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PC prices to continue slide, suppliers say

Global personal-computer prices are likely to keep dropping because there are too many manufacturers in Taiwan competing for orders from Hewlett-Packard Co, Dell Inc and other brand-name PC makers, bankers and suppliers said.

The country's technology industry, which produces about three-quarters of the world's PCs, is unlikely to consolidate because smaller and unprofitable rivals are still able to raise money from investors to stay in business, they said.

Hewlett-Packard chief executive Carly Fiorina said last week the world's second-biggest computer maker had been "overly aggressive" in cutting prices, as the company reported second-quarter sales and profit that missed analysts' estimates. A day later, main rival Dell slashed prices as much as 22 percent on some products.

"There is still overcapacity in the industry," said Yancey Hai (海英俊), a vice president with Delta Electronics Inc (台達電子), the world's largest maker of power supply equipment for personal computers.

"The market will decide prices, not Hewlett-Packard," Hai said.

Compal Electronics Inc (仁寶電子), the world's No. 2 notebook maker, this month said it expects its gross margin to decline this quarter as it sells more laptops at lower prices to boost market share. Compal expects shipments to rise to 3 million from 2 million in the first half, president Ray Chen (陳瑞聰) said.

Taiwan has more than 15 notebook PC companies that sell to Hewlett-Packard, Dell and other brand-name vendors, which are giving more manufacturing orders to other companies to cut costs.

Overcapacity is a feature in other areas of Taiwan's technology industry, investment bankers said.

The nation also has five computer memory-chip makers and five flat-panel display makers, some of which are hurting the industry by selling at prices that aren't profitable, they said.

"The Taiwan capital market is overgenerous, allowing the weak players to stay in business," said Sung Hsueh (宋學仁), a vice chairman of investment banking for Goldman Sachs Group Inc, at an industry event in Taipei.

"After consolidation, companies would have better pricing power," Sung said.

Neither Sung nor manufacturers expect mergers anytime soon.

The opportunity for buyouts -- when share prices are low -- passed after stocks of the Taiwanese PC companies as much as doubled in value from 12-month lows in April on signs of a rebound in demand.

In addition, investors in Taiwan's stock market have continued to provide capital to memory-chip and flat-panel display makers that have lost money for years, Sung said.

Winbond Electronics Co (華邦電子) has posted losses in three of the last five years, resulting in a NT$705.6 million deficit for the period. The computer memory-chip makers said on June 20 that it's revived plans to build a new chip plant worth US$1 billion.

"The industry should consolidate," said Michael Tsai (蔡國智), vice chairman of Powerchip Semiconductor Corp (力晶半導體), the country's third-largest computer-memory chipmaker.
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