In the second quarter of 2005, motherboard makers rode the continuing momentum caused by growth in emerging markets in the first quarter, as shipments to China, the Asia-Pacific region and Eastern Europe remained strong. According to the Market Intelligence Center (MIC), the industry thus withstood the effects of a traditionally weak season, as shipment volume reached 33 million units, year-on-year growth of 6.1%; total shipment volume in first half of 2005 reached 68 million units, year-on-year growth of 5.3%.

Besides the fact that makers used value-line offerings to stimulate demand in the end-market, other factors that boosted volume included orders postponed to the second quarter due to shortages in chipset supply in the first quarter, and the stocking by major brands in preparation for the second half of 2005.

Although Intel and AMD both introduced dual-core CPUs, the share of motherboards designed for dual-core CPUs remains low and consequently these new high-end offerings had only a limited effect on ASP (Average Selling Price). Additionally, demand from major brands and from the clone market for value-line offerings went up, causing ASP to fall year-on-year to US$54.8 from US$55.3. However, as shipment volume increased, shipment value grew 5.2% year-on-year to US$1.8 billion, totaling US$3.8 billion in the first half of 2005.

Looking ahead to the third quarter, shipment performance is likely to be affected by early stocking up by the major PC vendors; however, demand in North America, China and the Asia-Pacific region is expected to be brisk, stimulating shipment volume. Although the economy in Western Europe has not yet rebounded, back-to-school demand is expected to be strong. All these factors combined will bring about 5.8% year-on-year and 9.8% sequential growth in the third quarter, reaching 36.2 million units.

Although the traditional peak season will arrive in the second half of the year, the question whether the industry can continue its growth of the first half of 2005 is tightly interwoven with two factors. Firstly, AMD will stop supplying its K7 CPU series and Intel will do the same with its 845 chipset series, which might have an impact on the distribution of value-line motherboard offerings. Motherboard makers can choose to use Taiwanese makers' chipsets, but these makers in turn are expected to be affected by realignment of wafer foundry and packaging capacity, whereby the capacity share allocated for chipsets will go down, leading to higher costs. Secondly, PCB (Printed Circuit Board) makers are expected to have a delay in delivery schedules because of the problem of power outages in China. The supply-demand situation of chipsets and PCBs will have an impact on motherboard makers' control over material inventories and motherboard volume.

Although in the first half of the year motherboard makers have anticipated this component supply situation and have stocked up in advance, if demand in the second half of the year will not be as forecasted, pressure will be put on inventory levels. Whether makers can effectively deal with their inventories will be one of the key points in the second half of the year.

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About MIC

Market Intelligence Center, based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english