--------------------------------------------------------------------------------
October 30, 1997, TechInvestor
--------------------------------------------------------------------------------
Southeast Asia Currency Fall Halts Local PC Market Growth
Mark Carroll
Until late this summer, Southeast Asia's decade of double-digit growth was the envy of the world. The recent up-to-45-percent decline in its currencies vs. the U.S. dollar has left Southeast Asian economies stalled, however. The currency devaluations will, of course, lower the cost of PC components manufactured in these countries. Conversely, it casts 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," said a spokesperson for First International Computer (FIC).
Notebook sales are also down in the region. "The situation now in Southeast Asia is very bad," said Derek Brearley, marketing manager at Twinhead International. "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."
Although the U.S. CPU makers are very close-lipped about the currency crisis, they admit they also are feeling the effects. "Asia as a whole is OK, due to the strength of the China market," said a spokesperson at Intel, in Santa Clara, Calif. "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," he 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. Although no one is yet openly admitting 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.
"Our customers are asking for credit extensions. We are reviewing these on a case-by-case basis," said York Chen, managing director of Acer Computer International (ACI).
This strategy of negotiating new credit terms for each customer is a common one here now. FIC, Twinhead, and even Intel said they are trying to ease the currency pressure their customers are facing. The big question is: How long will PC sales in Southeast Asia will remain this depressed?
Such a projection is tricky. ACI, 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 said it believes the worst will have passed in Thailand and Indonesia by the end of this year. The company thinks the Philippines will remain tight until the elections there, next June. ''Our distributors are saying that the worst is over. We have no idea, however, when it will grow again," Cyrix's Roach said.
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 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 in that area.
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," said Matt Cleary, associate research director for UBS Securities. "On the other hand, it will help manufacturers here of such low-end components as pcbs, connectors, cases, and the like. Sub-$1,000 PC makers could also be especially big winners here."
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," Cleary said, "the overall effect globally is not world-ending. I project 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 ACI 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," he said. |
