Abstract

Kontron Gains Strength through M&A Activities

Kontron has grown by acquiring other IPC makers that have significant growth potential or that have a strong customer portfolio in a particular regional market. The acquisition of leading industrial and embedded computer manufacturers has also helped Kontron to build up its technology capabilities and develop new customers, thereby speeding up Kontron Group's expansion in the IPC market.

Advantech Relies on Formation of JVs for Revenue Growth

Advantech has chosen to adopt a business model consisting of own-brand operation and ODM services; ODM's share of total revenue has gradually increased in the last few years. Advantech has a comprehensive product line and high production capacity. To maintain its growth trajectory, the company has overhauled its marketing model, focusing on the development of large customers as a driver of growth. At the same time, Advantech sets minimum acceptable profit margins even for the largest orders, to ensure that the company's earnings performance does not deteriorate.

Whereas Kontron has relied mainly on acquisitions to expand operations, Advantech has focused more on the creation of independent profit centers and on the formation of joint ventures with other companies. Individual divisions within the Advantech Group operate independently, while still being able to create synergy through the sharing of resources.

ICP Electronics Spins off Own-brand and ODM Businesses

In the past, ICP Electronics combined branded manufacturing with ODM in a business model similar to that used by Advantech. However, in 2004 the company decided to separate these two activities owning to the concern of its outsourcing clients and resources allocation. IEI Technology is given responsibility for branded manufacturing, while ICP Electronics focuses on developing large-volume contract manufacturing business.

ICP Electronics has positioned itself as an EMS provider, anticipating that this re-positioning will help to drive growth for the IEI Group as a whole.

Exploring Niche Market

While the three IPC makers profiled above have all adopted business models that are based on careful analysis of their own strategic requirements, Taiwan's small and medium-sized IPC makers have continued to focus on their original core competencies.

ADLINK and Portwell have focused on the development of communications products; both have been working actively to develop products conforming to the new AdvancedTCA standard. ADLINK is also the only Taiwanese company to have developed testing devices for semiconductor equipment. Flytech produces mainly POS and kiosk products; iBase has focused on motherboard cards, while Lanner has made network security and KVM products its niche.

As more and more new entrants are attracted to the IPC market by the high profit margins that can be achieved there, competition is becoming more intense. To maintain sales growth and profitability, existing IPC makers have been repositioning and restructuring themselves, a trend that will have a significant impact not only on the existing player but also on companies considering expanding into the IPC sector and on PC makers in general.

Appendix

List of Companies