PC sales data have little impact

News that Asia's personal computer sales grew more slowly than expected last quarter will have only a minor impact on Taiwanese contracted or original equipment manufacturing (OEM) companies, as the majority of the nation's sales go to North America or Europe, industry watchers said yesterday.

Fourth-quarter PC sales "slightly missed" the forecast of 7.9 million units made by US-based International Data Corp (IDC), or an increase of 16 percent from the previous year, according to a statement from IDC analyst Kitty Fok.

That means IDC's 2003 target of a 14 percent rise, to 28.5 million units, was also not met. Fok declined to give shipment numbers, which IDC is scheduled to release tomorrow.

"Despite the weaker-than-expected sales, Taiwanese OEM PC companies are not going to suffer a serious setback as US PC vendors make up a big chunk of the total orders," said Ken Ko (柯維華), an analyst with Topology Research Institute (拓墣產業研究所) in Taipei.

China, the world's second-largest PC market after the US, is expected to ship half of all computers sold in Asia outside Japan this year, IDC said.

Fourth-quarter sales may have missed estimates because the Lunar New Year holidays fell earlier than usual in January this year, prompting some retailers to reduce inventory.

"Another reason may be because notebook demand was a bit softer in China and in India during the fourth quarter," JP Morgan Chase & Co analyst Anuj Sehgal in a statement to Bloomberg News.

Taking Quanta Computer Inc (廣達電腦), Taiwan's biggest contracted notebook computer maker as an example, October to December shipments were quite good and did not suffer any order cutbacks, Ko said.

Quanta's fourth-quarter sales more than doubled to about NT$90.1 billion from some NT$44.6 billion recorded during the same period in 2002.

Compal Electronics Corp (仁寶), the nation's No. 2 notebook manufacturer, had similar good fortune, netting NT$59.5 billion in revenue in the fourth quarter, or a 67 percent increase from the same period the previous year.

"In addition, local OEM companies are expanding their client base to produce computers for Japanese vendors in order to reduce the risk of losing massive orders amid stiff competition, and to improve their gross margin," Ko further explained.

In addition to US PC giants Hewlett-Packard Co, Dell Inc and International Business Machines Corp, Quanta also produces laptop computers for Japanese Toshiba Corp and Sharp Corp along with China's biggest PC vendor Legend Holdings Ltd (聯想), he added.

Local companies are able to have approximately double the gross margins of US vendors at about 12 percent by making notebook computers for Japanese brands, according to Ko.

Agreeing with Ko's view, Roger Lin (林峻毅), an analyst at Pacific Securities Co (太平洋證券), said he did not expect local companies to suffer a setback in shipments due to slower-than-expected sales in Asia in the last quarter.

"Though 2003 PC demand is mostly driven by Asian nations including China, India and Thailand, the sales, or shipments in the region still lag far behind the US and Europe, which accounts for about 50 to 60 percent of total global PC shipments," Lin said.

Quanta's smaller Taiwanese rival Wistron Inc (緯創), a spin-off PC OEM unit of the Acer Group, told industry analysts that it is not concerned about falling demand in Asia as the company already re-gained orders from clients like Acer and IBM starting in the last quarter, Ko said.