A forecast says the PC motherboard market will post a sharp contraction this year as a surge in demand for artificial intelligence (AI) concentrates semiconductor supply in the corporate market. The analysis says demand for PC upgrades is slowing rapidly as memory, CPU and storage prices rise.

Taiwan's DigiTimes, cited by online outlet GigaZine on May 11, said major motherboard makers have lowered their sales targets across the board this year. Based on industry forecasts, motherboard sales by the top four companies are expected to fall about 28% from a year earlier.

A key factor is a surge in demand for semiconductors for AI servers. With supply concentrated in AI data centres and the server market, the supply of consumer PC parts has relatively shrunk, driving up prices for memory, storage and CPUs. As a result, consumers are delaying new PC purchases and upgrades and using existing devices longer.

Company-by-company forecasts are also weak. ASUS sold about 15 million motherboards last year, but shipments in the first half of this year are said to have stayed at about 5 million units. The industry expects it will be difficult to sell even 10 million units by year-end, which would mean sales fall about 33% from a year earlier.

Gigabyte and MSI also sold 11.5 million and 11 million units, respectively, last year, but are said to have lowered their internal sales targets this year to about 9 million and 8.4 million. The declines are about 22% and 24%, respectively.

ASRock's situation is more serious. ASRock's shipments are expected to drop to about 2.7 million units this year from 4.3 million last year, a decline of about 37%.

The industry views the slump as closer to a structural weakening in demand than a simple seasonal adjustment. DigiTimes assessed the current situation as "more serious than during the global financial crisis or the early stage of the COVID-19 pandemic."

The slowdown in PC upgrade demand reflects both component prices and changes in replacement cycles. As prices keep rising due to shortages in memory and CPU supply, a slower replacement cycle for Nvidia GPUs has also weakened consumers' incentive to upgrade. With global inflation adding to the pressures, the analysis says consumers are choosing to extend the life of existing devices rather than build expensive new PCs.

Some assessments also say the slump in the consumer components market does not necessarily translate directly into a deterioration in overall corporate performance. That is because major manufacturers are expanding the share of production devoted to AI server products.

ASUS' server business revenue is said to have grown more than 100% last year from a year earlier. Server revenue in the first quarter this year is also forecast to rise to nearly double from the previous quarter. That suggests a structure is forming in which demand for AI infrastructure partly offsets the slowdown in the consumer PC components market.

The industry is also watching the possibility that this trend may not be limited to the PC market. If constraints on memory and high-performance semiconductor supply persist, prices and shipments of smartphones and other electronic devices could also be affected, a forecast said.

An analysis says the PC components market is likely to remain in a contraction phase this year as a semiconductor supply structure reshaped around AI servers, higher component prices and longer replacement cycles interact at the same time.