Quanta Computer is chatting with its biggest customer HP about walking away from some of its lower margin orders.

According to Digitimes, Quanta is worried that it is spending all its time and money on low margin hardware making. It wants to abandon some notebook orders with low-gross margins to keep its profitability. This could mean pulling the plug on 3-5 million units of Quanta's shipments in 2011. Of course Quanta are not commenting and probably wouldn't anyway. It is not clear what Digitime's sources for this are.

However it could have some truth in it. The rising Taiwanese dollar and increased labour costs in China, and tough competition are making for a rough time for Quanta. HP usually asks for lower quotes than most of other brand vendors, several of HP's partners, in addition to Quanta, have decided to negotiate to raise quotes.

Quanta wanted to ship 60 million notebooks in 2011, but the new strategy may cause the company to fail to achieve the goal. However it will see gross margins increase for the year, if Digitimes is right.