Top notebook manufacturers start 2013 on a weak note, says IHS

The world's leading notebook ODMs will endure a bleak first quarter and slow first half in 2013, before ultra-thin PC sales help revive the market later in the year, according to research firm IHS.

Notebook shipments from the top five ODMs are forecast to amount to 35.2 million units during the first quarter, down 15% from 41.4 million in the fourth quarter of 2012. While shipments commonly decline in the first quarter compared to the fourth, the drop in 2013 is expected to be particularly sharp, said the firm.

"Notebook ODMs in early 2013 are feeling the pain from the combined impacts of uncertain economic conditions and slower-than-expected sales of ultrabooks," said Peter Lin, senior analyst at IHS. "Consumers are remaining wary as uncertainties linger in the global economy, and a slowing in the markets of Europe, China and the US further depresses sales. More importantly, smartphones and tablets have been outselling notebooks, and demand for ultrabooks and other ultra-thin PCs so far has not taken off as expected. However, an expected increase in demand for ultrabooks and other ultra-thins will help reignite notebook shipments from ODMs to their client OEMs in the second half of 2013."

Taiwan on top

All based in Taiwan, the top five notebook ODMs are employed by OEMs, which use them on an outsourced or contract manufacturing basis in order to make computers that are then branded by the OEMs to sell to the public. The key strengths of Taiwan-based notebook ODMs include low manufacturing cost, flexibility, quick response and high vertical integration, qualities that most major notebook OEMs are keen to leverage in the design and manufacture of their own branded products, said IHS.

Among OEMs, Hewlett-Packard (HP), in 2012, outsourced its notebooks to Taiwan-based ODMs like Quanta Computer, Compal Electronics, Wistron, Inventec, Pegatron Technology and Foxconn Electronics (Hon Hai Precision Industry). Lenovo did the same, contracting out to Quanta, Compal, Wistron and Pegatron, noted IHS.

Meanwhile, the ODM Quanta had its hands full with orders from computer makers such as HP, Lenovo, Dell, Acer, Asustek Computer, Toshiba, Apple, Sony and Fujitsu.

Within the ODM circle, number one Quanta will suffer a decline of more than 10% in the first quarter of 2013, although its perch at the top will not be threatened as the giant manufacturer continues to be the biggest notebook ODM. In comparison, second-place Compal will see a drop of 5-10%, while number three Wistron will also be down 10% on the quarter.

Ultrabooks to the rescue

After a shaky start, the notebook ODMs will start picking up steam as 2013 unfolds, IHS believes.

Though not performing as expected in 2012, ultra-thin notebooks are being given a new lease on life in 2013 in light of new features, including improved battery power, a form factor that lets the display be detached for use as a tablet, a higher-performance CPU in the form of Intel's Haswell chip, and the gradual uptake of the recently released Windows 8 operating system.

Additionally, the ODM market will recover starting in the second half of 2013. And at the close of the year, notebook shipments from ODMs to client OEMs will rise 5% from their 2012 level of 156.9 million units, IHS estimates.