Reports published in Taiwan’s business-facing journals don’t paint a rosy picture of the PC industry. Today the China Times reported that PC-making OEMs like Acer, Asus, and MSI are seeing their inventories “burst” with stock, which has been kept back due to retail channels not being able to clear products. Similar problems face the ODMs who make PCs and laptops for the likes of HP, Dell, Apple, et al.
Two of the worst affected companies with inventory overload are Asus and Quanta. Asus looks like it is in particularly bad shape among the OEMs, with the equivalent of $6.8bn worth of inventory going nowhere. This represents a near 60% increase over its inventory levels at the same time last year. Only Quanta has greater inventory, worth approx $8.4bn, which is nearly a 55% increase over last year.
PC inventories explode, media report.Acer NT$63.44 billionAsustek NT$206.19 billionMSI NT$38.45 blnCompal NT$148.46 blnInventec NT$76.05 blnQuanta NT$254.33 blnWistron NT$186.74 blnTotal NT$973.66 billion (US$32.30 billion)Chart: Company - Q2 Inventory - YoY % rise pic.twitter.com/z7f1EEj891August 23, 2022
Interestingly, the China Times report, highlighted by analyst Dan Nystedt, has some deeper insider info about the makeup of Asus inventory and the company’s perspective on the situation. Apparently, about half of Asus inventory is finished products, and the other half is components and ICs.
Some Asus products and components will reportedly have to be sold in the coming quarter(s), or they will be out of date and lose a lot of value. However, Asus estimates it can use about 80-90% of its inventory ICs and components to make next-gen products and PCs. Nevertheless, Asus has set a target to clear a quarter of its existing inventory by the end of the year.
Aggressive inventory clearance targets, like the one set by Asus, could be good for end-users looking to snap up a bargain. The China Times sources reckon most PC brands will “aggressively push finished products to the channel through discounts and promotions.” As a result, PC and components makers will simply have to sacrifice some profits to see retail stocks and warehouse inventories clear. How the companies achieve this could make quite some difference to their Q3 and Q4 2022 financials.
Of course, the above inventory issues are being experienced as recession fears heighten. At the height of the pandemic, consumers and companies couldn’t get enough PCs for entertainment and WFH, and we saw some components in extremely short supply – made much worse by the crypto boom in the case of GPUs. However, the demand curve seems to have snapped back very rapidly, with crypto crashing, the energy crunch, and the war in Ukraine (though these three effects might be closely connected).