 144 million PCs would be sold, but as demand fell, so did estimates. Last month, the company revised the figure down to 139 million units, or 5.8 percent more than last year -- the slowest growth rate in a decade.

In a sign of optimism, however, a number of Taiwanese motherboard makers say the industry is edging upward, although slowly.

"Actually, business started really picking up in the second half of June, and for the second half of this year we believe PC demand will grow," said Benson Chang (張文忠) vice president of marketing at Gigabyte Technology Co (技嘉科技).

Motherboard orders to his company, which are tallied week by week, shot up 20 percent during the third week of June and Chang believes the upward trend will continue. In the first half of the year, the company made between 4.5 million and five million motherboards, and in the second half "we hope to get six million," he said.

Executives from market leader Asustek Computer Inc (華碩電腦) also said the worst is over. "In terms of year-on-year growth rate, our shipments hit their low in April," said Alan Chan (詹斯政), marketing manager at Asustek.

Asustek produced between six and seven million motherboards during the first half of the year and expects growth similar to Giga-byte's in the second half -- 30 to 40 percent over the first half of the year.

Gigabyte and Asustek are two of the top motherboard makers in Taiwan, sharing their billings with only two other companies, Micro-Star International Co Ltd (微星科技) and Elite Group Computer Systems Co Ltd (精英電腦).

These companies are counting on the launch of Intel's newest Pentium IV microprocessors and Microsoft Windows XP to boost computer sales -- and motherboard sales -- worldwide. In fact, some analysts believe that aside from the poor performance of the world economy, the only thing holding back PC sales is the people who are holding off new purchases until Pentium IV and Windows XP launch.

"If you know there is a new model two months down the road, then it's not urgent to buy right now," said Henry King (金文衡), electronics analyst at Credit Suisse First Boston. He expects the third quarter to be better than the second, and the fourth to be the strongest of the year.

Back-to-school computer sales usually boost the industry in the third quarter of the year, and Christmas season buying helps boost fourth quarter PC sales.

Consumer buying habits aside, the main factor that usually trips up the PC industry is excess inventory, and all three pundits agreed current inventory levels are quite low throughout the industry.

According to another analyst, the PC clone (non-brandname)market is carrying no inventory, and in terms of the exuberant orders for spare parts, he said.
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