March 2001 Industry Update

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PC Marketplace

As more and more analysts jump onto the ‘PC slowdown’ bandwagon, signs that things may be picking up just a bit are beginning to surface. I wrote back in August the first signs of a slowdown were being reported by some manufacturers and resellers who reported disappointing sales. Recently, spokespersons for several manufacturers mentioned that the past few weeks have seen a noticeable increase in sales, with some indicating that Q1 sales were better than Q4 of last year and they are forecasting an even better Q2. However, others have indicated that Q1 is flat compared to Q4, and do not expect to see much growth in Q2.

Intel has warned that their quarter will be fairly dismal, and several large OEMs have also indicated that their sales will be disappointing this quarter, which has added to the general fear. With the economy of the U.S. slowing, and indications of some economic problems in other countries (most notably Japan), the overall outlook appears to be somewhat bleak. However, VIA has reported the past two months that their sales are rising, and AMD has hinted that Q1 will be in line with expectations, so the natural question is whether there is any correlation with the motherboard makers who are reporting some pickup in sales.

In order to get a better picture of what is happening, I sent a brief survey to most of the top motherboard makers. I asked questions about their target market, their product mix, percentage of shipments to various market regions, etc. Not all manufacturers responded, and the answers provided no real clear-cut trends, however those with a greater North American market share and a larger percentage of Socket A sales were a bit more optimistic and generally reported some Q1 growth over Q4.

As would be expected, motherboard manufacturers vary in the strength of their markets in Europe, Asia and America and not all divide their market regions the same way. Some include North and South America as one market, while others separate them. Most include all of Asia (including Australia) as another, though some break out Mainland China from the rest of Asia. The other main geographic market is Europe. Those with greater strength in the North American market seemed to be doing a little better than those whose main market is in Europe or Asia, but not decidedly so.

About half of those responding indicated that their main market is gamers, while others indicated they prefer to target the high-end desktop, workstation and server markets. The larger manufacturers were more focused on the OEM and system integrator channels, as would be expected, though differences in target market (gamers, business, power users, VAR/Reseller, etc.) did not seem to have much influence on their reports of how well they are doing. Most manufacturers reported that they are diversifying their products lines to protect themselves a bit, with some moving towards the low-end (webpads and PDAs) and others moving towards the higher end (networking and communications). A few are adding additional PC components such as CDs, cases, graphics cards, etc. None of these items seemed to have much immediate impact on their overall sales, though those getting involved with the network products indicated that the growth of these product lines were very good.

In the final analysis, the information provided does seem to indicate that things are picking up, or at least are not getting any worse, since December, but most are hesitant to consider it a trend yet. Hopefully, just as the few spotty reports of slow sales signaled the beginning of the downturn, this is a signal that things will soon be picking up. The hesitancy for manufacturers to jump into volume production of DDR capable components seems to be contributing a bit to the market malaise, as many end users seem willing to wait it out. It would appear that any real improvement in the market will most likely occur in July or August, though there are some signs that things could start to improve as soon as April or May.

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