Components shortages threaten tech bounce back

 

Gallery

By Reuters

Posted on 1 Jun 2009 at 08:18

A shortage of components such as memory chips and displays threatens to derail a nascent recovery the technology sector.

At the Computex trade show in Taiwan this week, electronics companies including Acer and Asus will showcase their latest gadgets to tempt buyers wary of spending as a global recession pinches.

In the past few months, China's $600 billion stimulus spending has driven a recovery in Asia's tech sector, especially in Taiwan, as China moulds itself into an electronics consumer and not just an exporter.

But many tech companies, especially makers of memory chips and displays, have sharply trimmed output since late last year or were too cash-strapped to invest in new production equipment in the sector's downturn, leading to shortages of key components.

"Tight supplies are creating a headache for many computer vendors," says Alex Huang, vice president of Taiwan's Mega International Securities. "So it remains a question mark, if you ask me, how strong the recovery will be in the next few months."

AU Optronics, the world's third biggest maker of LCD panels for PCs and flat-screen TVs, says it can only meet 70% of its orders, even if it runs at full capacity in the next three months.

It's a double blow as many leading PC companies have seen their profit margins weaken as they sell cheaper netbooks.

As prices of displays and memory chips rise due to supply shortages, while demand remains lukewarm, Merrill Lynch expects PC vendors to face more pressure on margins from this quarter. Research firm IDC has forecast worldwide PC shipments will fall 4% this year.

Computex down

A total of 1,712 exhibitors will attend the Computex show in Taipei, slightly fewer than last year. Many Chinese buyers, including Lenovo and Sichuan Changhong Electric, will also shop for new gadgets at the show.

"For us, China is a very important market, where growth will be faster than any other major market," says J.J. Wang, a vice president of Dutch NXP Semiconductor.

Mobility will be a key theme at the world's second biggest PC fair, and there is likely to be keen interest in super-thin, lightweight laptops designed to cut power consumption and save battery life.

Acer, Asus and Microstar are betting on new-generation laptops, powered by Intel's new consumer ultra-low voltage (CULV) processors. They expect slimmer laptops to fit the space between netbooks and traditional laptops, pumping fresh life into the on-the-go computing world. However, they face an uphill climb.

Big PC vendors are jumping into the ultraportable segment, hoping to entice consumers to buy laptops such as Apple's ultra-thin MacBook Air at less than half the price but with better processing power, bigger screens and longer battery life than the netbooks.

"CULV models will eat into a big part of the share in the traditional laptop market, and we definitely don't want to miss such an opportunity," says Sambora Chern, director of notebook PC sales department of Microstar International (MSI).

At Computex, Microstar will display the X-Slim line, powered by Intel's Core 2 processor and a glossy LED screen, which the company expects to help boost its 2009 laptop shipments by 20-30% from last year.

Acer and Asus, Taiwan's two most recognizable PC brands, will tout a line of touchscreen desktops and netbooks, and eco-friendly products for buyers who care about green energy and cost savings.

Up the production chain, Intel and AMD will showcase new processors and chipsets, while Intel will once again promote WiMAX, the wireless standard that's struggling to gain traction.