Micro-Star International and other motherboard manufacturers are branching into the portable computer market for higher margins. They have no choice but to do so, but could find a bumpy road ahead, analysts said yesterday.

"The motherboard business is already a mature industry, and the gross margin could be as low as 7 percent for manufacturers," said Chou Chin-chung , an analyst at Grand Cathay Securities Co

"Since the space for growth is limited, after grabbing global market share of between 80 and 90 percent, local motherboard makers will have no choice but to diversify their product lineup," Chou added.

Micro-Star is scheduled to roll out its first own-brand notebook, named the "MEGABook," later this month, and will launch 10 laptop models this year.

The company has set a goal of shipping 350,000 laptops, with own-brand and original equipment manufacturing (OEM) models each making up half, said Cheng Hui-cheng, a marketing project manager at Micro-Star.

"We have formed our own research and development team to develop our laptop business," Cheng added. He declined to name the companies outsourcing partners and OEM clients.

Rival Gigabyte Technology  relaunched laptops under its own name last year, after its withdrawal from the market in 2001.

"But Micro-Star and Gigabyte face a tough road ahead to tap the crowded notebook market with their namebrand products," Chou said.

Taiwanese manufacturers are expected to contribute 29 million units this year, accounting for over 60 percent of global shipments of up to 46 million units, according to figures by a Taipei-based research house, Topology Research Institute..

Four million to 5 million of the shipments were namebrand products, Topology said.

"It is already late to enter the competitive and mature notebook market," said Joseph Lee, a researcher at Topology.

"The prospect of the companies does not appear too bright, as people's identification with and confidence in notebooks bearing the companies' names may not be high," Lee added.

For example, Asustek Computer Inc , the world's largest motherboard maker, spent over 10 years in the laptop market to successfully build up its namebrand business.

The entry of Micro-Star and Gigabyte into the laptop market may also tighten the market's already harsh price competition, Lee said.

The companies could target markets in second or third tier cities in China or clone markets in Europe and the US.

They may start with the European clone markets through channels it has established through its motherboard business, Chou said