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Taiwan's PC makers are seeing margins plummet while being squeezed till the pips squeak. The providers of kit to the IT giants such as Compaq and Dell are having to make drastic cut backs, according to the Commercial Times, Taiwan. At last month's Computex Taipei PC show, quotations for some desktop PCs fell to under $400 per unit. Sub-$600 desktops control around a third of the US market. And one South Korean vendor plans to launch a new desktop running on Linux for under $200, reports said. In addition, the multinationals are trying out tougher strategies. Earlier this week Compaq was demanding its Taiwanese suppliers cut prices by 15 per cent. Mitac, a former major manufacturer of Compaq kit, is starting an ecommerce division to sell its kit direct. This may have been a reaction to Compaq's price cut demands, according to the Taiwanese press. Also, Dell and IBM have been giving buying orders to new partners, hoping to lower OEM costs and force older partners' prices down. One HP representative said falling PC prices and rising costs had squeezed profit margins – and the trend to build sub-$300 PCs would continue to force US PC makers to boost their outsourcing. "To consolidate orders with the world's top five PC makers, local manufacturers had better forget that they are 'computer manufacturers' and continue to come up with higher value-added products and services," he said. ®

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