Weak shipments of desktop PCs dragged down demand for PC parts during the first quarter of this year, but the market appears to have picked up in the second quarter.
"The April to June earnings of US PC parts makers were stronger than expected," wrote analysts from Japan's Nomura Securities in a client briefing.
"In particular, microprocessor shipments turned up, so we think the likelihood has risen of a strong recovery in demand for PC parts."
The anticipated rise in CPU production will benefit Japanese firms like Shinko Electric, which makes key parts of the CPU chip package for Intel.
In addition, a shakeout in the hard disk components industry has left surviving manufacturers of parts like drive motors and magnetic heads in a stronger position to negotiate prices with hard drive makers.
The two leading CPU makers, Intel and AMD, have both made progress in reducing surplus inventory, said Nomura vice president Manabu Akizuki.
However, while Intel's CPU inventory is now close to "satisfactory" levels, AMD may still face problems, the analyst predicts.
"While AMD's shipments have picked up, this was apparently due largely to a new order from a major laptop PC manufacturer and to the completion of inventory adjustments at wholesalers in January to March," said Akizuki.
"It appears that AMD's microprocessor unit price has fallen nearly nine per cent quarter-on-quarter so we do not consider AMD to be solidly on the path to recovery yet."
PC recovery benefits chip and drive makers
By Simon Burns on Jul 26, 2007 2:54PM