AMD dips on mobo market slowdown fears

Taiwanese mobo vendors have begun slimming down production expansion plans on fears of a major slow-down in the PC market - and that, in turn, is hitting chip makers' stock.

Or rather chip maker, singular. While Chipzilla stayed still yesterday, AMD's shares dropped 8.7 per cent, down $1.81 to $19, after Robertson Stephens analyst Eric Rothdeutsch said in a report that demand for fully fitted out motherboards was not "up in any meaningful way from sales in October".

That's certainly how the Taiwanese mobo makers are beginning to see the situation. Taiwan business newspaper the Commercial Times reports that many second-tier vendors, like Shuttle, Soyo and Iwill, are scaling back or even hanging fire on their expansion plans.

The paper notes that while market leaders Asustek, Giga-Byte and Micro-Star have yet to halt schemes to boost production capacity, their plans are sufficiently flexible to cope with unexpected dips in demand of the kind everyone else is now anticipating.

Giga-Byte's new Chinese plant will churn out 350,000 mobos per month initially, rising soon to 850,000 units a month, the company said. Giga-Byte is already working on a second plant, also in China, and a third is in the early planning stage.

Of course, the market leaders are to a degree insulated from dips in demand by the overall volume of orders - a ten per cent, say, fall in demand won't hurt them as much as it would hurt a second-tier player with a much smaller marketshare. So you'd expect lesser companies to start worrying sooner than the big guns. The real signs of a major slowdown will come when Asustek and co. put their expansion plans on stand-by.

If that happens, Intel and AMD may be forced to cut prices to stimulate demand for new PCs - at least that's what Rothdeutsch reckons. And it's on the basis of lower prices leading to lower revenues and lower profits that's giving Wall Street the jitters. ®