NEC to increase motherboard orders with Taiwan suppliers

By Ruby Ying, The China Post

Japan’s PC maker NEC revealed recently that the company will shut down its motherboard factories in Japan by March next year and outsource its motherboard production to Taiwan suppliers. According to local media, NEC is reported to be planning the transfer of all its motherboard orders to Taiwan manufacturers in the first quarter of next year. As NEC is Japan’s leading PC supplier, with output in 2001 expected to reach 3.9 million units, local motherboard makers have geared up to vie for its orders. Currently NEC’s OEM partners in Taiwan include MiTAC and Tatung for desk-top computers and Micro-Star International for motherboards.

Because Micro-Star has so far been NEC’s sole motherboard supplier on the island, NEC’s increase in orders for Taiwan motherboards is expected to drive up Micro-Star’s performance next year, despite the fact that NEC is reported to be looking to widen its range of suppliers in Taiwan. Executives with Micro-Star refused to confirm that the company has picked up additional orders from NEC but stressed that its Japanese buyer did show an interest in furthering cooperation between the two. Meanwhile, three other Japan computer makers, Toshiba, Sony, and Epson, have also increased their orders to Taiwan motherboard manufacturers since this year, causing observers to predict that Taiwan motherboard profit margins will pick up overall in 2001. Manufacturers in the industry believe that Japanese corporations’ preference for Taiwan motherboards is confirmation of Taiwan’s capability in producing high-end motherboard products, especially those based on DDR (double data rate) and Rambus technologies. Previously, most Taiwan motherboard makers reported slack output in April due to low buyers’ sentiments and Intel’s earlier announcement that it wants to cut the prices of microprocessors. The expected increase in Japanese orders is particularly important to Taiwan’s motherboard makers.

According to reports, Taiwan’s motherboard output in April slumped by 20 percent from March and major manufacturers in the industry, including Gigabyte Technology and Micro-Star International, predicted that output in May would continue to drop. At the end of April, Intel announced that it would launch a large-scale price cut on its microprocessors, causing foreign buyers of motherboards to temporarily halt the placing of orders. In addition, the recent depreciation of the euro has reduced market demand, another contribution to sagging motherboard output. In company breakdown, Asustek registered a 30 percent decline of output in April, whereas Micro-Star output slumped by more than 40 percent. DFI Corp. and Soyo Computer, on the other hand, both managed to keep their output hovering around March’s level. As for Abit Computer, its April output even dropped to 200,000 units, although the company claimed that its profit margin has been maintained at 20 percent. As output of high-end products such as motherboards based on Pentium IV and DDR (double data rate) technologies are still low, local manufacturers are conservative about their revenues in April and the coming months.