Asus to outsource notebook production in Q4 2008

During an August 6 investors conference, Asustek president Jerry Shen explained the weaker-than-expected second-quarter sales to a decline in notebook shipments. The earthquake and weak stock market in China led to a sharp erosion of consumption in the second quarter. Consumption in Europe was also low due to the ongoing weak economy, he said.

Demand for notebooks in China and Europe has resumed in July and August with monthly shipments to each region posting sequential growth from July, Shen said. He anticipated that sales should grow progressively onward. Commenting on notebook sales trends in the US, Shen said growth is still anticipated due to promotions with retailer Best Buy and growing adoption of Eee PCs.

Asustek guided notebook and Eee PC shipments to be 1.5-1.8 million units each in the third quarter, up from 1.2 million and one million units in the second quarter. Despite that shipments growth is anticipated, Shen said it will be hard to achieve the planned annual notebook shipments of 6.6 million units, but he noted that shipments of more than six million units could be possible.

Responding to industry concerns about ongoing Eee PC sales now that they face severe competition from rivals, Shen said he is confident that shipments will surpass five million units in 2008 thanks to joint promotions among distributors and telecom service carriers in Europe and Japan.

In order to further reduce costs, Shen also updated that about 30% of notebooks and Eee PCs will be produced by subcontractors in the second quarter of 2009, but declined to name specific OEM partners. He added that Asustek will partner with ODM/OEM players during the initial stages, but partnerships with EMS players are also possible.