- In the first quarter of 2004, Taiwanese wired LAN (Local Area Network) shipment value dropped 7.8% to reach US$271 million, with NICs (Network Interface Card), switches, and routers comprising 7.6%, 37%, and 55.4% respectively. NIC shipment value fell as much as 40.1% due to erosion from LOM (LAN on Motherboard). Switch shipment value declined 24.9% as a result of falling prices. Router shipment value climbed 19%, while ASP (Average Selling Price) grew due to swift transition to 802.11g.
Impacted by erosion from LOM , shipments for wired LAN NICs shrank and mainly derived from replacement demand in the retail market. Demand for Gigabit NICs did not experience marked growth in the first quarter of 2004, as they were still 1.5 times more costly than 10/100M NICs and applications remained lacking. As a result, Taiwanese wired LAN NIC shipment volume fell 11.3% sequentially due to a seasonal reduction in orders from retail channel players. In the absence of an expansion in Gigabit NIC shipment share, shipment value slid 20.4%.
Despite weak demand from retail channels, Taiwanese switch shipment volume and value were both boosted by the recovering corporate market, thus dropping only 0.8% and 4.7% respectively. This slide was a result of, other than weak demand, delayed shipments from chipmakers, which tight capacity. Consequently, Taiwanese makers will mainly ship Layer 2 10/100M switches in the second quarter of 2004. With the Gigabit switch market having not picked up substantially, shipment value is expected suffer a bigger drop than shipment volume due to price competition.
As demand from North American retail channels subsided and vendors cleared off inventory through promotions, router shipment volume from Taiwanese first-tier makers fell in January. Shipment did not resume previous strength until mid-February. Due to brand-name retailer channel players' aggressive promotions of 802.11g routers in the fourth quarter of 2003, Taiwanese wireless router shipment share jumped over 70% in the first quarter of 2004. Shipment share of 802.11g routers by first-tier makers even grew to over 80%. However, price reductions in the retail market turned in an ASP increase of only US$5.1 sequentially. Although Taiwanese shipment volume fell 5.3%, shipment value still climbed 7% in the first quarter of 2004.
In the second quarter of 2004, demand from the retail channel market is expected to plateau. While Gigabit NIC shipments remain low, LAN NIC shipment volume is anticipated to decline 15% to approximately five million units due to erosion from LOM. Switch shipment volume is expected to grow 1.1% sequentially, reaching around 29.8 million ports, as corporate users are likely to pump up technology investment compared to the same period in 2003. Router shipment volume is expected to grow 3.2% sequentially to reach about 3.5 million units as the global broadband market continues its steady growth and home networks are increasingly prevalent.