Source: Company data, IDC, Credit Suisse estimates ODM builds likely peaked in 3Q, despite Chromebook demand remains healthy. The Global PC market continues to show more resilient momentum YTD with total volumes growing 7.8% YoY in 1Q-3Q20 supported by increasing NB (22% YoY) and consumer (17% YoY) demand amid COVID-19, offset by weaker DT (-19% YoY) and enterprise (+1% YoY). Consistently, Taiwan top ODMs’ NB builds also grew 19% YoY YTD, driven especially by Quanta’s outperformance (+58% YoY) given its unique position in Chromebook, for which market could see further demand spill-over into 2021. We believe Quanta is the only ODM that could deliver near flattish volume change QoQ on better Chromebook demand, if component supply improves, while other ODMs’ builds should have likely peaked in 3Q. Comparatively, Asia PC brands’ sales should sustain into 4Q on seasonality and channel inventory refill, but we would highlight that Lenovo’s YTD shipment is behind the industry, likely due to NB share loss.

Consumer outlook supported by roll-out of new platforms. AMD and Intel have already launched their latest CPU for DT and/or NB in the past few months, while NVIDIA also unveiled the new RTX line-up in Sep. In addition, AMD’s new Radeon GPU is also set for 28-Oct release based on cross-generation 7nm technology. Thus, we expect consumer demand including NB, Motherboard, and Graphic Cards to further sustain, as new hardware solutions based on the latest platforms by major chip vendors begin mass roll-out from 4Q20. We believe this should also support better DIY and gaming in the near term. However, key components’ tightness will remain a headwind into year-end.

Stock picks: Quanta remains top pick for ODMs; Gigabyte preferred play for brands. We continue to like Quanta, as we expect it to see the best computing momentum uptick amid COVID-19 given its exposure in Chromebook and MacBook. Incrementally, Quanta is also a leading server ODM with the best positioning for long-term data workflow shift to the cloud and whitebox proliferation, aside from Wiwynn which has the best leverage with pure exposure to cloud. For other brands, we prefer Gigabyte on better gaming and DIY demand from the new CPU/GPU roll-out, while the long-term story on the server business ramp for tier-2/3 CSP and telcos also remains intact. We keep all other names at NEUTRAL.