Taiwanese Firms Could Get Boost From Budget PCs

While the worldwide computer market see the worst sales in years, one bright spot is coming from mini-laptops known as 'netbooks,' which appeal to the budget-conscious.

TAIPEI, Taiwan (AP) -- Thinking small might help Taiwan's computer industry emerge from the global downturn as an even bigger global player.

While the worldwide computer market is suffering through its worst sales in years, one bright spot is coming from the mini-laptops known as "netbooks," which appeal to the budget-conscious in tough times.

Several research groups have forecast that global demand for the thin, light machines could double this year -- and the category is dominated by Taiwanese brands and Taiwanese contract manufacturers.

With the island's $2.5 billion in electronics exports accounting for one-fifth of Taiwan's overall exports in January, Taiwanese government planners hope netbooks can boost an economy that is struggling.

At 5 percent, unemployment is moderate by worldwide standards but at a five-year high here. And with exports registering two consecutive monthly drops of more than 40 percent year-over-year, economists are predicting a 3 to 6 percent contraction in the Taiwanese economy for 2009.

Taiwan-made mini-laptops burst onto the world's electronics scene with an estimated 11 million units sold last year. This year, sales could hit 22 million units, according to several analysts. In comparison, 120 million standard laptops are expected to be churned out this year.

With screens of 9 to 10 inches -- or smaller -- and prices generally between $350 and $700, netbooks have relatively scant memory, and specialize in accessing the Internet and checking e-mail. Their low price is meant to appeal to the budget-conscious, but netbooks' small size also makes them convenient for business travelers.

"It is small but has enough functions for my personal and office use," said Taipei insurance company employee Winnie Tsai, who bought a 10-inch netbook for 16,000 New Taiwan dollars ($476), about one-third of what her old standard laptop cost.

Growth in netbooks could be well timed for Taiwanese contract manufacturers, which need to keep their assembly lines busy during a falloff in orders for conventional laptops and desktops. Some 85 percent of all laptops are made by Taiwanese companies.

Taiwan-based AsusTek Computer Inc. got the netbook ball rolling in 2007. Acer Inc., the world's second-largest laptop vendor, was initially dismissive of the AsusTek models as cheap knockoffs but soon followed suit. Last year Acer and AsusTek dominated the world netbook market, with each selling about 5 million units -- a combined share of more than 90 percent.

AsusTek and Acer netbooks are among the top-selling computers listed by Amazon.com, the leading online retailer, and Business Computer News Ranking, a Japanese market research firm. And sales of those computers figure to help Acer and AsusTek raise their profiles abroad with consumers who might remember those brands when shopping for desktops and standard laptops, said Tu Tze-chen, head of research at Taiwan's Industrial Technology Research Institute.

At least for now, AsusTek appears to be lagging the larger Acer in the netbook market. AsusTek has learned an important lesson: Small may be beautiful but too small can be useless.

It forecast a loss for the fourth quarter of 2008, blaming it in part on a failure to cut production of its relatively slow-selling 7-inch netbook, which has limited functions and a screen many users find too small.

"We paid a price for the 7-inch experiment, but we also learned valuable lessons and introduced the larger ... versions soon after," said AsusTek spokesman Beck Lee.

The popularity of netbooks has prompted other computer companies to launch their own versions, though most -- including Dell Inc., Hewlett-Packard Co., and Toshiba Corp. -- have consigned production, and sometimes design work as well, to Taiwanese contract makers like Quanta Computer Inc.

In turn those Taiwanese companies often turn to massive assembly lines in mainland China, where production costs are lower.

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