A Sigh of Relief, Vista NB Coming on Strong
After the official launch of the Windows Vista home edition in January, it played a crucial role to the NB demand growth. Consumer NBs were the main driving force in fueling the Vista adoption rate and overall NB growth in 1Q07. According to the roadmap of vendors, a more notable amount of NBs will be installed with Vista after 3Q07. By then, the Vista adoption rate in consumer NBs is projected to surpass 80%, a better-than-expected figure than previously forecast during early 2007.
In 2007, total NB shipments are expected to grow by 25%, underpinned by Windows Vista, and the growing replacement effect of NBs over DTs. In the forthcoming quarters, NB shipments are expected to grow by each quarter, which should be more evident in consumer NBs than in corporate NBs. Amid continuing global economic growth and flat demand for other IT products (excluding exceptions as Wii), NBs are becoming a more eye-catching product to consumers. Helped by the other two contributing factors, growth in the NB industry in 2007 will be very promising.
Obstacles Removed
In early 2007, high DRAM price was still a "probable obstacle" to Vista, which requires 1 GB of DRAM to perform smoothly, since the cost of the 512MB DDR2 module alone already represents 10% of the NB cost. Recently, in the wake of the plunging DRAM prices in March and April, the DDR2 512MB module average contract price for 1H of May has fallen to roughly USD 18.5, while the DDR2 1GB has declined to around USD38. This is in stark contrast to 4Q06 and Jan07, when DDR2 1GB module price was still approximately USD 100.
Nevertheless, the current DRAM pricing levels can be considered very "Vista Friendly". The low DRAM prices have been a big boost to the DRAM content per box level. It is said that OEMs and DRAM makers striking long term or special deals. For 2Q07, OEM makers are expected to acquire a substantial amount of low-priced DRAM, which will pave the way for a higher Vista penetration rate. Before DRAM prices rally sharply again, we should see the adoption rate of 2GB modules to grow. However, consumer preference will remain as the key deciding factor.
LCD Panel Facing Tight Supply
As for other NB components, supply has been relatively sufficient in 1Q07. Based on the current situation, it is unlikely to see any serious supply shortage for 2007. The only probable exception would be LCD panels, due to limited capacity expansions of this year, especially in the IT panel sector. With LCD panel prices already on the rise, some OEMs have begun to stock up on inventory. Although panel makers are set to further raise their production utilization rates, the increased supply may still not be enough in accommodating the future demand. Both OEMs and ODMs are expecting the panel supply to be tight at least before 3Q07.
