China spurns notebook PC makers

By Staff and reports

TAIPEI, Taiwan (CNN) -- PC notebook makers are finding it difficult to offload their inventory in China -- a market that prefers desktops to laptops.

The world's leading notebook makers have cut prices of their computers in China with hopes of slimming down notebook stock in the Mainland market, according to a Nikkei report.

But slashing price tags has done little to reduce inventories as Chinese consumers still hold back from buying.

Small laptop appetite

Analysts say China, regarded by many as the world's most significant emerging IT market, has a remarkably small laptop PC appetite.

"For notebook PCs, the market is very small," said Merrill Lynch's Taipei-based research analyst Tony Tsung.

"For this year, I've heard of total sales of only 700,000 units for the whole China market."

Facing the threat of unsold inventory, the prices of mainstream laptop PCs in China fell by 40 percent in the second quarter, according to the Nikkei report.

Analysts say worldwide, notebook computers account for 22-23 percent of total PC shipments. But in China, the figure stands at less than 5 percent.

"This percentage varies country by country," said Tsung. "In Japan, it's 40-45 percent. In the U.S., it's 25 percent."

"It's much lower in emerging markets."

Lowering sales targets

In light of China's weak notebook demand, Nikkei reports that Taiwanese PC makers Acer, Asustek, and Twinhead International are now "wondering how to extricate themselves from an unsatisfactory situation."

Even China's number-one PC maker Legend has lowered its annual notebook sales target by 40 pecent, from 250,000 to 150,000 units.

Merrill Lynch's Tsung says Acer shares Legend's guarded outlook.

"They are doing business in China but very cautiously," he said.

Research firm IDC estimates that Acer is the world's ninth-largest PC maker, and number-eight in notebook computers.

Acer Chairman Stan Shih said last week it was not easy for the company to see an operating profit in 2001.

Taiwan's top PC maker last week posted disappointing results with sales plunging 35 percent in June from the same period last year.

Acer recently split into two companies -- one selling products under the Acer name and the other manufacturing under contract to other brand names. The move was done in order to "stop the rot" by streamlining the company's operations.

The dismal performance announced by Taiwan's blue chip PC maker has also hit the country's celebrated semiconductor sector.

United Microelectronics, the world's second largest microchip foundry, said on Sunday it laid off 266 employees or 2.86 percent of its workforce to cope with the slowing economy.

Last week, Taiwan posted its worst export numbers since tracking started in 1976. June sales of Taiwanese good abroad thudded 16.6 percent lower from a year earlier.

Exports of electronics fell 29.1 percent in June from a year earlier. Information technology and telecommunication exports, which includes Taiwan's world-leading notebook PCs, dropped 16.5 percent.