Taiwan - Strong global demand worldwide for the hottest tech products has squeezed supply in some areas, with Taiwan manufacturers expanding rapidly to meet demand. On other fronts, Taiwanese manufacturers are reporting a return in supply of key components that allows them to boost output and cut costs.

The Taiwan External Trade Development Council (TAITRA) reports that supply problems in computer components may lead to price increases. A recovering U.S. economy and booming Chinese market are causing shortages among key components.

Most notable among those facing tight supply is the TFT-LCD industry, which is still adding capacity and expects to see more volume brought to the market in next half of the year.

Taiwan’s biggest names such as BenQ and Sampo are focusing heavily on flat-screen TVs and monitors, with prices and quality having tipped in favor of consumers there’s a lot to suggest that this will be a bumper year for those products. But the sticking point could be supply of LCD panels and related components which appears to be insufficient now and will likely lead to an increase in component prices toward the end of the year.

Taiwanese LCD monitor volume shipment grew 72 percent last year according to Taiwan’s Market Intelligence Center (MIC).

Whether that leads to an increase in retail price will depend on individual company strategies. Already, some Taiwanese manufacturers have committed to keeping prices down despite increased costs, and instead accepting smaller margins. Yet other companies are likely to have to pass on those costs to consumers.

In other product lines, manufacturers are reporting a return in supply of flash chips and wireless LAN chipsets, both of which were in severe shortage in the second half of last year.

Taiwan’s IT industry which dominates the manufacture of thumbdrives, MP3 players and digital cameras say that flash chip supply has returned, with the end result being significantly reduced retail prices worldwide.

Taipei’s Transcend Information, which makes thumbdrives is among those that says it has no problem procuring enough flash chips to meet its needs, with the industry now facing oversupply and flash prices falling.

Another of the hot product lines dominated by the Taiwanese is wireless local area networking (WLAN). Six to eight months ago, equipment maker Z-Com lost out on significant sales of its modules and finished products because it couldn’t secure enough 802.11g chipsets, according to Z-Com officials.

Today, however, increased production of these next-generation 802.11g chipsets has driven its price down to as much as 15 percent cheaper than earlier-generation 802.11b, and manufacturers reported no problem in securing components.

By the first quarter of this year, that turnaround had already started to present itself, with total volume shipment of WLAN network interface cards (NICs) growing 126 percent year on year, and volume shipment of WLAN access points (AP) growing 114 percent, according to MIC.

Looking toward the end of this year, 802.11g standard is expected to dominate new WLAN shipments, with falling costs set to boost overall WLAN penetration both in the corporate and consumer spheres.