Surge in motherboard sales could be over

Elitegroup Computers Systems Co (精英電腦), a Taiwan motherboard maker whose shipments have risen the past two months, expects the trend to continue this month. Sales should keep climbing as Intel's price cuts boost computer demand, said Elitegroup Financial Controller Kreps Lin.

"There's repressed demand," said Kreps Lin, the company's financial controller. "Customers have postponed buying until the price cuts and new products arrived."

`Looking Good'

Asustek, Taiwan's biggest motherboard maker, reported rising shipments in July and August. Gigabyte, No. 2 in the industry, said shipments to customers that may have included Compaq Computer Corp, International Business Machines Corp, and Legend Holdings Ltd (聯想), rose more than 15 percent on month in July and August.

"Our forecast for September is 1.4 million boards," said David Chang, deputy director of finance at Asustek, which shipped 1.1 million motherboards to customers such as Hewlett-Packard Co in August. "October orders are looking good."

The motherboard orders, price cuts and Windows debut come as economies around the world are slowing. The US economy grew 0.2 percent in the second quarter, its slowest pace in more than eight years. Germany's economy didn't grow in the second quarter, while Japan's shrank 0.8 percent.

"We believe there must be demand for the new products," said Sunny Han, marketing manager at Asustek, "though we can't guarantee what's on users' minds."

`Why should I?'

Wang Ya-ping, an assistant manager at semiconductor trading company G-Skill Ltd is of two minds. She's debating the merits of buying her first home computer.

"Why should I pay for the most advanced processor or operating system when all I do is check e-mail?" she's asking."Even if Intel cuts its prices, that wouldn't attract me." Inventories If the motherboard sales boom is sending a false signal, companies may be left with stocks of motherboards and computers they can't sell, delaying a recovery in the industry.

"Inventory pileup in manufacturing channels in anticipation of a spike in PC demand driven by new operating software and Intel price cuts may not be a genuine recovery," said Henry Wang (汪島雄), an Acer spokesman.

Investors, too, are guarded. Between Aug. 17 and the terrorist attacks in the US on Tuesday, Asustek shares fell 14 percent, Gigabyte dropped 16 percent and Elitegroup is down 18 percent.

That compares with an 11 percent fall in the main TWSE Index. Last month, Merrill Lynch & Co cut its recommendation for Asustek to "neutral" from "buy" on concern about PC growth.