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Renewed orders a false dawn for Taiwan's OEMs

It's just short-term stock-piling, industry watcher warns

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Increasing sales to major US PC companies are almost certainly not a sign of the long-awaited industry revival, Taiwanese component and computer manufacturers have been warned.

Quite the reverse, the island's Institute for the Information Industry (III) has said, according to a Commercial Times report: the renewed ordering activity will be a short-term phenomenon driven by the IT giants' attempts to build up inventory of crucial components in case airfreight schedules are disrupted by the US' punitive attacks on Afghanistan's Taleban regime.

The III claims that the likes of Quanta and First International Computer have seen orders from Dell, IBM, Hewlett-Packard and Compaq - to name but four - soar. And since demand for new PCs remains low, the III has concluded that the orders are not driven by an anticipated upturn in the market, but by fears of future supply problems.

Either way, that's not good for component makers. Even if no restrictions are placed on commercial flights, unless demand picks up significantly PC makers will be left with inventory they need to clear and that means future orders will fall. Sales will also fall off is there are subsequent limitations placed on the number of flights.

"As long as the short-lived demand of overseas companies is fed, local electronics firms will face adversity of sharply decreasing orders for contract manufacture, which may dent their performance for next year," said the III. Indeed, said the III, thanks to the aftermath of the 11 September attacks, the output value of Taiwanese IT production could fall by as much as NT$130 billion ($456.34 million) or 15 per cent this year. ®

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