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Wednesday, October 18, 2006, 09:35 am PT (12:35 pm ET)

Apple MacBook makers lead ODM chip spending in 2006

Apple Computer MacBook makers Quanta Computer and Asustek Computer are expected to be the leading buyers of semiconductors among all Original Design Manufacturers (ODMs) in 2006, according to iSuppli.

Semiconductor spending by Taiwan-based Quanta, which manufacturers Apple's MacBook Pro notebooks, will rise to $5.2 billion in 2006, up 17.9 percent from $4.4 billion in 2005.

At the same time, 13-inch Apple MacBook maker Asustek, also of Taiwan, will buy $4.7 billion worth of semiconductors, up 20.1 percent from $3.9 billion in 2005, solidifying its hold on second place.

"Most of Quanta’s chip purchasing is for making computer products, mainly notebook PCs," said analyst Min-Sun Moon, who covers OEM semiconductor spending and design influence for iSuppli. "Because of this, PC-oriented chips like microprocessors, logic Application-Specific Standard Products (ASSPs) and DRAMs are the major types of semiconductors that Quanta is expected to buy in 2006."

Asustek also relies heavily on the PC market, with 75 percent of its total ODM semiconductor spending in 2006 expected to be dedicated to computing-related chips, Moon noted.

With its notebook orders exceeding 300,000 units some months, Apple recently inked a deal with Foxconn, its infamous iPod nano maker, to assume the role of a third notebook manufacturer. Though there is still a bit of uncertainty, it's believed Foxconn will be responsible for assembling the company's still-unannounced line of Core 2 Duo-based 15-inch MacBook Pro notebooks.

Meanwhile, Moon also noted that Inventec Appliances will see its semiconductor spending soar to $1.8 billion in 2006, up 49 percent from $1.2 billion in 2005, mainly due to big orders from Apple for its video-enabled iPod models.

However, the analyst noted that Inventec's rise in spending still represents a slowdown for Inventec from 2005, when the company led ODM chip spending growth. He corroborates an earlier Morgan Stanley report in attributing the deceleration to Apple adding new ODM and Electronics Manufacturing Services (EMS) providers (Quanta) to its iPod contract-manufacturing roster.

"The slowdown for Inventec is expected to continue in 2007," he said.