Fri, Jun 03, 2005 - Page 10 News List

Mixed outlook for hardware in Q3

GROWTH POTENTIALHigh demand for motherboards prompted optimism from some analysts, but others said supply uncertainties skewed the third-quarter picture

By Amber Chung  /  STAFF REPORTER

Visitors to the Computex 2005 Technology Show in the Taipei World Trade Center on Tuesday examine the inside of one of Hon Hai's latest computer motherboards, marketed under the brand name Foxconn.

PHOTO: GEORGE TSORNG, TAIPEI TIMES

The nation's motherboard sector expects to see a rosy outlook for the upcoming July-September quarter, in the wake of the busy Computex Taipei 2005 Technology Show and healthy desktop computers demand worldwide, analysts said yesterday.

As the trade show entered its third day at the exhibition halls of the Taipei World Trade Center, expectations and confirmations of orders secured by local manufacturers appeared to boost the sentiment across the tech sector, market watchers said.

"We are optimistic about the motherboard sector in the third quarter after seeing a smooth seasonality in the current quarter, where shipments should decrease marginally by only 3 percent quarter-on-quarter -- much less than the average decline of 10 percent," Jenny Lai (賴惠娟), a hardware analyst at JP Morgan Chase & Co said in a phone interview yesterday.

The total number of motherboards shipped by the nation's top four manufacturers, including Asustek Computer Inc (華碩電腦), Elitegroup Computer Systems Co (精英電腦), Gigabyte Technology Co (技嘉科技) and Micro-Star International Co (微星科技), will jump by 15 percent to some 25 million units, from around 22 million units in the current quarter, Lai predicted.

She attributed the robust growth outlook to the busiest Computex trade show in the last four years, which also saw heavier visitor traffic.

According to the Taiwan External Trade Development Council (TAITRA, 外貿協會), the show attracted 23,309 visitors yesterday alone. For the first three days, it has attracted a total of 53,529 visitors, TAITRA said. Among that figure, 18,085 were foreign visitors, including foreign buyers and reporters, it said.

TAITRA expects to see 120,000 visitors with 28,000 from overseas this year.

Lai said the positive outlook is being partly boosted by a healthy demand for desktop computers worldwide, driven by a stable platform powered by Intel Corp's sufficient supply of affordable 915 chipsets.

Yet the eye-catching novel product of the dual-core microprocessor in the show may not become the market mainstream for the months ahead, as "CPU [central processing unit] availability and software optimization remain key issues to mass adoption, on top of pricing concerns," Lai said.

Meanwhile, JP Morgan recommended Asustek and Micro-Star as their overweight picks.

In contrast, Smith Barney equity research at Citigroup appeared to be less bullish about third-quarter prospects for the motherboard industry, citing concern on supply uncertainty.

The new Waste Electronics and Electrical Equipment (WEEE) and Restrictions on Hazardous Substances (RoHS) requirements, to take effect in the EU in August this year and July next year, will cost Taiwanese companies US$3 to US$4 more per board and reduce output speed by 10 percent to 20 percent, Kirk Yang (楊應超), said Smith Barney's head of Asia technology hardware research in a report released on Wednesday.

The potential chipset shortages from Intel Corp and the likely summer power shortages in China both cloud the third-quarter outlook, Yang said.

The researcher predicted the top four players plus the heavyweight newcomers Hon Hai Precision Industry Co (鴻海精密), the world's leading electronics manufacturing service (EMS) provider, to ship combined 134 million motherboards, accounting for 96.6 percent of forecasted global shipment of 138.7 million units this year.

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