Outsourcing of notebook manufacturing to Taiwanese companies is keeping the largest players in the black, making them attractive to investors, market watchers said yesterday.
"The global PC market is slowing, but the notebook market is still growing. This year we will see double-digit growth," Stephen Tseng (
"The leading players are eating into other players' markets. It is a market share game," Tseng said.
Two of Taiwan's largest notebook manufacturers, Quanta Computer Corp (
"Definitely [Quanta and Compal] are good [investment] options as we will see more outsourcing to Taiwan next year," Tseng said.
Other analysts agree.
"The Taiwan notebook industry can still grow its market share," said Martha Chen (陳洪), an analyst at Primasia Securities in Taipei.
However, Chen was not so confident about Quanta's prospects.
"Compal will outperform the market according to our evaluation. It is more attractive than Quanta," Chen said. "We think Quanta's prospects are limited next year as its profit margin is a concern, as is Quanta Display."
Primasia rates Quanta's stock as neutral, forecasting 4 percent growth in sales next year, in contrast to Compal's 14 percent.
New outsourcing may come from Japanese vendors, analysts say.
"The big US vendors have all outsourced here, but there are still opportunities with Japanese vendors such as NEC Corp and Sony Corp," Chen said.
"Even though Sony and Toshiba are manufacturing in China, they need to rely on the Taiwan supply chain," Tseng said.
He suggested that the Japanese might consider outsourcing all manufacturing to Taiwan. This would free up the Japanese companies to concentrate on making better products, Tseng said.
The secret to the market leaders' success has been diversification, analysts said.
"Quanta is the most apparent example of diversification, as now they deal with almost every computer manufacturer in the world. And Compal now has orders from Dell Computer Corp and will have more from Apple Computer Inc by early next year," Tseng said.
The two companies have also diversified their product lines, now offering handheld computers, LCD monitors and servers.
By gaining market share, the two largest manufacturers have squeezed smaller players to the limit. Both Inventec Co (
Inventec's problems are compounded by its reliance on sales to businesses rather than consumers.
"This year there were corporate spending cuts on technology and this is not expected to change any time soon. As a commercial supplier, Inventec's growth is capped," Tseng said.
Primasia's Chen said that Arima's prospects are even more dismal.
"I think Arima will underperform because there is no profit coming from the operation of its core business. They aren't making money, and I don't think they can even make money in 2003," Chen said.
This year in Taiwan notebook manufacturers will produce more than 18 million computers, meaning three in five notebooks sold worldwide by the end of this year will have been manufactured here.
This will rise to almost two-thirds next year, according to the Market Intelligence Center (
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