- Greater Chinese motherboard shipments are expected to grow at an unprecedented low in the fourth quarter of 2002, growing 5.6% to 28.7 million units from the third quarter. With the large volume of orders resultant from overoptimistic forecasts of third quarter demand, inventory pile-ups in the fourth quarter are likely to result in decreased orders. In addition, corporate PC replacement demand will be unlikely to surface as the global slowdown continues.
Growth in the third quarter reached 14.9% compared to the second quarter, lower than the 15.7% growth originally expected and a 2.7% drop year-on-year. "Although initial forecasts had accounted for rather weak back-to-school demand, 2002 back-to school-demand was even lower than anticipated," said Stanley Su, Senior Industry Analyst with Market Intelligence Center (MIC). "Additionally, it is likely that consumers held off on purchases due to price reductions Intel had scheduled for December," Su added.
Although the Greater Chinese motherboard industry is growing at a slower rate, the industry continues to account for a larger share of the worldwide market. In the third quarter more Korean manufacturers withdrew from desktop PC production and outsourced to Taiwanese makers, helping to boost Greater Chinese global market share to approximately 91%. The substantial increase in such OEM/ODM business was a chief driver of third quarter growth.
Along with the growth in OEM/ODM business, there was a marked increase in industry concentration. The six largest manufacturers accounted for 76.3% of Greater Chinese shipment volume in the third quarter of 2002, compared to 69.6% in the second quarter. This increase was mainly due to international vendors outsourcing a greater portion of motherboard R&D to first tier manufactures. "In addition, first tier makers have been very active in the clone market, and have gradually expanded their marketing efforts to include rapidly growing emerging markets, which were formerly the province of second tier manufacturers," added Su.
In an effort to further take market share away from second tier manufacturers, first tier makers have continued to further cut prices. Given that the Pentium 4 will remain the mainstream product over the coming year, ASP will be unlikely to increase over the coming twelve months. "Most first tier makers will be able to maintain profits of around 10% to 14%, and faced with limited growth in market demand, these makers will continue focusing on seizing second tier market share. Prices could fall yet further," Su said.
For more information on the Greater Chinese motherboard industry, please refer to the report "The Greater Chinese Motherboard Industry, 3Q 2002 and Beyond."