May 23, 02

While Taiwan is already the notebook computer manufacturing country ranking as number one in the world, major contract makers are scrambling to consolidate their business operations in the new Hewlett-Packard era.

Local analysts told the press that after the recent formation of the New HP as a merger between the old HP and Compaq Computer, just three tip brands -- that is Toshiba and Dell in addition to the new HP -- will account for about 50% of the total supply of notebook PCs in the international market. This will lead to a major re-adjustment for big contract suppliers and have important implications for Taiwan, the industry of which is the biggest contract manufacturer of these products.

Quanta Computer Inc., a key supplier to both Dell and the old HP, expects to ship about three million notebooks to Dell this year, with the HP-Compaq merger, however, Quanta's orders for the OmniBook business notebook model will dry up at the end of the year.

Compal Electronics Inc. is the only contract supplier of notebook PCs to all of the top three brands. Its largest customer is Dell, which will take about 1.5 million of Compal's notebooks this year. Compal is also Toshiba's longest term contract supplier on the island. It has started turning out highly competitive models equipped with desktop PC central processors, helping Toshiba to pul ahead of Dell to become again the world's biggest notebook brand in the first quarter of this year .

Compal recently beat out Quanta to win orders for Powerbook note PCs from Apple Computer, with deliveries to begin in the fourth quarter of this year.

Taiwan's Inventec Corp. suffered a 30% drop in sales last year because its major customer, Compaq, experienced at sharp decline in sales and transferred some of its orders to Quanta. Early this year, however, Inventec won new orders from both Compaq and Toshiba and is confident that it will become a major contract supplier to the New HP as well.

As major Taiwan manufacturers have their low-cost production bases in China, Taiwan industry analysts point out that local suppliers should be able to win more orders from all of the Japanese notebook PC brands, who are suffering constant losses thanks to their high manufacturing costs at home.

Notebook PCs constitute the largest segment of Taiwan's IT industry, with production value and volume rising by 33% and 45%, respectively, in the first quarter of this year.

The quasi-government Institute for Information Industry (III) predicts that Taiwan will deliver 17 million notebook PCs this year, up 20% from 2001- This will boost the island's share of the international market to 58%, up from 55% last year.

American PC manufacturers, including Dell, HP. Compaq, Apple, IBM and eMachines, have been increasing their OEM orders with contract manufacturers in Taiwan since early this year. More recently, Japanese brands such as NEC, Sony, and Fujitsu have followed suit.

Low-price manufacturers in South Korea, however, are posing an increasing competitive threat to Taiwan's notebook PC industry. To cope, domestic manufacturers have accelerated their shifting of production facilities to China. According to the Institute,, production in China is expected to make up 30% to 50% of all production by Taiwan manufacturers this year and rise further to 70% in 2003.