The PC Motherboard Industry: manufacturing musical chairs

The increasing concentration of market share among the top suppliers of motherboards, combined with their intensifying efforts to boost sales, may set the stage for a competitive bloodbath this year, iSuppli Corp. believes.

The motherboard market's five tier-one companies-Asus, Hon Hai (Foxconn) ECS, MSI and Gigabyte-together accounted for 72 percent of all units shipped in 2003.

However, the top-five motherboard makers are not satisfied with controlling nearly three-quarters of the market and now are planning to increase their share even more. iSuppli's analysis of the planned production of the top-five suppliers indicates that they have all boosted their manufacturing capacity.

Using number-one ranked Asus as an example, the company is quoting a unit shipment target for 2003 of 40 million units, a rise of 35.6 percent compared to its 2003 shipments. All the other tier-one vendors are presenting similar growth target numbers.

If we multiply their combined unit shipments by this number, a total of 130 million units is the result. iSuppli is predicting worldwide motherboard shipments in 2004 will amount to 148.5 million. Thus, the top motherboard makers are hoping to claim 87.5 percent of all sales in 2004.

To achieve this number the top five will need to conduct all manufacturing for most of the tier-two and tier-three motherboard vendors, plus a significant portion of the production for Original Design Manufacturers (ODMs). iSuppli believes this market penetration is not achievable except at the cost of a severe ASP decline.

Table: Top 5 Motherboard Manufacturing Ranking for 2003 (Ranking in Thousands of Units)
Rank	Company	2003 Ship	2002 Ship	2003 Grow	2003 Share	Cumulative Share
1	Asus	29,500	16,865	74.9%	22.3%	22.3%
2	Hon Hai (Foxconn)	18,500	13,000	42.3%	14.0%	36.3%
3	ECS	18,360	17,835	2.9%	13.9%	50.2%
4	MSI	15,014	12,560	19.5%	11.3%	61.5%
5	Gigabyte	13,775	11,815	16.6%	10.4%	71.9%
	Total Market Shipments	132,300	119,386	10.8%
Source: iSuppli Corp. July 2004

Despite expected market growth in 2004 of 12.3 percent from 132.3 million units in 2003, the reality is that most if not all the top-tier motherboard makers simply won't achieve their growth targets for this year, and those that grow will mainly do so at the expense of other tier-one players, iSuppli believes.