In the investor conference to discuss the earnings of the third quarter, Asus CEO Jerry Shen brought up two issues that will have a bearing on the company’s business prospects through 2019. The first has to do with the short supply of low-end Intel CPUs, a problem that may not be resolved before the third quarter in 2019. The other is the impact of the US-China trade war situation on Asus in the coming quarter and the following year, as the company has two manufacturing facilities in Mainland China. Both issues are crucial, calling for immediate policy decisions. Acer Inc., the other Taiwanese manufacturer, will be facing the same problems, as they too depend on Intel chips, and have opened a manufacturing plant in China recently.
The shortage of entry-level chips was caused by Intel’s decision to give priority to Xeon and Core processors for high-end computing, as the demand from that segment was very high. This led to the current shortage of entry-level CPUs. Nevertheless, Intel has decided to allocate $1 billion to boost production in its plants in the US, Ireland and Israel. The problem is that it will take months for these facilities to send out processors to market. Asus assesses that it will be the second or third quarter of 2019 when there will be enough availability. The shortage is mainly felt in the desktop CPU sector; laptop chips are still available. Answering a question, Shen said that Asus will be using more AMD processors for markets where AMD has a good customer base.
The trade conflicts between the US and China is another problem the company must tackle. Apart from short-term issues like currency fluctuation and market risks, Asus, like many other manufacturers, will have to think about moving their production plant from mainland China to escape the direct effects of the trade conflict. Asus is considering locations like Taiwan, Vietnam and some other countries in Southeast Asia. The other option before the company is to stay put in China and mark up pricing to reflect cost in western markets. It is too early to say how thing will shape up.
William has an experience of more than seven years writing for the web. In the recent couple of years, he’s been focusing on the business sector, watching market trends and the growth of economies. At News IMN, we use his services to keep our readers updated about the market that decides their lives.