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Taiwan's ODMs and EMS set to benefit from tussle

The ongoing tussle between US chip giants Intel Corp and Advanced Micro Devices (AMD) Inc is resulting in sharper-than-usual price cuts on processors, which is set to benefit Taiwanese manufacturers, Credit Suisse said.

"Significant price cuts will result in lower gross margins for Intel and AMD, and they are essentially a transfer of profits to the consumer and/or the PC supply chain," Credit Suisse said in a report issued on Friday.

If price reductions have the result of stimulating computer sales, makers in the field of dynamic random access memory, (DRAM) which include Powerchip Semiconductor Corp (力晶半導體) and ProMOS Technologies Inc (茂德科技), would be the most obvious beneficiaries, the Swiss brokerage firm said.

Benefitting

Original design manufacturers (ODMs) and electronics manufacturing service (EMS) providers -- especially Asustek Computer Inc (華碩電腦), Quanta Computer Inc (廣達電腦) and Hon Hai Precision Industry Co (鴻海精密) -- will also gain from the price reductions, it said.

"If falling margins for Intel and AMD mean that others in the PC chain start to breathe more easily, the Taiwanese ODMs and EMS companies would have the most to gain, given their extremely low margins," the report said.

According to Credit Suisse, prices for the current mainstream desktop processors, or central processing units (CPUs), are estimated to fall by 40 to 60 percent from April to next month.

Price cuts are likely to be less aggressive for dual-core mobile CPUs, estimated to be 30 percent less in the third quarter over the second, according to the brokerage firm.

"These numbers are higher than those seen in previous years? Though price cuts are standard in this industry, the extent of the reductions this time is unusual," the report said.
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