The Asia PC Pulse (Issue No. 37): European Demand Concerns Start
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EQUITY RESEARCH 26 May 2012 INDUSTRY UPDATE THE ASIA PC PULSE (ISSUE NO. 37) Asia ex-Japan IT Hardware European demand concerns start to show 2-NEUTRAL Unchanged up in the PC supply chain, but not much yet Asia ex-Japan IT Hardware Kirk Yang Slightly cut May and 2Q12 NB shipment forecasts: While shipment forecasts of +852 290 34635 Pegatron, Inventec, and Quanta remain unchanged, we see some potential order delays [email protected] for Compal and Wistron, and therefore revise down our NB shipments forecast for May Barclays Bank, Hong Kong to up 14% m/m from up 16% (5-year average: down 1% m/m). We also slightly revise Jerry Wu down our 2Q12 NB shipment forecast to up 8% q/q from 9%, as some ODMs are +8862 6638 4685 moving toward the low-end of their 2Q12 guidance range, but still better than normal [email protected] seasonality of up 6%. BCSTW, Taiwan Slightly cut May and 2Q12 DT/MB shipment forecasts: Similar to the NB shipments Wayne Dong trend, we also revise down May DT/MB shipments to up 12% m/m from up 14% (5- +8862 6638 4696 year average: down 2% m/m) on end-demand concerns, which results in our 2Q12 [email protected] BCSTW, Taiwan DT/MB shipments forecast moving to up 8% q/q from 9%, still higher than normal seasonality of down 4% q/q. We believe demand in emerging markets and China Richard Cheng remains solid, but with uncertainties in the US and Europe. +852 290 34582 [email protected] Top 4 global brand PC companies all suggest European weakness this week: HP, Barclays Bank, Hong Kong Lenovo, and Dell reported results this week (please click here for reports on HP, Lenovo, and Dell), and all with a consistent message, that demand in Europe is slowing down – consumer segment for HP, corporate segment for Lenovo, and public sector for Dell. The feedback from Acer’s NDR this week also suggests a similar trend (click here for the report). Although none of the brand PC companies are cutting down their current quarter guidance, their ODM suppliers are becoming more cautious to avoid and anticipate any potential excess inventory, especially toward the end of 2Q12 into 3Q12. Expect Computex (June 5-9) to be the next catalyst: Unlike the previous few years, we expect this year’s Computex to generate more excitement (similar to 2007 when netbooks were first introduced), as we will for the first time be able to see actual working PCs running on Windows 8 (preview version), in addition to various models of ultrabooks running Intel’s Ivy Bridge CPU. We also expect to see various cloud computing strategies from different PC companies (e.g. Acer Cloud), with better convergence devices. We continue to like Asia brand PC companies on their market share gains and strong 2H12 outlook, with Lenovo (1-OW) and Asustek (1-OW) our top picks. We also like Quanta (1-OW), which will make the next generation of Apple MacBook Pro/Air likely to be announced at WWDC in June. Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 51. Barclays | The Asia PC Pulse (Issue No. 37) CONTENTS THE ASIA PC PULSE ...........................................................................................................................3 Barclays Asia PC Pulse – Week of 25 May (Issue No. 37)............................................................................ 3 Slightly revise down 2Q12 forecast for NBs and DTs/MBs with some noise ahead .................. 3 COMPANY SNAPSHOTS..................................................................................................................12 Compal (2-Equal Weight; PT NT$33)..................................................................................................12 Quanta (1-Overweight; PT: NT$92).....................................................................................................13 Wistron (2-Equal Weight; PT: NT$42).................................................................................................14 Inventec (3-Underweight; PT NT$10) .................................................................................................15 Pegatron (1-Overweight; PT NT$54)...................................................................................................16 Gigabyte (2376 TT, not rated) ..............................................................................................................17 Elitegroup (2331 TT, not rated) ............................................................................................................18 Microstar (2377 TT, not rated) .............................................................................................................19 APPENDIX I: NOTEBOOK, DESKTOP, TABLET PCS AND SERVERS...........................................20 APPENDIX II: SMARTPHONES........................................................................................................33 APPENDIX III: INTEL MICROPROCESSOR ROADMAP................................................................37 APPENDIX IV: CUSTOMER-SUPPLIER SALES MATRIX (2012E)...............................................38 APPENDIX V: APPLE BUYER/SUPPLIER MATRIX........................................................................39 APPENDIX VI: TAIWAN SUPPLY CHAIN CONCEPT STOCKS.....................................................40 APPENDIX VII: BILLS OF MATERIALS ...........................................................................................41 APPENDIX VIII: CHINA MANUFACTURING MAPS ......................................................................43 APPENDIX IX: LCD TV BUYER/SUPPLIER MATRIX, 2012E .......................................................46 APPENDIX X: LCD TV PANEL SUPPLY CHAIN MATRIX, 2012E................................................47 APPENDIX XI: ASIA EX-JAPAN TECHNOLOGY CAPEX 2009-2013E .......................................48 APPENDIX XII: ASIA EX-JAPAN TECHNOLOGY COMPARATIVE VALUATIONS ....................49 APPENDIX XII: ASIA EX-JAPAN TECHNOLOGY COMPARATIVE VALUATIONS (CONT’D)..50 26 May 2012 2 Barclays | The Asia PC Pulse (Issue No. 37) THE ASIA PC PULSE Barclays Asia PC Pulse – Week of 25 May (Issue No. 37) Our “Asia PC Pulse” report tracks shipments from the top-five NB and top-four motherboard companies in Asia – as Asia makes around 90% of global NBs and desktop PC MBs. While the data we track are for “sell-in”, we believe they provide a good proxy for “sell-through”, as inventory, which we also monitor, usually remains stable under normal conditions. Slightly revise down 2Q12 forecast for NBs and DTs/MBs with some noise ahead NBs: ODMs see order push-outs; trim 2Q12 forecast to up 8% q/q from 9% Trim May NB shipment growth to up 14% m/m from +16% due to some order push-outs For the month of May, we trim our May ODM NB shipment forecast to grow by 14% m/m (previously 16%) as we see some order push-out into June. This is still much higher than the 5-year average of down 1%. Although our channel checks suggest major OEM players might stay with their previous May shipment target – HP looks for +60% m/m and Acer looks for +50% m/m, the supply chain might seem to be more conservative for now. By company, we maintain Quanta’s May NB shipment forecast to grow 18% m/m to 4.7mn units, in line with market expectation. This is mainly due to aggressive pull-in from MacBook refresh models. Our checks also indicate that MacBook Air shipment might ramp up by over 80% m/m starting May. On the other hand, we cut Wistron’s May NB shipment to grow by 4% m/m to 2.6mn units (previously 2.8mn), mainly due to order push-outs. Separately, we expect Compal and Inventec’s NB shipments to outperform in the month, due to their larger exposure to Acer and HP. Yet, we see Pegatron’s May momentum being much slower than the industry average due to a very high base in April. Expect June NBs to grow by 8% m/m within mixed guidance of OEMs Our latest channel checks imply that OEM players are maintaining May shipment targets which indicate a significant rebound, while staying cautious on forecasts in the coming months. We see major names HP and Acer’s NB shipment guidance to be flattish or slightly down m/m into June. With regard to the other big names, Asustek and Lenovo, the biggest outperformers among non Apple brands, their rolling forecast still looks unchanged in May/June. Our checks suggest that Asustek and Lenovo will gradually grow shipments into June, compared to their more conservative peers. In other words, although none of the brand PC companies are cutting their current quarter guidance, their ODM suppliers are becoming more cautious to avoid and anticipate any potential excess inventory, especially toward the end of 2Q12 and into 3Q12. Consequently, we expect June NB shipments to grow by 8% m/m, lower than the seasonal trend of up 11% m/m. Slightly revise down 2Q12 NB shipment growth to 8% q/q from 9% due to near- term noise; still better than normal seasonality of up 6% For 2Q12, our recent checks suggest that top 3 ODMs Quanta, Compal and Wistron will slightly