The outlook for consumer PC sales for the rest of the year is getting murkier and murkier. A drop-off in US sales in July, followed by continued weakness in early August despite the traditionally bountiful back-to-school season, has already started ringing alarm bells among analysts.
Now there’s additional evidence, from the world’s biggest notebook casing manufacturer, that any quick uplift in end demand is unlikely . Ju Teng makes the outer shell of a notebook – a manufacturing process that involves more than 300 steps and 400 different materials – for all the world’s top PC brands.
Dennis Huang, spokesman for Ju Teng, said in Taipei on Thursday that “this year, end demand has been very uncertain [and] there is more concern about the fourth quarter of this year [compared to the third]”.
The second half of this year “will be more difficult than past years because we are now already at the end of August and still have no confidence about the fourth quarter – that is not a good sign,” he said.
Mr Huang said Ju Teng is expecting, in a worse case scenario, a 10 per cent quarter-on-quarter sales decline from the third quarter to the fourth. “Of course the better scenario is that sales would be flat or slightly better, but the downside risk is much bigger,” he said.
He cast doubt on the theory that this was because notebook sales were already being hurt by the rise of tablet computers, particularly Apple’s iPad. “We have several projects that are for tablet computers, but the volume is still very small. The big wave [of tablet PCs] will likely come in the first half of next year,” he said.
Ju Teng, which mainly competes with electronics contract-manufacturing giant Hon Hai and Singapore-listed Huan Hsin, is also an example of how the past year’s remarkable recovery in the technology sector has not lifted all boats equally.
Because of Ju Teng’s aggressive capacity expansion over the past year, utilisation in its plastics-casing factories were only at 60 per cent in the first half, despite Ju Teng increasing its sales volume by 30 per cent from a year ago. Profit margins also fell while inventory turnover days increased.
Factory utilisation in the second half “could be lower than in the first half,” Mr Huang said. Not a good sign indeed.
