Demand for desktop PC motherboards "is falling off a cliff" in late October as users put off purchases until the Windows Vista OS launches in January, investment banking firm Goldman Sachs said on Saturday.
Motherboard orders for the clone, or white box desktop PC market have slid nearly 20 per cent from its early October peak.
"Motherboard demand weakness is in line with our view that Vista has a negative impact on (fourth quarter) motherboard demand, but it happened earlier and more significantly than we expected," said Henry King, executive director of technology research for Goldman Sachs.
He also blamed a scarcity of low-cost Intel microprocessors and Advanced Micro Devices Inc. AM2 processors for the drop in demand, since it means there are fewer low cost PCs on the market. Demand for low cost PCs remains strong.
Rising user demand for laptop computers is also pushing demand for desktop motherboards down, he said.
As motherboards and other desktop PC components pile up at the end of October and in November, King believes companies will start a price war to clear their inventories.
The laptop PC sector is also facing some trouble. Strong user demand for laptop PCs is causing a shortage of components, King said.
At an investors conference last Friday, Acer executives said they expected to be able to procure only 95 per cent of the components they need to sell laptops in the fourth quarter, which is the peak season due to year-end holidays.
"Since the second half of August, we've seen demand rush in. We can't fill all our laptop orders," said Gianfranco Lanci, president of Acer, at the conference. The world's fourth largest PC vendor expects a short supply of laptop batteries as well as microprocessors.
A massive recall of laptop batteries by major PC vendors such as Dell and Apple has caused a shortage of batteries because it comes at the time of peak laptop demand for the year.