Taiwan, nominally the world's largest manufacturer of portable computers, is expected to see almost all of its laptop shipments produced in China this year, the Market Intelligence Center (MIC, 市場情報中心) said yesterday.
"We expect the nation's notebook shipments to be nearly 100 percent manufactured in China this year," Helen Chiang (江芳韻), research manager of personal computer (PC) industry at the Taipei-based research house, said on the sidelines of a press conference yesterday.
It is an inevitable trend because the nation's laptop makers are trying to cut costs amid deteriorating gross margins and to keep up with their clients, who are attempting to gain footholds in the Chinese market, Chiang said.
Taiwanese information technology (IT) companies who have their manufacturing bases in China were responsible for 70.1 percent of US$68.4 billion worth of the Taiwanese IT hardware produced last year, up from 63.3 percent of US$56.7 billion worth in 2003, according to MIC's latest figures.
The notebook-computer sector, for example, saw up to 82 percent of its production manufactured in China last year, up from 66 percent a year ago.
MIC said the laptop sector is expected to see lackluster performance with shipments of around 8.9 million units in the traditionally slow first quarter, down 14.7 percent from 10.4 million laptops in the fourth quarter of last year, dragged down by the shortage of key components, such as Intel Corp's Celeron central processing unit (CPU).
Deficiencies that started haunting the laptop sector may not be easily relieved by the end of this quarter, Chiang said.
She described the problem as the result of Intel's strategic move to phase out a product line that is less profitable.
Annual shipments this year are expected to grow to a total of around 41 million laptops, which would represent 74.5 percent of the forecasted 55 million units worldwide, up from 33.3 million units that made up 72.3 percent of the world's 46.1 million-shipment last year, MIC said.
It attributed the growth to Taiwanese companies' competitive edge in offering more favorable prices than their South Korean rivals, which has helped win more orders from Japanese firms looking to cut costs through outsourcing.
For example, Toshiba Corp plans to reduce the proportion of its high-cost in-house products from over half of its production to 30 percent, she said.
Toshiba has chosen to leverage the strength of Taiwanese companies, including Quanta Computer Inc (廣達電腦), Compal Electronics Inc (仁寶電腦) and Wistron Corp (緯創), in this respect, Chiang said.
However, she said that a price war among laptop vendors is expected this year, which could erode the nation's suppliers' already slim margins.
The sector may see its average gross margin of around 5 percent to fall to below 4 percent or even lower, Chiang said.