As suppliers of passive components are mulling further price hikes in July amid the sustained supply shortfalls seen through the end of 2018 at least, Taiwan notebook ODMs including Compal Electronics are moving to strongly ask customers to absorb part of the increased costs or face shipment disruption starting in the third quarter of the year, according to Compal president Ray Chen.

Notebook ODMs have seen gross margins fall to only 3-4%, showing little space for absorbing further hikes on the costs of passive components. If customers decline to absorb the increased costs, he stressed, Compal will have no other choice but to suspend shipments to them in the coming quarter, a high season for shipments of electronics devices.

Chen said that Compal and its affiliated enterprises will team up to boost bargaining chips and sign long-term supply contracts with component makers to secure sufficient supplies at better prices and cushion the impact of component quote hikes on lower-price communication network products rolled out by the firm's affiliates.

Industry sources said that Taiwan notebook ODMs see little problem receiving orders from customers, but the shortages of passive components such as MLCCs and resistor chips have been a thorny issue. The ODMs were forced to expand their inventories of the components starting in the second half of 2017, but the inventories are running out, prompting them to persuade customers to share the ever-higher component costs to maintain viable production.

The sources said downstream customers seem more willing to accept the request by ODMs than before, as the ongoing supply shortfalls are seen in many passive components and terminal customers do not like to see their shipments disrupted in high seasons.