Most Taiwan-based IC design houses should see January 2011 revenues rise 10% to more than 20% sequentially thanks to strong demand from China. Most market watchers previously predicted consumer electronics and handsets to be the main sales driver in China prior to the Lunar New Year, however, thus far in 2011, demand for notebooks and desktops has been surprisingly strong.

Sources from IC design houses indicated that the global PC market is showing signs of life in the first quarter of 2011, which could be credited to both Intel and AMD introducing new processor platforms and the supply chain's successful inventory digestion since the third quarter of 2010.

In addition, with the economy continuing to recover, companies are increasing capex to upgrade computer equipment, which in turn has stimulated chipset orders from the enterprise segment, the sources said.

With new CPU platforms hitting the market and the popularity of tablet PCs, chipset demand in China prior to the Lunar New Year has heated up. First-tier design houses such as MediaTek, Richtek Technology and MStar Semiconductor are seeing more procurement efforts from clients.

Despite the first quarter being the annual low season, the design houses are now expecting higher-than-expected sales for the period since the companies believe any seasonal impact took place earlier than usual in the fourth quarter of 2010.

Notebook and desktop component makers pointed out that the rise in orders could be a big challenge with the severity of the current labor shortages in China, which could further exacerbate in February. Vendors such as Asustek, Acer, Dell and HP have upped procurement for January and requested suppliers raise inventories for future orders.

Component makers, however, have yet to commit to building inventory as they have learned their lesson from recent years and need to ensure that demand will last. Moreover, with upstream material costs on the rise, the makers remain cautious about inventory management.