North America and Western Europe will remain the chief markets for 2005, but emerging markets such as Asia-Pacific and other parts of Europe also present strong prospects. 2005 will bring the introduction of several newer technologies to the desktop PC market, including products that incorporate dual-core CPUs, BTX systems, and the mobile Sonoma platform. The rollout of these technologies is expected to put a spring back in the step of the desktop PC market. Notebook PCs have felt the effects of price deflation among key components such as panels and CPUs, leaving an opening for a price drop in the end market and the likely acceleration of desktop replacement. As a result, notebook PCs are expected to constitute 30% of the total PC market in 2005.    

The PC market as a whole can be expected to expand in 2005, but uncertainties within the global economy coupled with an apparent lapse in the PC replacement cycle will impose restraints on growth. Nevertheless, growth of 9.3% from 2004 is anticipated. As for servers, the rollout of dual-core processors and operating systems that support 64-bit platforms will likely stimulate demand for corporate server replacements and upgrades. But the lack of stability in the global economy is likely to indirectly curb corporate IT procurement, and consequently, the server market is expected to grow more modestly at around 10.1% in 2005.

In 2004, Taiwanese desktop PC suppliers experienced growth in orders from brand-name vendors, but sluggish sales in the clone market limited overall growth. While the prospects for increased orders from HP and Dell looks bright in 2005, other brand-name vendors such as IBM, Fujitsu-Siemens, and Lenovo have inserted restrictions into their procurement contracts and continue to maintain high levels of in-house production. Opportunities for large-scale growth in orders are therefore not particularly plentiful, and Taiwanese desktop PC makers are likely to feel the squeeze. Taiwanese motherboard makers already control 95% of the global market, but the gradual slide in orders from Intel and Trigem has triggered a price war among Taiwanese makers. In such a competitive environment, motherboard makers are shipping at higher levels of assembly and increasing R&D capacity. Such moves may cause first-tier players to have a greater impact on industry structure.

In 2004, Taiwanese notebook PC suppliers saw an upsurge in orders from brand-name vendors, especially Toshiba. Taiwanese makers produced more than 70% of all notebook PCs in the global market in 2004. With orders from Japanese vendors continuing to rise and Korean suppliers becoming weaker in their ability to compete for orders, Taiwanese notebook PC makers could control as much as 73% of the global market in 2005. The forecast for Taiwanese server makers looks more mixed. On the one hand, Dell and HP are expected to increase outsourcing to Taiwanese ODMs (Original Device Manufacturers). On the other hand, most major international vendors are still not willing to outsource high-end offerings, despite their insistence on low production costs. This situation may prove advantageous for EMS (Electronic Manufacturing Services) providers, as they continue to eye orders going to their Taiwanese ODM competitors. For this reason, growth within the Taiwanese server industry could be limited in 2005.