February 2001 Industry Update

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PC Marketplace

Unfortunately, the fallout from the economic slowdown is still affecting the PC industry, with several major players indicating that the first half of this year will continue to be slow, including Dell and Compaq. Obviously, Intel has not been unaffected by this, with their Puerto Rico plant where some of their motherboards are manufactured as an apparent casualty. This, in turn, has caused Dell and Compaq to reportedly turn to Taiwanese motherboard makers to fill orders.

Since the beginning of the year, I have been hearing that some segments seem to be doing better, and the forecasts from several manufacturers are assuming a decent Q2, primarily due to sales of DDR based products. Whether or not these sales actually materialize is going to determine the fate of a number of smaller motherboard makers, and possibly even memory manufacturers.

Though it is probably too early to tell for sure, it looks like the industry may have reached the ‘bottom’ in terms of the slowdown, as most manufacturers have claimed that sales in January were about the same as the last two or three months of 2000, and Q1 is typically somewhat slow anyway. According to several sources I spoke with, business does not appear to be doing much buying at this time, though consumer sales are good. This could be a bad sign for Intel and OEMs, because the largest consumer segment seems to be gamers, who favor AMD processors and systems, and generally seem to be more likely to upgrade or build from scratch. Some manufacturers indicated they feel that the PIII still has some promise with Tualatin (due out in Q2), but Pentium 4 is stuck in the doldrums.

Several large motherboard makers I spoke with have all but given up on the low-end market (sub $600), as there are no margins and it seems to be saturated now. These manufacturers expect that this market will go to the Internet Appliance, so they are refocusing on either the mid and high-end desktop, or the workstation/server market. There are a few who are still going after the low-end, but they are not as aggressive as they once were.

As would be expected, the events of the past several months have brought out the doomsayers of the industry, who are once again proclaiming the end of the PC era. The problem with this is that the PC has become fully integrated into daily business operations, and is a standard appliance in a large number of homes. Moving away from this will not be fast or easy, as there is a lot of money and time invested in them. Editorials by Michael Slater of MDR and Charles Kozierok of The PC Guide have explored this issue fairly well, and are worth the time to read if you have not already done so.

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