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Taiwanese ODMs get toothache from Apple

Apple HeadquartersFirst time ODMs to post YoY single-digit unit growth since 2000. iPad expected to continue to account for 70% of tablet PC market in 2011 while Apple also gains share of global notebook market.

 

Following a strong rebound in 2010, a recent industry report indicates PC shipments are expected to decline to 7.4% year-on-year growth in 2011 (excluding tablet PCs).

This is considerably lower than research firm IDC’s forecast of 10.7% growth.

The research report compiled by the Asian division of Royal Bank of Scotland sees global desktop PC unit growth falling to 3.5% year-on-year (v. 7.9% in 2010) and global notebook shipments rising 10.2% year-on-year (v. 19.7% in 2010).

In the report, a forecast is presented whereby Taiwan’s top-three notebook ODMs will see 9.7% quarter-on-quarter unit growth in 2Q11 – indicating 1Q11 as the trough for notebook shipments, with a 10.2% quarter-on-quarter unit decline. (Table 1)

 

Table 1

Taiwan notebook (NB) ODM shipment forecasts

Taiwan Notebook ODM Shipment Forecast

 

In mature markets, consumer notebook demand has been affected by the iPad cannibalization effect and the slow economy. The bank expects consumer notebook demand to remain weak in the US and Europe into 2Q11 as shoppers continue to shift spending away from the segment and as distributors try to lower inventory levels; however sources cited in the report indicate they are already seeing stable growth in commercial purchasing.
 

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On the other hand, the report continues that both the consumer and commercial segments have seen healthy emerging market notebook unit growth in 2Q11.

For example, China saw a strong sales rebound during 2011 Labor Day holiday thanks to more-than-30% price cuts by major notebook OEMs.

Notebook shipment momentum looks set to recover in 2H11
Year-on-year notebook shipment momentum is expected to recover in 2H11, and forecasts 10.9% and 6.7% quarter-on-quarter notebook unit growth in 3Q11 and 4Q11, respectively, cites the report.

However, Taiwanese ODMs are expected to post only 8.3% year-on-year unit growth in 2011, showing single-digit growth for the first time since 2000. (See 2010 Top 10 EMS / ODM)

ODM Quanta (13.1%) and Wistron (14.4%) are expected to maintain notebook unit growth above 10% for fiscal year 2011.

However, the report states Compal’s shipments may remain flat due to its much higher exposure to Acer (the report cites more than 50% of Acer’s notebook orders are to Compal in 2011).

Therefore, Acer is considered the major victim of iPad cannibalization and Apple’s notebook market share gain. (See Figure 1)

 

Figure 1

Apple notebook (NB) market share

Apple Notebook Market Share

 

Netbook sales face considerable decline in 2011
Apple’s iPad is expected to continue to dominate 70% of the tablet PC market in 2011 (~34 million units) and to continue cannibalizing the netbook market.

iPad fever affects netbook shipments the most.

Before the iPad launched, netbooks were the primary choice for a second notebook for light computing (chatting, web browsing, email and simple multimedia functions) the report states.

However, the iPad has since essentially replaced the netbook in these areas.

Since the iPad launch, netbook unit growth has declined from 197% year-on-year in 2009 to 3.4% in 2010, states the report.

Acer, once again, appears to be the main victim of iPad cannibalization due to its high exposure to the netbook market segment (with 26% global netbook market share), followed by ASUSTek (16%) and HP (14%). (See Figure 2)

 

Figure 2

Netbooks – Global market share – 2010

Global Netbook Market Share 2010

 

iPad dominates 70% of the tablet PC market
Non-Apple tablet PC shipments amounted to only 3.1 million units in 2010, lower than previous forecasts of 5 million units, citing sources in the report.

Looking ahead, 2011 forecasts have been cut 25% from 20 million units to 15 million units as notebook OEMs / ODMs have successively pushed out tablet PC projects from 2H10 to 1H11 and, then to 2H11.
 

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The key challenge is delays to the Android 3.0 (Honeycomb) operating system (OS) and user – interface integration – market acceptance of already launched Android 2.2-based tablet PCs (i.e., Samsung Galaxy) was not well received as cited by report sources.

It is believed Apple’s iPad will continue to account for 70% of total tablet PC shipments in 2011, with the only uncertainty being iPad component supply. (Read: Apple iPad v. netbooks, notebooks, smartphones)

Although many new Android 3.0-based tablet PC models will be launched in 2H11, not many firms believe these models will exhibit significant market share progress, for the following reasons:

Android 3.0-based tablet products are still in the early stage and therefore likely to suffer some product quality and / or technical issues that will affect their early market acceptance.

PC vendors have limited experience selling tablet products via traditional IT channels so they need to develop new channels or learn to leverage the telecom distribution market.

At present, few third-party applications support Android tablets compared to the iPad.




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