Taiwan's PC and semiconductor makers are seeing hopeful signs for the ailing PC market, but remain cautious that the pickup is merely a respite, not a recovery.
PC, IC, and motherboard manufacturers on the island are whittling down their inventory surpluses, a sign that PC demand could be rebounding.
"Our inventories are dropping, thanks to orders placed by some OEM customers," said Henry Wang, a spokesman for Taiwan's top PC manufacturer, Acer Inc., which supplies desktop and laptop PCs to major OEMs. Inventories at the Taipei-based company stand at two weeks, compared with nearly four weeks in December, Wang said.
Taiwan is one of the U.S. electronics industry's most important supply chain links. The island supplies OEMs and integrated device manufacturers with many key components, including chips, motherboards, notebooks, power supplies, scanners, and other PC-related products. A pickup in business there could portend a healthier PC market worldwide.
The world's two largest silicon foundries-Taiwan Semiconductor Manufacturing Co. Ltd. and United Microelectronics Corp.-also see indications that the PC industry is recovering. Business conditions in the communications segment, though, are still weak.
"The shipment of PCs is more stable," TSMC's chief financial officer, Harvey Chang, told investors and analysts at a recent meeting. "However, the inventory correction of communications ICs hasn't shown any signs of improvement."
TSMC should know. The company last year increased its percentage of business it derives from the communications segment. TSMC generated approximately 36% of its 2000 revenue from that sector, compared with 30% in 1999.
The company has lessened its dependence on the computer sector, which represented 33% of its revenue last year, vs. 42% in 1999.
"It will take at least another six months for communications companies to clear out their inventory glut," said Paul Wang, an analyst at SG Securities Ltd. in Taipei.
And the relatively positive reports from the PC segment come with a caveat: predictions of a sustainable recovery could be premature.
"Our motherboard customers have been cautious, since it's difficult to tell when the market will bottom out," said Frank Jeng, a spokesman for Via Technologies Inc., Intel Corp.'s biggest rival in the PC chipset market.
"The visibility for the world's largest market, the U.S., is still pretty low," Jeng said.
Although Via president and chief executive Wen-chi Chen has said the company's sales will hit a record level in the first quarter, Jeng cautioned, "That's not to say the PC segment is poised to recover." Via is expected to post a decline in sales in the second quarter, he added.
Hsinchu-based Winbond Electronics Corp., Taiwan's largest DRAM maker and a key DRAM supplier for Toshiba Corp., takes a similarly cautious view. "We haven't heard anything exciting," said Winbond spokesman Hander Chang.
Various factors, including seasonally slow demand, are expected to pull down Taiwan's PC sales in the second quarter. "The market consensus is that the figure will fall 10% to 15% from the first quarter," SG Securities' Wang said.
While a pickup in Taiwan offers a flicker of hope, the global PC industry is not yet out of the doldrums.
"Demand from the U.S. and Europe is still weak," cautioned Tony Tseng, an analyst at Merrill Lynch Taiwan Ltd. in Taipei. "The worst of the PC decline is over, but nobody knows how long this pickup will last, or how soon a real recovery will begin."