PC motherboard sales slide further ahead of Vista

Sales of motherboards used in desktop PCs continue to decline ahead of the launch of Microsoft's new Windows Vista OS, a sign that could foretell bargains for users in coming months.

Slowing demand from PC users ahead of the launch of Vista is the main culprit for falling motherboard sales, while shortages of key components such as low-end microprocessors are also a factor, said Henry King, executive director of technology research for Goldman Sachs (Asia) L.L.C., in Taipei, in a report published Thursday.

The analyst warned that his view of motherboard shipments has dimmed further since he wrote a few weeks ago that demand for desktop PC motherboards was "falling off a cliff."

He further revised down his motherboard shipment target ahead of the important holiday season. October shipments will likely dive 6 percent compared to September, and shipments will drop further in November, King predicts. Fourth quarter shipments overall should limp by with 5 percent growth, compared to normal growth of up to 19 percent.

"This would be the worst (fourth quarter) we have seen since we started to track motherboard data in 1999," said King.

As motherboard inventories pile up, King believes a price war will begin. "Our supply chain checks indicate that both inventory build-up and price competition are imminent," he said.

Unlike desktops, demand for laptop computers remains strong, he said. Goldman Sachs also believes Vista will boost PC sales over the next few years. In the near term, however, users are shying away from new purchases in the months leading up to the launch of the new OS.

King is a long-time IT industry watcher, and being based in Taipei gives him a unique view of global trends. Taiwanese companies, including Asustek Computer Inc., Micro-Star International Co. Ltd., and Hon Hai Precision Industry Co. Ltd., dominate the global market for computer motherboards with over a three quarter share. They report revenue figures each month in accordance to stock market regulations, and often give out motherboard shipment data as well.

None of the major Taiwanese motherboard makers has reported October revenue yet.

Both of the major microprocessor makers lowered prices on some products in late October. Intel Corp. dropped prices on a host of Pentium D processors aimed at the desktop market, according to a new price list published Oct. 23 on its Web site. Advanced Micro Devices Inc.'s latest processor price list from Oct. 30 shows slight adjustments for some desktop processors.

Microsoft also in late October announced a plan to give users who buy PCs loaded with Windows XP this holiday season a coupon for free or discounted upgrades to Vista when it ships next year.