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Taiwan analysts say notebook shortage to linger until Q4

Low vaccination rates in Asia mean potential for further disruptions 'high for the foreseeable future'

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Laptop sales in Taiwan have surged since last week. (Pixabay photo)

Laptop sales in Taiwan have surged since last week. (Pixabay photo)

TAIPEI (Taiwan News) — The global notebook market has been on a rollercoaster ride since COVID-19 erupted in January 2020.

Driven by unprecedented demand for remote work and learning applications, global notebook shipments hit a historical high of 55.8 million units in the second quarter of 2020. The average shipment in previous second quarters had been about 40 million units and exceeded 200 million units for the year, an annual increase of 24.5 percent.

Yet this robust demand for notebooks has been a double-edged sword for Taiwan’s tech-dependent economy, buoying the bottom lines of some leading Taiwanese firms in the notebook supply chain. It has also delayed shipments while pushing production capacity at Taiwan’s foundries to the limit — and then some.

TrendForce analyst Stan Shen told Taiwan News, “The notebook industry also faced an escalating shortage of components, including mostly semiconductors, because component suppliers’ capacity expansion activities were outpaced by the growing demand. The ongoing component shortage has forced some brands to not only delay their release of new products but also limit their shipment volumes, thereby weakening their shipment performance despite high market demand.”

Indeed, since the third quarter of 2020, there has been a shortage of key semiconductor-based notebook components due to inadequate capacity at 8-inch fabs. Pressure on capacity already existed due to the U.S.-China technology war, which has seen orders transferred from China to Taiwan and pushed some fabs to maximum output levels.

The pandemic has exacerbated the problem, with Shen adding that “notebook shipments for the first quarter of 2021 became the highest among all first-quarter shipments in the past 10 years.”

Currently, components facing the most acute shortage are timing controllers (Tcon) and display driver ICs, which are used in the display to push graphics from the processor to the screen. Taipei-based research firm DigiTimes estimates that “supplies of panel modules, ICs, and CPUs are still over 10 percent short of demand at the moment and may expand to over 20 percent later in the third quarter for some specific panels and ICs, as brand vendors build up their notebook inventory for year-end holiday shopping, and component supply is unlikely to see major improvements” before the fourth quarter.

At the annual Taiwan Conference held in June, UBS analysts said that while demand was strong for companies in PC supply chains, inventories were just two to three weeks, well below the normal six to eight weeks. Shipments are lagging market demand by 20-30 percent, the bank said. The ongoing component shortage has also forced some PC brands to delay the launch of new products.

At the same time, with demand for components at an all-time high, a big winner has been the share prices of Taiwanese notebook giants Asus and Acer. Asus’ stock price is up 68 percent on-year to approximately NT$379 (US$13.55), while Acer is up 63 percent to NT$28.75.

According to IDC, Asus controls 7.3 percent of the global PC market, while Acer has 8.5 percent. HP and Dell are the leaders because of their success in enterprise shipments. The former enjoys 25.8 percent, while the latter boasts 13.9 percent.

Taipei-based research firm DigiTimes expects the ongoing shortage of notebook-use chips, panels, and other components to improve substantially in the fourth quarter, but not any earlier. Driving the improvement will be an increase in semiconductor capacity and the pandemic being brought under control, DigiTimes said.

But has all of this meant that Taiwan has been a big winner? Not really. Angela Hung, an analyst with the Institute for Information Industry, a government-run research house for the IT sector, noted that while Taiwanese ODM manufacturers account for about 80 percent of global notebook PC production, about 94 percent of their notebook PCs were made in China as of 2020.

However, if there is one thing that has been learned in the past 18 months, trying to predict the pandemic’s trajectory is a perilous business. The ferocity with which it has hit Asia in 2021 — after the region was largely spared in 2020 — has taken many countries by surprise.

If vaccination rates in Asia remain low, the potential for further disruptions to the notebook supply chain will remain high for the foreseeable future.