On October 2, ABN AMRO Bank (Hong Kong) noted that Hewlett-Packard’s (HP) decision to discontinue its self-branded CD-RW drive product line would indirectly hurt chipset supplier MediaTek, which is already heading into its slow season. Furthermore, Foxconn Electronics (the registered trade name of Hon Hai Precision Industry) may still sell its shareholding in MediaTek, a combination of factors that is placing pressure on the short-term price of its stock.
However, ABN AMRO has confidence in the long-term success of MediaTek – the company reported a record high of NT$1.5 billion in September – and is recommending that investors take advantage of its low stock price and buy in now.
HP has decided to pull out of the self-branded CD-RW drive market at the end of 2001 so that it can concentrate on the development of DVD-RW drives. It currently commands a 35% share of the global market for CD-RW drives, many of which are produced by OEMs Sony, Samsung, Lite-On IT and Behavior Tech Computer (BTC). Even though HP will continue to sell CD-RW drives with its PCs, the decrease of orders to Lite-On IT and BTC will affect upstream chipset supplier MediaTek, which will not offer DVD-RW chipset solutions any time before the first half of 2002.