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Analysts expect mobile-phone parts shortage to ease

A shortage of cellphone parts is expected to ease in the first quarter of next year due to weaker demand and increased capacity at component plants, industry watchers said yesterday.

"The supply of key components is still very tight, especially the chips used for handsets. But we expect the shortage will ease slightly as early as later this month," said Alex Liou (劉維宇), a spokesman for BenQ Corp (明基電通).

The supply problems have caused a significant delay in Motorola Inc's camera-phone deliveries and cut into BenQ's sales.

But with an improved supply of parts, Liou said, BenQ's sales this month will rebound as the demand for mobile phones remains strong.

The company reported lower November sales, down by 9 percent to US$32.9 billion from October.

BenQ, Taiwan's largest mobile-phone maker, also produces Motorola's low-end T200 model, in addition to phones under its own name.

Despite Liou's optimism, industry analysts expect to see a slower but more pronounced improvement in key component supplies for the January-to-March period.

"The worst has passed in terms of demand and supply," said Chou Chi-shian (周奇賢), an analyst with SinoPac Securities Corp (建華證券). The demand and shipments usually peak around Thanksgiving Day and start to wane after Christmas holidays, Chou added.

"But the shortage won't be significantly eased until demand weakens and component suppliers finish increasing capacity in the first quarter of next year," he added.

Light-emitting diodes (LEDs) are increasingly used as display screens for high-end cellphones. But these components are also in short supply, Chou said.

Everlight Electronics Corp (億光電子), one of a few domestic companies capable of producing white LED products, is planning to increase monthly production to 20 million units in the first quarter, from 3 million to 5 million units currently, to meet growing demand, Chou said.

To catch up with booming demand for small-sized flat panels used for mobile phones, local flat-panel display makers are also stepping up production, he added.

Steven Tseng (曾續良), an analyst at Yuanta Core Pacific Securities (元大京華), said he expects to see a significant improvement in the first three months of next year.

"Weaker demand in the first quarter will offset the pressure of a supply glitch," Tseng said.

"It [the supply constraint] is not a critical problem as it will hurt cellphone makers' sales for just a month or two," he added.

Tseng said manufacturers were cautious about demand as SARS caused inventories to grow last summer.
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