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Did you know that more than 90% of personal computers are manufactured by Taiwanese manufacturers in Taiwan? The total number of PCs manufactured totals more than three hundred million units per year (excluding tablets). These Taiwanese manufacturers are called original equipment manufacturers (OEMs) or original design manufacturers (ODMs). Only a small percentage of PCs have an OEM brand name stamped on them. Since these companies are manufacturers specializing in services to overseas customers, most of their products are stamped with branded names from companies located overseas.
In the early days, the main business function of Taiwanese manufacturers was to assemble PCs based on the designs from other manufacturers. They purchased materials and components from overseas suppliers because there were no reliable suppliers in Taiwan. Purchases included semiconductors, display panels, passive components, optical components, mechanical components, disc drives, keyboards, PCBs, various cables, and more. A significant amount of entrepreneurial progresses has occurred over the last 20 years and many new venture companies began production for these components and materials. Currently, Taiwanese PC manufacturers can procure all kinds of materials and components in Taiwan. These domestic suppliers transitioned to developing manufacturing and assembling equipment. Some Taiwanese PC manufacturers now design their own PC products.
The manufacturing segment for PCs is a huge industry in Taiwan; however, most manufacturers are happy to play the role of a subcontractor for overseas companies. Taiwanese PC manufacturers are very sensitive to global market trends and tie their investment and employment plans to these trends. They do not trust data provided by market research companies and forecast their own sales based on customer relations from a worldwide market. Component suppliers and material suppliers forecast their business the same way the PC manufacturers do. They know their positions in the supply chain for the PC industry and try to predict business trends from their customers throughout their network. The forecast not only relies on numerical data, but also the customer the information came from, the model number of the product, when the busy season will begin and end, and how external factors will contribute to a slow down or spike in sales. Accordingly, their forecasts are quite accurate.
These forecasts were extremely accurate over the last two years. Taiwanese manufacturers forecasted a slowdown for the global PC market in 2013 and they expected the notebook PC market would have strong growth in the wake of strong demand from tablet PCs and smartphones (they were correct). They predicted the downward trend for PCs will continue during the first half of 2014 and would show a rebound in the third quarter of 2014 (correct again). Unfortunately, some Taiwanese manufacturers are forecasting a further slowdown for the PC market during the fourth quarter of 2014 and all of 2015. This time around they expect the tablet PC market will also slow.
Does it mean the entire electronics industry will slow down for a while? Some believe that when the PC industry sneezes the rest of the electronics industry catches a cold.