Plunging desktop demand could mean bargains for users

Demand for desktop PC motherboards "is falling off a cliff" in late October as users put off purchases until Vista launches

Demand for desktop PC motherboards "is falling off a cliff" in late October as users put off purchases until the Windows Vista OS launches in January, investment banking firm Goldman Sachs said Saturday.

Motherboard orders for the clone, or white box desktop PC market has slid nearly 20 percent from its early October peak.

"Motherboard demand weakness is in line with our view that Vista has a negative impact on (fourth quarter) motherboard demand, but it happened earlier and more significantly than we expected," said Henry King, executive director of technology research for Goldman Sachs (Asia) L.L.C., in Taipei, in a Saturday report.

He also blamed a scarcity of low-cost Intel microprocessors and Advanced Micro Devices AM2 processors for the drop in demand, since it means there are fewer low cost PCs on the market. Demand for low cost PCs remains hot.

Rising user demand for laptop computers is also pushing demand for desktop motherboards down, he said.

As motherboards and other desktop PC components pile up at the end of October and in November, King believes companies will start a price war to clear their inventories.

The laptop PC sector is also facing some trouble. Strong user demand for laptop PCs is causing a shortage of components, King said.

At an investors conference last Friday, Acer executives said they expected to be able to procure only 95 percent of the components they need to sell laptop PCs in the fourth quarter, which is the peak season due to year-end holidays.

"Since the second half of August, we've seen demand rush in. We can't fill all our [laptop] orders," said Gianfranco Lanci, president of Acer, at the conference. The world's fourth largest PC vendor expects a short supply of laptop batteries as well as microprocessors.

A massive recall of laptop batteries by major PC vendors such as Dell and Apple Computer has caused a shortage of batteries because it comes at the time of peak laptop demand for the year. The recall was due to defective Sony parts that can cause the batteries to overheat and possibly catch fire. Sony expects the recall to total around 9.6 million batteries.

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Dan Nystedt

IDG News Service
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