DEVELOPING WORLD PROMISES BIG COMPUTER SALES

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If you're a supplier of plastic parts for the telecommunications, computer and business equipment industries, the good news is that 1997 promises strong sales. The bad news is that a good percentage of those sales will be to developing countries.

The result for suppliers is that major original equipment manufacturers will continue to squeeze processors to lower costs while providing more value-added services. Sales growth in personal computers slowed in 1996. During the last week of October, both Compaq Computer Corp. in Houston and Dell Computer Corp. in Austin, Texas, announced price cuts. Dell also introduced products to attract entry-level buyers.

Cost-cutting should help boost corporate sales, but analysts said the first wave of computer-buying for the in-home market has slowed significantly. As a result, computer makers plan to target existing computer owners who want to upgrade in 1997, said Martin Reynolds, vice president of technology assessment for Dataquest Inc. in San Jose, Calif.

Reynolds forecast just under an 18 percent growth rate worldwide in 1997, with most of that coming from Japan, which is growing at a 34 percent annual rate, and Asia-Pacific and Latin America, each with a 24 percent annual growth rate.

``We'll see the beginning of a shift away from the big growth of [PC sales] in the United States to countries that are just beginning to computerize,'' Reynolds said.

``We do see an opportunity for a shift away from the big manufacturers, particularly in developing countries,'' Reynolds added. ``The issue is getting a computer of any kind, which means the name brands will still do well in developing and emerging econ-omies, but people will buy their first computer from a no-name clone. As they develop, they'll buy a brand the second time.''

Some computer makers are still after first-time buyers with inexpensive models. Monorail Inc. of Atlanta recently unveiled a computer for under $1,000. And Tai-wanese computer giant Acer Inc. plans to become a leading provider of ``intelligent consumer products,'' such as its new Basic machine, which operates through a TV and costs $499. The continued price reductions do not worry Reynolds.

``Prices don't really drop. You just get more goodies for the dollar. A price decrease is simply a price increase that failed,'' he said.

New machines and new pricing could help revive Apple Com-puter Inc., whose market share continued to slide in 1996.

``Apple won't have quite as strong a year as other makers, but it will pick up in 1997 compared to this year as people replace their old Apples with new,'' Reynolds said.

Custom molder Trend Plastics Inc. in San Jose, Calif., is a primary contract manufacturer for Apple. Sales manager Joe Parlett said that even with the downturn at Apple, ``we still grew by 12-13 percent, and have plans for some major expansions next year.''

Some OEMs are moving manufacturing to Latin America and China. Acer plans to build a plant in Mexico through its Acer Com-putec Latinoamerica division, to make parts and subassemblies for the North American market.

One custom molder said Com-paq is taking most of the molding of computer parts offshore, primarily to China. ``About the only stuff that's left [in the U.S.] is the server equipment,'' said the molder, who did not wish to be identified. ``All of Compaq's suppliers have lost a ton of work.''

Some in the industry are optimistic about 1997. Joe Caretti, vice president of Ideal Tool Co. in Meadville, Pa., said his custo-mers in the computer industry did not have a good 1996, but 1997 promises to be much better.

``Quoting [for new molds] in 1996 was slow, but my customers are increasing their product lines and buying new tooling, which obviously means new products, and expanding their markets,'' Caretti said.

Molders for computer peripherals and business equipment said those products are nearly as price-sensitive as computers.

``Price compression in the printer industry will continue,'' said Tim Reis, national sales manager for GW Plastics Inc. in Bethel, Vt., ``and all that consumer price bickering puts the pressure on molders.''

Overall, the business equipment industry is shaping up well for 1997. John Henry of Peripheral Insights, an analyst in Nashua, N.H., said scanners show about a 25 percent compounded annual growth rate in North American shipments over 1995, 1996 and 1997, with expected shipments of 2.2 million units this year. He forecasts about 14.5 million printers of all types will be shipped in 1997 to supply North America.

``Mexico and Central America are emerging opportunities again,'' he said. ``There's more stability in the political situation and the currency, and we have the population to support strong sales that will allow companies to grow their markets outside North America.''

Tom Podesta, sales manager for Tech Group Scottsdale in Scottsdale, Ariz., sees moderate growth in the computer and business equipment markets.

``There's lots of new products coming, but most have short life cycles, so it's tough to tell about growth,'' Podesta said.

Price wars in telecommunications continue to batter both OEMs and their suppliers. Mo-torola Inc. blamed price wars in several of its markets, including cellular phones and pagers, for its drop in 1996 sales, as Finnish-based Nokia Oy put on a full-court press for cell-phone market share. Nokia posted a 39 percent jump in third-quarter sales, to $2.1 billion.

However, wireless communications have the potential for explosive growth as new digital technologies come on line, and developing nations provide a huge market for OEMs. David Kerr, an analyst at Strategy Analytics in Morristown, N.J., said that globally, the ``strongest growth is definitely outside the United States.''

Kerr added: ``Price pressures on [cell-phone] handsets are intense and will get worse, but they're the 100-ton gorilla, and everyone wants a piece of that.''