Chip set shortage hurts PC industry, but will clear soon

A shortage of Intel chip sets has crimped PC sales during the third quarter, but more chip sets from other suppliers should ease the shortfall in October, the world’s largest maker of computer motherboards said Wednesday.

On the surface, however, it might be hard to see the pain. PC sales have been far stronger than expected in the third quarter, causing market researchers such as Gartner and IDC to revise upward their full year PC growth forecasts. But third quarter sales could have been even better had the chip set shortage been avoided, said Sunny Han, director of marketing at Asustek Computer in Hsinchu, Taiwan.

Over the past few months, Asustek has been unable to fulfill all of its orders due to the chip set shortage. The company could have sold 10 percent to 15 percent more motherboards in each of the past few months if it had been able to secure enough chip sets, according to Han.

“There has been a serious shortage of chip sets this quarter, but it should clear up in October,” said Han. It takes several weeks to finish production of a chip set, meaning output increases can take some time to actually reach the market. This year has been especially hard because brisk demand for a number of electronics goods has kept chip factories humming, with little excess production left over for the chip set emergency.

In August, Intel said stronger-than-expected PC demand had forced it to reduce production of certain kinds of chip sets because its factories were already full of orders for higher-margin products. The manufacturer has been battling to keep up with chip set demand for much of the year.

Chipsets regulate the flow of data between the CPU (central processing unit) and other chips inside a PC, such as memory and graphics. They fit onto computer motherboards, a circuit board that holds and connects most of the vital chips and components inside a PC.

Since Asustek supplies almost 40 percent of the world’s motherboards, it has a unique view of the PC industry and the component supply situation, and can see which chips are hot sellers.

Representatives from a handful of Taiwanese motherboard makers confirmed that the Intel chipset shortage has been particularly good for Advanced Micro Devices (AMD).

“It’s a shortage of Intel chip sets, AMD has been fine,” said one Taiwanese motherboard executive, speaking on condition of anonymity. “A lot of distributors have been suggesting to their customers that they use AMD because there’s no shortage of AMD components.”

A representative for Taiwanese chip set maker Silicon Integrated Systems (SiS) confirmed that the company’s production schedule should ensure better output of Intel-compatible chip sets soon.

“We can say with assurance that most of the demand in October will be satisfied, but we can’t say we’ll meet all orders,” said Jessie Lee, a spokeswoman for SiS in Taipei.

PC vendors are enjoying a far better than expected year in 2005 thanks in part to strong demand in Europe and Asia, according to revised market statistics from researcher IDC, released Monday.

PC vendors could ship 204.6 million units this year, a 14.1 percent improvement over 2004 shipment totals, according to IDC’s new forecast. Earlier in the year, IDC was predicting global PC shipment growth of only 11.4 percent this year, down sharply from a banner 2004, when growth reached 15.3 percent.