HIGH TECH: 'THERE'S SOMETHING WRONG OUT THERE'
Computer-industry overcapacity is taking a toll
businessweek.com
Some interesting excerpts:
"...There's just something wrong out there," says Stephen Luczo, president of Seagate Technology Inc., which in December said it would shutter one plant in Ireland and postpone expansion of another. "My sense is that things are slowing down, but all our big customers are saying demand is great. Someone isn't telling the truth...."
...All that new capacity has led to price wars. Even before Asia's woes, the industry was seeing troubling declines in prices for disk drives, memory chips, software, printers, and PCs. Rather than the usual 25%-a-year price cuts, disk-drive prices have dropped over 10% this quarter alone, says Quantum Chief Executive Michael Brown....
...Another factor in the profit equation is the move to "build-to-order" manufacturing by computer makers. Hoping to match the efficiencies of direct-mail leader Dell, companies such as Compaq, Hewlett-Packard, and IBM are starting to rejigger their plants to build systems to customer specifications--and avoid a buildup of costly inventory. But the changeover to that system is causing major dislocations among parts suppliers, who are getting stuck with excess inventory. According to estimates by Michael K. Kwatinetz, an analyst at DMG Technology Group, the shift to build-to-order will lead to a one-time 7% hit on PC component sales this year.... |
