In the fourth quarter of 2006, first-tier notebook vendors advanced their orders in preparation for launch of the Microsoft Windows Vista operating system (OS) in January 2007. However, with consumer demand not meeting vendors’ expectations after the Vista launch, the result was that first quarter shipments from Taiwan decreased at a seasonal rate of 12%, the same rate seen in the first quarter of 2006, but still a higher rate than was expected.

Seasonality caused a lull in both network interface card (NIC) and wireless router (WR) shipments in the first quarter of 2007, as witnessed by the sequential drop in combined shipments of 5%. However, shipments were still up 15% on-year.

Taiwan’s optical disc drive (ODD) shipments fell 15% sequentially to 16.5 million units in the first quarter of 2007, while global shipments totaled 77.05 million units, down 5% from the fourth quarter of 2006.

Although the first quarter is the low season in the digital industry’s demand cycle, Taiwan-based makers were still able to increase their shipments 22% from the same period last year, amid increased orders from Japanese customers in 2006. In the first quarter of 2007, Taiwan recorded its best on- year growth in four quarters.

In the fourth quarter of 2006, Taiwan’s optical disk drive (ODD) makers continued to feel the heat from the pricing campaign that Toshiba Samsung Storage Technology (TSST) had launched in the second quarter. Offering quotes US$1-2 lower than competitors’ prices for each ODD, TSST succeeded in winning orders from brand-name PC vendors chiefly at the expense of Lite-On IT. Quanta Storage and Asustek Computer also were affected.

In terms of manufacturing, the digital camera (DSC) industry’s demand cycle usually peaks in the third quarter in preparation for the Christmas shopping season, and it then lapses into the low season in the fourth quarter. However, in the fourth quarter of 2005, the Taiwan DSC sector beat seasonality to register high growth because of strong orders from major brands, and Taiwan makers were hoping to repeat such a performance in the fourth quarter of 2006.

Shipments of network interface card (NIC) and wireless router (WR) applications both maintained growth in the fourth quarter of 2006 on seasonal demand, though quarterly shipments for WRs (including access point; AP) missed our previous forecast by growing only 5% on quarter, compared with our previous estimate of 9.7%, as enterprise customers have concerns about migrating to the pre-N platform. NIC shipments were up 16% sequentially.

At the start of the fourth quarter 2006, the notebook industry was permeated with worries that shortages in CPUs, DRAM, batteries and other components might drive down notebook shipments 10-20% for the quarter. But the actual outcome proved otherwise. Vendors’ pricing strategies and the planned launch of the Vista operating system (OS) boosted shipments.

Taiwan handset makers shipped 36.35 million units in the fourth quarter of 2006, up 5% sequentially and up 54% on-year, as vendors increased their orders to meet seasonal demand. The sequential growth was low because the insolvency of BenQ’s German subsidiary BenQ Mobile took a heavy toll on the parent company’s shipments, which in turn cancelled out part of the increase from other players.

During the third quarter, Taiwan’s number-one optical disc drive (ODD) maker Lite-On IT took over the ODD unit from its chief local rival – BenQ. But the synergy failed to prevent fierce pricing competition from Toshiba Samsung Storage Technology (TSST), which – among other factors – took a heavy toll on Lite-On IT, whose shipments (including output from BenQ’s original ODD unit) dropped 14% in the third quarter.

The notebook market had a strong third quarter due to several factors: Intel’s CPU inventory issue was solved, demand in Europe picked up, Microsoft’s Windows Vista operating system (OS) was up and coming, and the high season was beginning. As strong demand will last through the fourth quarter, Taiwan makers’ notebook shipments in the second half of the year are expected to account for 57% of their total shipments for 2006.

Shipments for both network interface cards (NIC) and wireless routers (WR) – including access points (AP) – among Taiwan network equipment makers were up in the third quarter of 2006, though the shipment total for NICs was below DigiTimes Research’s previous forecast. WR shipments, on the other hands, exceeded expectations.