And another one...
Southeast Asia PC Market Stumbles On Fallen Currencies
(10/29/97; 2:00 p.m. EST)
By Mark Carroll, EE Times
Until late this summer, Southeast Asia's decade of double-digit growth was the envy of the world. The recent decline of up to 45 percent in its currencies vs. the U.S. dollar has left its economies stalled, however. The currency devaluations will, of course, lower the cost of PC components manufactured in these countries. Conversely, they cast a large cloud over the possibility of selling computer products in what was forecast to be the most attractive market in the world.
Sales of PCs in Southeast Asia have fallen by almost half for some companies.
''Our sales in Southeast Asia are down, on average, by 40 percent. Thailand and Indonesia are the worst now,'' a spokesperson for First International Computer (FIC) said.
Notebook sales are also down in the region.
''The situation now in Southeast Asia is very bad. Malaysia is our biggest customer nation there. Sales have dropped, and we are just trying to move product now. Historically, we had been expanding in the region month by month,'' said Derek Brearley, marketing communications manager at Twinhead International.
Though the U.S. CPU makers are very close-lipped about the currency crisis, they admit that they also are feeling the effects.
''Asia as a whole is OK, due to the strength of the China market," said a spokesperson for Intel. "Sales in Southeast Asia are sluggish though. We are monitoring the situation very closely.''
Everett Roach, marketing manager for Cyrix in Asia, was a bit more direct.
''Sales currently in Southeast Asia are pretty dismal, Roach said. "Sales were great for us in the first half of the year; now it's not so good.''
One of the major fears of technology manufacturers trying to sell in Southeast Asia is the specter of customer bankruptcy. While no one is yet openly admitting that customers have defaulted on them, fancy credit deals are becoming the norm.
''Most of our business is via distributors. Some of them have become pretty liberal recently with their credit terms. Luckily, though, some of our distributors had their cash in U.S. dollars, so they are OK,'' Roach said.
York Chen, managing director of Acer Computer International said: ''Our customers are asking for credit extensions. We are reviewing these on a case-by-case basis.''
This strategy of negotiating new credit terms for each customer is a common one here now. FIC, Twinhead, and even Intel admitted that they are trying to ease the currency pressure their customers are facing. The big question is, How long will PC sales in Southeast Asia remain this depressed? Such a projection is tricky. Acer, the No. 1 seller of PCs in Southeast Asia, thinks it is not likely to quickly go away.
''Actually the third quarter wasn't so bad," Chen said. "The fourth quarter and perhaps all of 1998 will, however, be bad. It's hard to forecast what will happen in 1998. The major challenge will be retaining some degree of profit.''
Others are a bit more optimistic for 1998. FIC believes that the worst will have passed in Thailand and Indonesia by the end of this year. FIC thinks the Philippines will remain tight until the elections there next June.
Roach at Cyrix said: ''Our distributors are saying that the worst is over. We have no idea, however, when it will grow again.''
More than a short-term downturn, a long-term lack of growth is the most destructive effect of the currency crisis. Dataquest and International Data Corp. had both widely forecast 21 percent annual growth in the Southeast-Asia PC market through the year 2001. Such rosy figures had caused both Taiwanese and multinational PC makers to rush into the region and pin their future hopes on burgeoning sales here.
This downturn in Southeast Asia's buying power will not hit all manufacturers equally.
''The weakness in Southeast Asia will effect companies such as Intel, high-end graphics chip makers, and maybe notebook producers. On the other hand, it will help manufacturers here of such low end components as PCBs, connectors, cases, and the like. Sub-$1000 PC makers could also be especially big winners here,'' said Matt Cleary, associate research director for UBS Securities.
Despite Southeast Asia's historically strong growth, the economic importance of the region needs to be put into perspective.
''Even assuming a significant shrinkage in Southeast Asia PC sales in 1998, the overall effect globally is not world-ending," Cleary said. "I project that a 10 percent shrinkage in Southeast Asia PC sales would reduce global PC growth from 16 percent this year to about 12 percent. Significant, but not a catastrophe.''
Chen at Acer puts his company's contribution to the Acer Group's revenues into perspective.
''This year, Acer Group will have about $6 billion in revenues. Southeast Asia sales will contribute about 3.25 percent of that figure,'' Chen said.
Copyright (c) CMP Media, 1997.
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