Taiwan's notebook shipments dropped 9.8% sequentially and 2.6% on year to only 41.42 million units in the first quarter of 2011. Global notebook shipments also dropped 8.9% sequentially and 1.7% on year to 46.94 million units due to weak overall demand plus Intel's defective chip incident, according to Digitimes Research senior analyst Joanne Chien.In addition to the weak performance of netbooks, Chien believes that the traditional notebook segment is also facing a challenge from tablet PCs with the segment's shipments in the first quarter down 9.9% sequentially and saw no growth on year.However, under the unfriendly economic status, China-based Lenovo and the US-based Apple still managed to achieve excellent performance for the first quarter. Taiwan's traditional notebook shipments to Lenovo in the first quarter surpassed those of Dell and were only 0.5pp less than Acer at number two.Although Apple has also been affected by Intel's defective incident, the strong market demand for its MacBook Air and MacBook Pro, still allowed the company to place total orders of 2.8 million notebooks with its upstream ODM/OEM partners. Of which, about 20%, or 600,000 units were orders for MacBook Air, Chien added.

A presentation recently prepared for Taiwan's Ministry of Economic Affairs (MOEA) had been made available for publication. The presentation highlights business opportunities for companies from an Asian perspective.For readers interested in accessing the original presentation, a link is provided at the end of the article. - The global ICT industry faces four main challenges.- Events from the 2008 financial crisis to the 2011 Japanese earthquakes demonstrate that the market faces unstable demand.- The global electronics industry is also faced with the problems of increasing oversupply and market concentration, leading to shrinking profit margins.- Taking the display panel industry as an example, although many countries have tried to develop their panel industries, to date only Taiwan and South Korea have done so on a significant economic scale, but they nevertheless face overly long investment cycles and profitability issues.- Emerging markets account for an increasingly large share of the global market; the US, Western Europe and Japan accounted for 75% of the global PC market 20 years ago, whereas today, emerging markets account for more than half of the PC market.- Another major variable in the global technology industry is the rapid rise and increasing involvement of China; the China market accounts for a increasingly large share of the global market, with the country's economic development and accumulated investment power making it a key topic for the global technology industry.- More than 350 millions PCs were shipped in 2010.- As markets in the Asia Pacific region have developed rapidly, countries in the region have also come to play key roles in the electronics industry itself.- In addition to notebook computers, which are produced almost 100% by Asia Pacific nations, countries in the region also play a vital role in everything from mobile phones to TV sets.- Consequently, Asia Pacific nations excluding Japan already contribute some 57.7% to global IC components, a figure that is projected to continue to rise in the years to come.- Taiwan is an indispensable part of the global ICT industry- Taiwan is at the forefront of industries including notebook computers, wafer contract foundries, IC encapsulation testing and IC design.- The commercial opportunities created by large-scale manufacturing in Taiwan have been eagerly pursued by technology firms worldwide.- The next few slides give an overview of the status quo for the industry in Taiwan, as well as the possible models for collaboration between global technology companies and Taiwan.- Statistics from Digitimes show that Taiwan had a total of 735 listed electronics companies at the end of 2010.- The total combined revenues of these companies in 2010 was US$411b, while the industry growth rate for 2010 was 31.6%.- The ICT manufacturing industry, which is principally focused on the assembly and manufacture of products such as PCs and mobile phones, is the largest of the major industries, with total revenues of US$220b in 2010.- The second largest industry is the optoelectronics industry, which mainly focusing on manufacturing upstream and downstream products for display panels, and was worth US$53.2b in 2010.- The semiconductor industry, which covers areas including wafer foundries, encapsulation testing, IC manufacturing and IC design, was worth US$51.2b in 2010.- In other fields such as network communications, general components and electronics distribution, Taiwan-based firms have not only generated enormous revenues within Taiwan itself, but have also actively moved into the Asia Pacific region, enabling them to become key partners for world-class companies.- ICT manufacturing-focused firms are the largest of Taiwan's electronics companies.- Foxconn's revenues for 2010 were US$71.2b, making it the world's largest EMS firm.- If FIH (Foxconn International Holdings), which is listed on the Hong Kong stock exchange, and Foxconn Group's other subsidiaries are added in, the figure rises to over US$100b.- Other major firms including Quanta, Compal, Wistron, Acer and Inventec also have annual revenues in excess of US$100 billion, and are important partners for global giants such as Hewlett-Packard (HP), Apple and Dell.- Next generation electronics industries in Taiwan revolve around personal computers; Gartner estimates that the global PC market will expand from 350m units in 2010 to some 409m units.- A growth rate of 15.9% is predicted.- As tablet devices like the iPad continue to make inroads into the market, growth in the global computer market is likely to fall short of such optimistic forecasts in 2011; however, manufacturing systems for tablet computers are also highly dependent on Taiwan-based companies, and so changes in the market will have a very limited impact on Taiwan.- Taiwan is the world's number one producer of notebook computers, and average monthly production has been known to exceed 14m units per month.- Assuming that each unit requires components and materials worth US$400, Taiwan-based firms purchase nearly US$70.0b of such items globally each year.- The booming notebook industry also provides an excellent foundation for the development of Taiwan's display panel and IC design industries.- The largest purchasers of products from Taiwan globally include HP, Dell, Sony, Apple, Samsung and Lenovo.Among the ranks of new buyers which have become increasingly important in recent years are Nokia, NTT Docomo and Verizon, all of which buy network communications products from Taiwan and a number of major channel firms and electronics companies from emerging markets.- Taiwan-based companies have also worked closely with firms such as Microsoft, Oracle and IBM to cater for international purchasing in a number of areas by setting up highly specialized supply chain (SCM) and ERP management systems.- Taiwan's electronics industry previously centered on notebook computers, but has undergone significant structural changes in recent years in response to the wave of enthusiasm for smartphones and tablet computers.- Major global manufacturers eager to benefit from Taiwan's stable product chains have gradually handed over most of their smartphone and tablet production to Taiwan-based companies.- This has given rise to a trend for major upstream component manufacturers to promote their key technologies in Taiwan.- Taiwan has become a battleground for new technology, with Taipei's annual Computex computer show a already a key moment in the industry calendar.- Booming demand from the industry has helped Taiwan's IC design industry to flourish since the mid-1990s.- The wafer foundry industry has also been a critical factor in the development of Taiwan's IC design industry.- The world's two largest pure play wafer foundry firms are also both Taiwan-based companies, with TSMC alone accounting for nearly half of the global market.- According to analysis by Digitimes Research, North American IC design firms contribute roughly 61% of wafer foundry revenues.- Asia Pacific nations' contribution has also exhibited strong growth in recent years.- Taiwan accounts for approximately 21% of the global IC design industry, while China accounts for a further 9%.- As a result of Taiwan's burgeoning wafer foundry and IC manufacturing industries, Taiwan's key companies need to pour in large sums every year to update or invest in equipment.- TSMC's 2011 capital expenditure will reach US$7.8b.- Information from SEMI shows that total expenditure on semiconductor equipment from Taiwan was US$9.18b in 2010, with this figure set to rise to US$9.28b in 2011.- Taiwan's semiconductor equipment demand is the world's largest, accounting for around 30% of the global market.- Due to the importance of the Taiwan market, the world's most renowned semiconductor equipment firms have all established service centers or research centers in Taiwan.- Taiwan is the world's second largest semiconductor materials market after Japan.- Taiwan's semiconductor materials market grew from US$6.87b in 2009 to an estimated US$9.11b in 2010, representing a growth rate of 36.2%.- Barring any unforeseen circumstances, Taiwan will overtake Japan in 2011 to become the world's largest market.- Taiwan also exerts a great deal of influence in the China market.- Consequently, global upstream materials firms all maintain an active presence in Taiwan, from where they can serve the entire Asia Pacific market.- The global solar photovoltaic (PV) market is projected to reach 20.8GWp in 2011.- Germany and Italy collectively account for more than half of this market.- Following the major earthquake in Japan, even more importance is likely to be attached to the green energy industry.- China is currently the world's largest manufacturer of solar cells, followed by Taiwan in second place.- Total global production capacity is projected to rise from the 4Q10 figure of 30.3GWp to 58.0GWp in 4Q11.- China and Taiwan have been the most proactive of the various countries that are expanding production capacity.- Taiwan's total capacity is projected to rise from the 4Q10 figure of 5,446MWp to 10,788MWp in 4Q11.- Taiwan accounts for over 18% of total global capacity.- As the global industry has gradually matured, the resulting pressure has led the Taiwan industry to move further upstream, with the silicon wafer industry also making rapid progress.- China accounts for more than 60% of capacity in the major nations, but issues of over-investment have arisen.- Taiwan's total investment in silicon wafers will grow from 5,635MWp in 4Q10 to 7,090MWp in 4Q11.- Statistics on Taiwan's listed companies indicated that Taiwan's solar cell industry is already worth nearly US$4.0b.- The solar PV wafer and module industries are also of considerable size.- The Taiwan-based firms have generally opted to team up with companies in the individual countries for final assembly work.- Capitalizing on Taiwan's edge in production management, which derives from its manufacturing industry.To download the original powerpoint presentation, click here.

A presentation recently prepared for Taiwan's Ministry of Economic Affairs (MOEA) had been made available for publication. The presentation explains how Taiwan can be a springboard for companies looking to invest in China, as cross strait relations are becoming closer since the implementation of ECFA (Economy Cooperation Framework Agreement). For readers interested in accessing the original presentation, a link is provided at the end of the article. - Over the past 20 years, Taiwan has invested a total of more than US$100b in China, and has gathered a great deal of momentum in terms of cross-strait trade. - The majority of the upstream materials needed by Taiwan-based firms are also supplied by Taiwan, with the result that Taiwan has a considerable trade account with China. - Taiwan-based firms are playing a key role in China's increasingly important domestic markets, aided by the Economic Cooperation Framework Agreement (ECFA) between China and Taiwan. - International companies can gain access to lucrative opportunities in China via investment in Taiwan. - The ECFA trade agreement came into effect in January 2011.- Prior to ECFA, the share of China's imports accounted for by Taiwanese products had fallen year on year. In the two months after ECFA took effect, this share rebounded rapidly to 12.3%. - Taiwan included a total of 539 items from Taiwan in its "early harvest list" for the first phase of ECFA.- These products will benefit from preferential tax rates and tariffs, and are also areas which foreign funds should give particular consideration to when investing in Taiwan. - Investigations by Digitimes Research reveal that while China accounts for 9% of global GDP, its contribution to major electronic products exceeds this figure by a considerable margin.- China sold a total of 18.06m cars in 2010, accounting for 23% of the global total.- China also accounted for 21% of LCD TV sales and 23% of mobile phone sales worldwide.- This demonstrates that the purchasing power of the China market goes beyond the numbers evident from its GDP alone. - Although the China market is in many ways very attractive, it is also the world's most difficult market to penetrate.- As China's rural population remains vast, and individual provincial governments continue to provide support to certain designated industries, there are many hidden obstacles to moving into the China market.- Investigations show that China's LCD TV market was as large as 38m TV sets in 2010; however, the top six brands were all homegrown companies.- The global mobile phone market reached 1.454b handsets in 2010, representing 10.6% growth on 2009; taking a moderate outlook, the 2011 market is projected to reach 1.554 handsets, equivalent to an annual growth rate of 6.9%.- 2010 shipments exceeded forecasts by more than 60m handsets, mainly due to the larger-than-expected surge in the popularity of smartphones and burgeoning demand in emerging markets.- While the 2011 annual growth rate for mobile phone shipments will still be higher than in 2009, it will still be slightly lower than in other recent years, mainly because the market is gradually coming to maturity. However, the warmer global economic climate and stronger growth figures mean that the handset replacement will likely be close to that of 2010; moreover, if the number of new users added stays above 600m, there will still be a good chance that the market will grow to more than 1.5b handsets. - The smartphone market is predicted to reach around 440m handsets in 2011, accounting for 28.4% of the mobile phone market as a whole. There are four main reasons for this:1. Having passed through several years of "market education", consumers are now more receptive to the idea of smartphones, and demand is likely to flourish in 2011.2. While smartphone users' heavy bandwidth consumption can cause network congestion despite telecom carriers' best efforts to respond to customer complaints and carry out network upgrades, carriers are nevertheless predicted to continue to make smartphones the focus of their marketing activities, due to their consumer appeal and the high revenue contribution of smartphone users.3. The launch of new OS platforms such as Windows Phone 7 (WP7) and MeeGo, and in particular Microsoft and Nokia's joint attempt to revitalize their smartphone businesses, will inevitably involve the commitment of huge resources to marketing activities, further heating up the smartphone market.4. The budget smartphone solutions launched by chip vendors are projected to become more mature in 2011, reducing the purchase threshold for consumers and further stimulating demand. - Global mobile phone brand rankings were dramatically reshuffled in 2010, with Nokia's market share sliding to the brink of 30% and LG's market also dropping substantially.- Besides smartphones, the rapid rise of China and Taiwan-based firms is also a major factor. - The strong sales figures for white box handsets are intimately connected to the business models involved.- European and North American baseband chip suppliers previously supplied only the chips themselves, and did not offer refer solutions for either hardware or software design.- The Taiwan-based firms Mediatek (MTK) and Morning Star have both used this model to achieve success.- The component channel firms in the background also played an extremely important role.- Many emerging nations are keen to work with Taiwan to set up manufacturing systems for white box handsets. - Total shipments for mobile phone manufacturers in the Greater China region in 2010 are estimated to be 424m handsets.- Within this figure, white box handsets sold in China accounted for around 180m units, while domestic and overseas sales for well-known China-based brands totaled a further 180m units.- While the number of handsets made in Taiwan has fallen, Taiwan's industrial ecosystem is extremely adept at manufacturing a variety of components, turning Taiwan into a veritable arsenal of components. - Trade ties between Taiwan and China are already close, while the ECFA agreement which came into force in 2011 brings enormous potential opportunities for further trade.- The Pearl River Delta (PRD) region of South China has had excellent logistical systems for some time.- Taiwan is projected to strengthen its cooperation with provinces in the PRD region, as well as eventually extending the reach of these logistical services systems to the Bohai Bay.- Taiwan has concrete cultural, linguistic and political advantages in terms of its trade with China.- The ICT industry's business models are undergoing a period of intense change on a global basis, with globalization already an irresistible trend.- As the industry has become increasingly concentrated in Asia, component demand will also be stronger in the region; for European and North American companies, this means that establishing comprehensive systems to service companies in the Asia region is a necessity.- Outsourcing is another important trend. The Japanese TV giants Sony and Toshiba already outsource upwards of 70% of production, with the recent earthquake only likely to accelerate this manufacturing exodus.- The production of notebook computer products from major global firms such as Dell, HP and Lenovo, as well as Apple's iPad, have all been contracted out to firms in the Asia Pacific region, principally in Taiwan.- In addition to winning ODM/OEM orders from Europe, North America and Japan, another major challenge for firms in the Asia Pacific region is the issue of how to collaborate with channel firms in countries like Turkey, Russia, India and Brazil to bring in new products quickly.- It is undeniable that the value of software is continually increasingly, and this is also a challenge facing companies in the Asia Pacific region as a whole. - It is widely accepted that we are on the verge of an "Asia Pacific century".- More and more commercial opportunities will come from emerging markets rather than from Europe, North America and Japan.- Finding out how to sell to these emerging markets will require us to gain a new understanding of new environments such as the Internet.- From an Asian perspective, companies from Western nations should employ more persons of Asia Pacific origin, in order to help them truly understand the region's industries and markets.- Taiwanese people understand China better than anyone, so much so that the Koreans have dubbed those Taiwanese who best understand China the "Chaiwanese".- It goes without saying that the governments of Asia Pacific countries are all extremely proactive about developing cutting-edge technology industries, and Taiwan's past experiences have also been driven by more than a little political strategy.- This sort of strategic thinking is extremely important for firms around the world that wish to compete in the Asia Pacific market.- Whichever way you look at the Asia Pacific industry, Taiwan's track record of success has proven time and time again that Taiwan is the best choice.- Taiwan has invested more than US$100b in China, with annual exports to China worth in excess of US$100b.- Statistics show that 40% of all Taiwan's exports are destined for China.- Taiwan will enjoy even greater opportunities to share in the rapidly growing Chinese market following the signing of ECFA. - Taiwan has already become a model for emerging nations wishing to develop their technology industries.- However, Taiwan has limited resources and is ready and willing to share its experience and commercial opportunities with emerging nations around the world.- In this win-win situation, the two parties can establish long-term mechanisms for collaboration, working for a closer partnership with each passing year.- We suggest that the two parties start discussions on the possibilities for collaboration with the LCD, mobile phone and green energy industries.- For example, Taiwan could invite key companies in a country to invest in LCDs, while Taiwan-based firms invest in LCMs in the country.- Taiwan-based firms have complete manufacturing systems for notebook computers, tablet devices and mobile phones, and are willing to engage in consultation and discussion regarding potential collaborations. - Taking the mobile phone industry as an example, Taiwan-based firms play a critical role in China's white box handset industry.- More than 80% of baseband chips come from Taiwan, with Taiwan-based firms also providing assistance for component distribution and logistical systems.- We recommend that a country discuss possible ways to establish partnerships with Taiwan, as well as to share in the opportunities presented by emerging markets.- Participating companies will benefit from added value in areas from manufacturing to marketing. - The smartphones of the future and the iPad are assembled by Taiwan-based OEMs.- The Taiwan-based firms Mediatek (MTK) and HTC both provide excellent smartphone solutions. - Competition in the display panel industry is intensifying, with even greater financial resources and technical expertise required for investment in next-generation panels.- Taiwan has played a pivotal role in the display panel industry since its inception.- Taiwan-based firms are responding to demand from emerging markets by seeking out more partners in emerging markets. - Even greater importance will be attached to solar PV and other green energy industries following the Japanese earthquake.- Taiwan already enjoyed an outstanding reputation in the solar cell sector.- Europe's large solar power stations have all selected Taiwanese products.- We recommend that Taiwanese firms provide solar cells and work with local manufacturers on solar modules.- The two parties will of course discuss the possibilities for upstream/downstream integration, as well as joint R&D for silicon and other materials and equipment. - China is not just the world's largest market; the concentration of manufacturing in China also means that there is strong demand in China for upstream components for products including mobile phones, TVs and notebook computers.- Taiwan-based firms are the powerhouses in the middle, but increasing costs in China will also accelerate the pace of globalization for Taiwanese companies. - Taiwan's exports to China have shot up since the signing of ECFA.- Taiwanese firms have already invested hundreds of billions of US dollars in China to build a totally competitive industrial presence.- There are already more than 300 direct flights per week between Taiwan and China.- Taiwan will be a logistical hub for flights to every province in China in the future. - Multinational firms can harness the power of Taiwan's technology industries, as well as Taiwan's logistic systems to share in the rapidly growing China market. To download the original powerpoint presentation, click here.

About 20-25 million entry-level Android smartphones at contract-free prices of US$150 or below will be sold in the global market in 2011, much more than the 2.5-3 million units sold in 2010, Digitimes Research predicts. Global smartphone sales will hike 54.5% from 2010 to 445 million units in 2011, of which 165 million or 37.1% will be Android models, surpassing Symbian to become the largest smartphone platform. The large growth in entry-level Android smartphone sales will be driven by international, China- and Taiwan-based design houses' standard chip solutions that will facilitate minor and white-box vendors' launch of inexpensive models mostly in emerging markets. While mature markets accounted for more than half of the 2010 global sales of entry-level Android smartphones, emerging markets will dominate the handset segment in 2011. The China market will see demand for 10-13 million entry-level Android smartphones in 2011.

Facing fierce competition in the mobile device market, Acer has decided to replace its CEO and president Gianfranco Lanci. The company may not have to completely abandon its existing strategies of giving more emphasis on marketing than on product R&D because of Lanci's departure. But it definitively must devote more efforts to mobile devices and establish a new business model that leverages its current advantages.Most of the PC brand vendors had a slow start in the tablet PC market. But compared to Hewlett-Packard's (HP) acquisition of Palm, and Dell's and Lenovo's acceleration in unveiling their products, Acer's pace is slower than most of its competitors. Acer tried to establish a place in the LCD TV and smartphone markets, but failed. Lanci has to be held responsible for the failure to expand Acer's product lines.�@�@However, Lanci's departure may pose a risk to Acer, as the regions that contribute 70% of Acer's revenues are still managed by executives close to Lanci. Whether these executives will continue to stay loyal to the new Acer leadership in JT Wang will strongly affect the company's performance for the rest of 2011. In addition to these internal issues, whether Europe's channel retailers, which have strong relationships with Lanci, will continue to support Acer and not defect to Acer's competitors, is also an uncertainty.Acer's strong growths in the past 10 years were mainly driven by the expansion of shipments to regions outside Asia Pacific and Western Europe, where Acer was already strong. Acer also managed to expand its market share in Asia Pacific and Western Europe.But in terms of products, the PC and monitor businesses account for almost all of the companies, while other product lines share only less than 5%. Its major competitors HP and Dell have both achieved strong results from the enterprise software, storage and service markets.Mobile device technologies have see fast development in the past two years and have already started impacting the notebook market, forcing the notebook market to enter the initial period of the mature phase. But the smartphone and tablet PC markets taking off fast.PC and smartphone brand vendors have their own advantages in the tablet PC market. But in terms of supply chain resources and business models, PC brands are in an disadvantaged position. PC brand vendors will have to establish a new strategy for the tablet PC and mobile device marketA comparison of the top-three PC brand vendors' strategies for tablet PCs shows that HP, which acquired Palm in 2010, is expected to be the most qualified players to compete in the next-generation mobile device battle.Dell's strategy is to heavily cooperate with its ODM partners and is willing to try out many different options for its devices to find the best solutions. Although the result is not yet obvious, the strategy should allow the company to have a better understanding of the market and its brand new supply chain.Acer has been focusing on R&D for smartphones after acquiring Eten. But compared to other smartphone brand vendors' investment in R&D, Acer's spending has been far less. Without improvements in revenues from the segment, Acer has been faced with the dilemma of whether it should rely on ODMs the smartphone development to save cost, or to invest in developing its own technologies. Global mobile device shipments, 2013 (m units) Segment Volume Notebook 250 Tablet PC 130 Smartphone 800 Source: Digitimes Research, compiled by Digitimes, April 2011 PC and smartphone vendors' advantages in tablet PC competition Hardware design Software design Key component Manufacturing ability Control over IT retail channel Relationship with telecom carriers PC vendors Better Better Smartphone vendors Better Better Better Better Source: Digitimes Research, compiled by Digitimes, April 2011 Acer's CEO and president in different regions and 2009 revenues CEO and president 2009 revenues (NT$b) 2009 revenues share American market Emmanuel Fromont 153.25 26.1% Europe market Walter Deppeler 294.78 50.1% Asia Pacific market Steven Lin 107.21 (including China) 18.2% Taiwan Scott Lin 32.52 5.5% China Oliver Ahrens N/A N/A Source: Digitimes Research, compiled by Digitimes, April 2011

Microelectromechanical system (MEMS) applications range from automotive, industrial, military, and popular consumer electronics (CE) products such as smartphones and tablet PCs. Disruption to the supply of several components from Japan due to the recent earthquake and tsunami may create some issues for the worldwide manufacturing of MEMS devices.But Digitimes Research believes that the impact on the overall MEMS supply chain may not be serious, as the components that may be in tight supply from Japan are not as crucial as accelerometers, gyroscopes and microphones. They bring added-value to end products, but they are not essential features.Texas Instruments (TI) on March 29 issued a statement saying that shipments from its factory site in Miho, Japan, will not return to normal until September. The facility, which suffered substantial damage during the earthquake, produces DLP (digital light processing) chips used in embedded pico projectors.TI indicated that the company has identified alternative manufacturing sites for about 60% of its Miho facility's production.AKM Semiconductor, a major supplier of magnetic compasses mainly for navigation-enabled products, has seen production at its plant in Shizuoka Prefecture affected by rolling blackouts imposed by Tokyo Electric Power (TEPCO). Output is likely to reduce due to power issues.Seiko Epson, which makes gyros for InvenSense, had to close its Sakata plant in Yamagata Prefecture after the massive earthquake and subsequent tsunami struck the northeast coast of Japan. The company has issued its latest update, revealing that partial production resumed on March 28.InvenSense also outsources production to foundries including Taiwan Semiconductor Manufacturing Company (TSMC), Touch Micro-system Technology (TMT) and Dalsa Semiconductor. Failure of supplies from Japan should have minimal impact on its business.In addition, major producers of MEMS accelerometers and microphones continue their normal operations as their manufacturing sites are located in areas away from the quake-hit northeastern regions or outside Japan.Source: Digitimes Research, April 2011

Before the March 31 announcement of Acer CEO and president Gianfranco Lanci's resignation, Stan Shih founder and shareholder of Acer had made some comments at a press conference on March 29 in Taiwan, already hinting that the CEO may step down in near future.Commenting on Acer's lower-than-expected performance for two consecutive quarters at a press conference on March 29, Shih pointed out the the rise of tablet PCs and smartphones to become new trends, and the changes in the IT market's ecosystem have already far surpassed what Acer's executives can handle, and that Acer's winning strategy from the past had already lost its effectiveness, and the company needed to implement a change in direction.Shih pointed out that Acer was originally set to become the largest notebook vendor in 2011 and be the leading PC vendor in 2012, and the strategy was meant to increase the company's profitability through enlarging the company's economic scale; however, since the fact that economic scale does not necessary equal profitability, implementing a successful transformation will be much more important than becoming number one. Winning in shipment numbers, but losing profitability is meaningless.However, Shih pointed out that he has already stepped out of Acer's operations and was only giving suggestions as a board member. He did not give any clear pointers about how Acer could achieve victory in competition for the "smart online device" segment, saying that Acer's executives are the ones who need to be concerned with that, and that they will need some time to reach a consensus.Shih once said that a successful enterprise needs to start a reorganization every 10 years. It has been around 10 years since Acer spun off Wistron in 2001, and Shih commented that Acer needs to recreate itself since tablet PCs are a completely different ecosystem.Shih believes that Acer should face reality and observe the changes in the ecosystem, especially by acknowledging that the appearance of tablet PCs and smartphones has already significantly changed the IT industry. Tablet PCs are attracting consumers who do not use PCs, to start using PCs, and the changes will definitely impact notebook demand; however, it could also be an opportunity for makers.Shih pointed out that the IT industry should thank Apple for creating a new path and attracting consumers to accept tablet PCs, Acer tried to push tablet PC products in 2000, but failed. Apple has opened up a road for players to follow, and so he believes it should be much easier for others to succeed.Shih also noted that it is still too early to judge the winner of the tablet PC market, and that Acer still has a good basis to allow a transformation, therefore he is not concerned.

Overall supply of touch panel materials has seen limited impact from the massive earthquake and tsunami that hit northeastern Japan, as most of the production plants are located in western Japan away from the disaster areas.ITO is a key material for touch panels. ITO films are needed to make resistive touch and film-based projected touch panels. Although major ITO film suppliers are from Japan, most of their production plants are located away from the disaster area. There are also many ITO suppliers from Korea, Taiwan and China. Therefore, ITO supply is expected to remain normal.For the supply of ITO targets, leading supplier JX Nippon Mining & Metals' Isohara plant in Ibaraki Prefecture and third-largest supplier Tosoh Specialty Materials' plant in Yamagata Prefecture were seriously affected by the earthquake. But second-largest supplier Mitsui Mining & Smelting's plant was not affected. Production outside Japan should help keep sufficient supply of ITO targets.JX is also the leading supplier of treated rolled copper foil used in PCB and its production plant in Ibaraki Prefecture was seriously damaged. But the production plant of the second largest supplier Fukuda Metal Foil & Powder was away from the disaster areas. JX and Fukuda both have treated rolled copper foil production plants in Southeastern Asia and China, and therefore supply for the component will remain normal.Anisotropic conductive film (ACF) is used to bind touch panels with control ICs. Japan-based Hitachi Chemical and Sony Chemical & Information Device together account for 90% of the total ACF market. Hitachi's Shimodate plant and Sony's Kunuma plant are both located close to the disaster areas, but they have confirmed that no damage was done to production equipment and they resumed production on March 16-17. Both plants are expected to be affected by the rolling black-outs but will maintain utilization rates of over 70%. Top-4 ITO film providers Company Location Nitto Denko Hiroshima prefecture Dike Kyoto Teijin Chemicals Hiroshima Prefecture Suzutora Aichi Prefecture Source: Digitimes Research, March 2011 Japan major touch panel makers Company Technology Plant location Note Nissha High-end resistive touch Film-based projected capacitive touch Kyoto Away from disaster areas, no significant damage Gunze Kyoto Away from disaster areas, no significant damage Ishikawa Prefecture Shiga Prefecture Mie Prefecture Glass-based projected capacitive touch Hyogo Prefecture Away from disaster areas, no significant damage Andes (AIS) Glass-based projected capacitive touch Aomori Prefecture Away from disaster areas, no significant damage. Source: Digitimes Research, March 2011

The massive earthquake and tsunami that struck the northeast coast of Japan have not had significant impact on OLED material supply, but may affect entry-level OLED panel applications, according to Digitimes Research.Japan-based players have been developing OLED materials for a long time with Sumitomo Chemical and Showa Denko in the polymer materials segment, Idemitsu Kosan and Mitsui Chemicals in the small molecule segment and TDK Micro Device in the passive matrix OLED (PMOLED) panel segment.TDK Micro Device's facilities located in Ibaraki Prefecture saw partial equipment damage due to the tremor. But the impact on the PMOLED market may be minimal, as Taiwan-based RiTdisplay is the leading PMOLED supplier worldwide.Although the quake has had limited impact on the supply of polymer materials from Sumitomo, the company's R&D schedule is expected to be affected. Sumitomo has a total of nine plants in Japan, of which the Misawa and Chiba plants are closer to the disaster areas. Although no damage to building and equipment has been reported, production is expected to be affected by the rolling black-outs.Sumitomo mainly produces OLED polymer materials at its Osaka plant, which is away from the disaster areas, and supply of OLED materials will be little affected.Fellow polymer material supplier Showa has been hit more by the quake, and shipments to its clients may be affected.Idemitsu is seeing more impacts from the transportation and power supply issues, while Mitsui has not been significantly affected by the earthquake. Although more players are adopting small molecule in the current OLED industry, the earthquake will only have limited effects on the supply, as there are other suppliers, such as US-based Universal Display Corporation (UDC). Damage to Japan-based OLED suppliers Supplier Technology/production Impact on production Impact on industry Panel TDK Micro Device PM OLED panel Partial damage to equipment at Ibaraki Prefecture; production suspended Production mainly for PMOLED; only affects to entry-level applications Polymer Material Sumitomo Polymer materials for OLED, mainly for lighting and display application; acquisition of UK-based fellow supplier CDT in 2007 Osaka production plant away from the disaster area; partial damage to plant at Tsukuba research center in Ibaraki Prefecture Limited impact on material supply; to affect its own OLED R&D schedule Showa Polymer materials for OLED; In addition to display application; cross-licensing with US-based UDC for white OLED lighting technology Chiba plant suspended from March 14-16, resumed production on March 17; to prioritize production for basic chemical products Shipments to polymer material users to be affected; but small molecule material is more popular in the industry Small molecule Idemitsu Small molecule OLED materials; cooperation with Sony in OLED display No equipment damage at Chiba plant despite level-5 quake; to be affected by transportation and power supply issues Company is estimating its material inventory, and may suspend production if material inventory is insufficient Mitsui Small molecule OLED materials; cooperation with Idemitsu for OLED material development Osaka plant is away from disaster areas and not affected none Source: Companies, compiled by Digitimes, March 2011 Earthquake impact on TDK's OLED subsidiaries Plant Location Production Situation as of March 15 Narita TDK Narita, Chiba Prefecture Metal magnet Ready to restart production, but may be affected by rolling black-outs Kofu TDK Minami-Alps, Yamanashi Prefecture Thin film and silicon component Ready to restart production, but may be affected by rolling black-outs Technical Center TDK Ichikawa, Chiba Prefecture Component development Operation continues, but may be affected by rolling black-outs Media Tech Subsidiary Chuo, Yamanashi Prefecture Magnet tape for data backup, video for TV broadcasting company Ready to restart production, but may be affected by rolling black-outs TDK Micro Subsidiary Kitaibarai, Ibaraki Prefecture OLED Suspended for damage inspection Source: Company, compiled by Digitimes, March 2011

The massive earthquake in Japan has impacted the supply chain of Blu-ray Disc (BD) players. Blue laser diodes used in BD players' optical pick-up head units (OPU) are mainly produced in Japan. Sony's blue laser diode manufacturing subsidiary in Fukushima, Japan - Sony Shiraishi Semiconductor - has been suspended due to the earthquake. Digitimes Research believes that this could seriously disrupt the supply of BD devices, especially Sony's Playstation 3 (PS3), if the plant suspension prolongs.In addition to Sony Shiraishi Semiconductor, Sony also shut down the operations of Sony Chemical & Information Device's two plants in Miyagi that manufactures DB disc and smart cards; Sony Energy Devices' two plants in Fukushima that manufacture lithium batteries; and a plant in Ibaraki that manufactures DVD and CD discs.Sony Shiraishi Semiconductor's another plant in Miyagi which also makes blue laser diodes has also been suspend from due to facility and equipment damage.Sony's BD OPUs are mainly produced at the company's plants outside Japan. Although they were not affected directly by the earthquake, the shortage of the blue laser diodes is expected to hamper their production.Sony's blue laser diode production mostly caters to the company's own brand devices and Sony sold more than 21 million BD devices in fiscal 2010 with PS3 accounting for 15 million units and BD players and recorders combining for six million units.Blue laser diodes are used to create laser beams for devices to read data on BD discs and the component is also a kind of semiconductor. Sony's semiconductor business include two main subsidiaries - Sony Semiconductor Kyushu and Sony Shiraishi Semiconductor.Sony Semiconductor Kyushu has four plants for producing digital image and sensor components. They are located in Nagasaki, Kumamoto, Kagoshima and Oita, all on Kyushu Island in southwestern Japan, away from earthquake-hit northeastern region. But the blue laser diode maker Sony Shiraishi Semiconductor in Fukushima has been damaged by the quake. Sony may have to find alternative supply of blue laser diodes.In addition to Sony, Japan-based players such as Sharp, Nichia, Rohm and Panasonic are all suppliers of laser diodes with plants in Japan. But their plants are all located away from northeastern Japan. Panasonic's and Rohm's plants are in Okayama; Sharp's plant is in Hiroshima; Nichia's plants are in Kagoshima and Tokushima; and Sanyo's plants are in Tottori. Sony is the only laser diode supplier that has been hit by the earthquake.BD OPUs are usually tailor-designed for specific blue laser diodes, and therefore OPU makers usually depend on a single source of blue laser diode supply. Redesigning blue laser diodes requires more than three months. OPU makers are likely to have difficulties replacing their current laser diodes from Sony.If Sony Shiraishi Semiconductor is unable to resume its operation in the near future, Sony will likely halt its blue laser diode supply to outside clients and reserve its capacity for in-house use. If that happens, its OPU clients will have to be forced to seek help from other suppliers. Sony's laser diode clients have pointed out that almost all outside OPU makers have products that adopt laser diodes from, Sony, which has had advantage in terms of cost and production capacity.But by stopping supplies to outside clients, Sony will risk losing orders from these clients who will need to redesign their existing models or design new models using laser diodes from new sources in order to maintain their shipments. Even if Sony manages to resume all its capacity, these clients will not shift the orders back to Sony due to compatibility issues.Since Sony is also likely to adopt laser diodes or OPUs from outside sources to resolve its component shortage crisis, OPU suppliers including Sharp, Panasonic, Hitachi, Toshiba and Sanyo may all benefit from the orders. Sanyo, which ships most of its OPUs to outside clients, currently has the highest share of the OPU market. But as some of the company's OPU models also use Sony's blue laser diodes, its OPU shipments may also be affected.Game consoles have an average life cycle of over five years, versus BD player's one year. Therefore, a game console's basic structure cannot be changed often, especially crucial components such as BD OPUs and blue laser diodes. As a result, Sony is unlikely to find a replacement OPU for its PS3 console and may have to prioritize its support for the production of the device. As PS3 currently accounts for 70% of Sony's BD products, Sony's blue laser diode supply issue may seriously hamper PS3 shipments. Sony product shipments, FY 2010 (m units) FY2009 FY2010 (estimated in Oct 2010) FY2010 (estimated in Feb 2011) LCD TV 15.6 25 23 Video Camera 5.3 5.3 5.3 DSC 21 23 24 BD Recorder 0.7 1 1 BD Player 3.3 5.5 5 DVD Player 11.5 11 11 PS3 13 15 15 PS2 7.3 6 6 PSP 9.9 8 8 Source: Sony, compiled by Digitimes, March 2011Sony PS3Photo: Digitimes archive