We continue to report about the situation among Taiwanese computer components makers. From our previous issues it became clear that the main problem among mainboard manufacturers is extremely low gross margin. Taking into account the brutal price war between competitors, it is quite hard to grow not only for the second-tier companies, but also for the first-tier manufacturers. Some of the former now try to find themselves different businesses and outsource their mainboards and graphics cards manufacturing to the bigger OEMs. However, the first-tier makers usually manufacture components for the world’s biggest PC-vendors and as there are now too lot of such OEMs, brand-name computer suppliers bargain considerably more than before as reported at DigiTimes.

A couple of years ago manufacturing capabilities of Taiwan and China mainboard makers were considerably lower than now and computer vendors had to book their products in advance, offering favourable prices. This helped the component makers to obtain confirmed and profitable orders. Now the things have changed and PC-vendors usually evaluate newly-developed products from the Taiwanese-suppliers, judging quality, features as well as pricing. Furthermore, even after saying the final words and ordering the products, PC-vendors may not buy all the inventory they originally wanted.

The result of such situation is that mainboard manufacturers now have to cut prices as low as possible, still having to expand their R&D teams in order to compete in terms of features. Hence, their gross margin is always affected in this case. It is even not a surprise that the investors are very concerned about the mentioned fact, since it becomes a general trend nowadays. Even Intel Corporation has to cut their CPU and core-logic costs very frequently.

The situation with computer components now resembles the state of DRAM memory market: small mainboard makers may exit the business and the remaining manufacturers may start dictating the prices provided they are able to consolidate in their desires. More importantly, the cruel price-war between the mainboard manufacturers may leap over chipset and CPU markets. We have already seen what happened when there were too lot of NVIDIA based graphics cards suppliers: small companies that earned too low profit either closed their doors or joined the so-called “ATI Camp”.