Notebook brand vendors have recently started the request-for-quotation (RFQ) process for 2014 orders. But because of the notebook industry's weak shipments and Lenovo increasing in-house production, competition between ODMs are expected to be fierce. Upstream suppliers may also see gross margins fall, according to sources from the upstream supply chain.

　　Wistron, which has lost some of the orders from Lenovo after the client shifted them to a joint venture it set up with Compal Electronics, has been aggressively competing for orders trying to make up for the loss, the sources said. Wistron's aggressiveness could result in fierce price competition between ODMs, the sources added.

　　Most notebook players were originally optimistic about the second half, expecting an overall shipment growth of 50% compared to the first. But after Computex 2013, some players have turned conservative and expect only a less than 20% growth for the second half and an on-year drop between 6-10% for the whole year 2013.

　　ODMs mostly still see their gross margins stay between 3-5%. In the first quarter, Quanta had a gross margin of about 4.05% and Compal 3.93%. Wistron had 5.09% and Inventec 4.91%, higher than the top-2 notebook makers due to contribution from their non-notebook businesses.

　　To shore up their gross margins, ODMs have been aggressively diversifying their businesses, with server manufacturing being one of their major focuses. Quanta and Wistron are targeting server orders mainly from large Internet players such as Google and Facebook, while Compal and Inventec are eyeing orders from server brand vendors. Wistron is also working on IT recycling and after-sales services.