Taiwan's computer industry is at least partly buffered from the impact of the continuing PC downturn due to increased orders from Western and Japanese companies cutting costs by farming out production, executives said yesterday. But with visibility in the PC industry limited, protection could be short lived.
Even industry bellwether Intel Corp is hurting, telling the market Tuesday that it had a 7-percent drop in second quarter sales of its industry-leading microprocessors and plans to slash 4,000 jobs.
That earnings bombshell sent Taiwan's tech-heavy TAIEX down 1.3 percent to close at 5,250 points.
Still, some companies are banking on increased orders from abroad to help stem the damage.
"[Our chairman] is not very confident about a recovery in PC demand over the next six months," said Justine Liu (劉宜君), spokesperson at the MiTAC-Synnex Group (神達聯強集團), one of Taiwan's top PC makers, "[but] we are pretty sure about Mitac's second half revenue."
Earlier this year, Mitac chairman Matthew Miao (苗豐強) said the silver lining of the downturn for Taiwan has been "the shift of a large volume of production to Asia, especially Taiwan," as companies from the US, Europe and Japan farmed out production in order to lower costs.
His company believes its sales will jump threefold in the second half compared to the first quarter on new orders from Dell Computer Corp, Intel Corp and others for new PCs, servers, PDAs and various components.
Other manufacturers, like Hon Hai Precision Industries Co (鴻海精密), which makes every part of a computer except the chips, have seen lucrative new contracts for electronics gear ranging from Sony's PlayStation 2 to notebook and desktop PCs. Nanya Technology Corp (南亞科技), the memory chip maker, last month signed a US$3 billion contract with Dell to provide computer parts as well.
By contrast, the outlook for Intel appears clouded at best.
"Although an overall industry recovery has been slow to materialize, we still expect a modest seasonal increase in demand in the second half," said Craig Barrett, Intel chief executive officer in a statement.
Industry watchers are not so sure. Motherboard and PC component analysts contacted by the Taipei Times said data is pointing more and more to a deadbeat PC market in the second half, as enterprises further put off replacing aging fleets of computers.
"We do see some [PC buying] in specific sectors and regions ... but Japan is dropping and the US is stable to low. All pickup is from consumers, not from corporate buying. There is no corporate demand right now," said one analyst. He believes companies might begin replacing desktops in the fourth quarter -- if budgets allow.
Typically, the second half of the year is the money-maker for firms, as back-to-school spending and the holiday season buying bolster the computer market.
Investors also latched onto the bad news, dumping PC-related shares on wavering confidence in the second half of the year. Hon Hai shed NT$8 to end the day at NT$143 per share and Mitac International dropped NT$0.3 to NT$12.9 per share.
"There's still no visibility," said Chris Hsieh, semiconductor analyst at ING Barings in Taipei. He said information from all sectors in the PC business is conflicting.
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