Notebook manufacturers, distributors and component suppliers in the US and Asia are reporting weak demand and order cancellations. Meanwhile, analysts said, the continued financial turmoil is pushing those who are buying towards low-end notebooks and netbooks, which will ultimately impact chipmakers' margins.
'Clearly the economic slowdown is spreading to notebooks and we're seeing it in two ways,' said Ms JoAnne Feeney, a senior chip analyst with FTN Midwest Securities. 'One is in lower unit shipments, but also a mixed shift to cheaper units. And that's going to filter down through the semiconductor world.'
Notebook sales have become more critical to the health of chipmakers, as they make up a larger and larger portion of PC sales every year.
Ms Feeney now expects fourth-quarter shipments of semiconductors for notebooks to fall 5 per cent to 10 per cent from the previous quarter, compared with a previous forecast for an increase of 10 per cent to 15 per cent.
She expects Intel, the world's biggest chipmaker, to cut prices to compete with rival Advanced Micro Devices Inc as demand shifts to lower-cost notebooks.
Mr Robert W. Baird, senior analyst w fromTristan Gerra cut his 2008 earnings forecast for Intel to US$1.08 a share from US$1.10 and lowered his 2009 outlook to 56 cents from 85 cents, citing weakness in notebooks. The average analyst estimate for 2008 is US$1.11 and for 2009 is 86 cents, according to Reuters Estimates.
'Our checks indicate notebook demand trends have further deteriorated since Intel reduced its 4Q guidance,' Mr Gerra wrote in a research note.
He said consumer demand appears to be the main weak spot.
ThinkEquity analyst Vijay Rakesh said checks with Taiwanese notebook manufacturers point to a 20 per cent to 25 per cent fourth-quarter sequential decline in notebook shipments.
He also sees more and more customers flocking to sub-$300 netbooks. He calls netbooks a 'big double-whammy. They're lower margin, it's like Frankenstein. You created it, you hate it but you cannot kill it because that's what selling.' -- REUTERS