The below is a compilation of recent news covering competitive issues at the system assembly and channel levels of the chain, as well as events taking place in component arena, from software and chips to notebook batteries and hard drives.

Systems

Lenovo-IBM Deal Gets the OK

After being waylaid due to national security concerns raised by Republicans in Congress, Cfius (The Committee on Foreign Investment in the United States) cleared the sale of IBM's PC unit to Lenovo in early March. The primary point of concern was IBM's Raleigh facility, where IBM undertakes activities such as sales, marketing, and server development. Some believed Lenovo's Chinese employees would have access to the sensitive information of IBM's broad government customer base, yet concerns were apparently assuaged following plans to move Lenovo's operations and some 1,900 employees to a separate, three-building complex. The corporate headquarters with a staff of roughly 100 is also to be moved from New York to Beijing. Official conditions for the clearance, however, remain confidential.  

Yang Yuanqing, chief executive of Lenovo, emphasized that the move was primarily in the interest of management convenience, rather than a concession to win Cfius approval. Yang further stated that in the future Lenovo will continue to have the right to sell to any US government agency that holds open tenders. Separately, Lenovo announced that the company will begin selling its consumer products via IBM's previously corporate-centric worldwide sales network by the end of 2005.

IBM: Aggressive Pricing in SME Server Market

In an effort to be more price competitive with Dell and HP, in April IBM will formally launch its SystemSeller program, offering IBM channel partners lower-priced, preconfigured server and storage offerings to serve the more price-sensitive mid-range market. IBM plans to monitor competitor prices on a weekly basis, as well as implement a US$100 million fund to generate demand. Financing initiatives will also be offered to boost sales.

IBM is expecting to expand the program to encompass printing systems by the end of June 2005, with software offerings coming into the mix during the second half of 2005.

IBM-Great Wall JV Now Official

The joint venture between IBM and Great Wall, ISTC (International System Technology Corporation) has completed registration with China's administration department of industry and commerce. The new company is mainly expected to produce servers, becoming the main base for server X and P series products for the Asia Pacific region.

With a total investment of US$7 million and registered capital of US$3.5 million, the company is 80% owned by IBM, and 20% by Great Wall.

Dell Shuts Down White Box Efforts

Dell is currently phasing out its program to sell white-box desktop PCs. Launched in August 2002 to help smaller assemblers build up their own brands in local communities, the company currently believes that directly using the brand is a larger draw for customers.

3D Display Notebook

Sharp announced its Actius RD3D, which displays 3D without the need of shutter glasses. The notebook PC will target vertical markets initially, such as the medical, pharmaceutical, chemical, energy, automotive, and aerospace industries. Sharp also has hopes for the gaming segment, and has added stereoscopic display support for nVidia's GeForce series graphics processors, which would allow for 3D functionality on most games.

The current offering incorporates Intel's Pentium M Processor 750, nVidia's GeForce Go 6600 graphics processor with 128MB of video RAM, and 1,028MB of DDR2 SDRAM. A button has also been affixed to allow users to toggle between 2D and 3D modes.

India to Lower PC Duties

The Indian government announced intentions to lower computer import duties by 10% beginning April 2005. Dell is expected to benefit most heavily from the decrease. The company supplies from sites abroad, and has therefore been primarily focused on supplying tax-exempt customers such as software suppliers and the customer service centers of multi-national companies. HP, by contrast, has been able to compete more aggressively on price in the country given its local assembly sites.

In early March the government announced the institution of an additional 4% CVD (Countervailing Duty) on components. Considering the recent 10% decline on import duties, the move will result in a net gain for importers, but the duty is expected to squeeze local PC makers.

Components

Microsoft Delays India Launch of Low-Cost OS

The Indian launch of Microsoft's low-cost Windows XP Starter Edition will be delayed as the company is still tackling localization issues. Originally scheduled for the first quarter of 2005, the release has been pushed back to the end of the second quarter. Starter Edition is hoped to reduce heavy pirating in the country, where only about 20% of the PCs are said to use legal copies of the operating system. Microsoft has targeted similar initiatives at other emerging markets such as Indonesia, Malaysia, Thailand, and Russia.

The stripped down Starter Edition can only run up to three programs running simultaneously and supports lower resolution graphics. The OS also lacks home networking and multiple user accounts. No pricing details have been announced, but a full version currently retails for about US$85 in India.

XP Offered Cheaply in China

As part of a broader effort to curb piracy and promote adoption of legitimate offerings, Microsoft rolled out a two-month China-wide promotion offering discounts on Windows XP up to late April 2005. Sold through Chinese retail chain Federal Software Stores, as well as on its website, consumers can purchase the home edition at 786 RMB (US$94,7; US$1 = 8.3 RMB), a 91% price drop. XP Professional is being offered at 1,270 RMB (US$153), a 36% drop.

The operating systems offered through the program are full versions, rather than the Starter Editions launched in other Asian nations.

Longhorn's Auxiliary Display Support

In February Microsoft revealed more details regarding its plans for auxiliary display support in Longhorn, which will allow small displays built into the external surface of mobile devices to show information without booting up the device or opening power-hungry applications. 

Regardless of the form factor, Microsoft expects the technology to display 16 to 24-bit color on screens roughly the size currently found on mobile phones. In addition to the notebook PC lids, the OS would support displays through software add-ons for mobile phones, PDAs, TVs, and electronic picture frames.

Microsoft is currently working with Intel on a reference platform, which is anticipated to include an ARM processor, flash-based boot memory, between 8-16 MB of RAM for caching information to be displayed, and a system management bus that will "wake up" regularly to synchronize data with the auxiliary display. The platform will be built on the run-time operating system used to power SPOT (Smart Personal Objects Technology) smart watches, rather than Windows CE.

The software developer expects the a development kit to ship around the same time as the Longhorn Beta 1, currently slated for the first half of 2005. An accompanying recommended hardware kit is also being designed to facilitate the plugging of displays into PCs as well as a software emulator for writing applications and testing against the reference platform.

Japan vs. Intel

Following similar action against Microsoft in July 2004, in early March Japan's FTC (Fair Trade Commission) issued a recommendation that Intel cease and desist the use of what it deems as unfair practices to attract and retain customers. The commission charged that the chipmaker offered discounts and rebates to domestic PC vendors Fujitsu, Hitachi, NEC, Sony and Toshiba, for not buying processors from rivals, namely AMD and Transmeta.

A response from Intel to accept or challenge the recommendation in court was originally required by March 18th, but has since been rescheduled to April 1st.

In a statement released March 8th, Intel disputed the warning, believing the company's practices to be fair and lawful.

Intel Plans New China Chip Factory

Intel has plans to build a second chip assembly and test plant in Chendu, Sichuan province. Expected to employ roughly 600 people, Intel and the Chinese government have lifted the investment cap for the site to US$450 million, from US$370 million previously. Intel also operates three assembly and test factories in the Shanghai Pudong area.

Notebook PC Fuel Cell

US company Millennium Cell has developed a fuel cell to power notebook PCs. Although most other fuel cells require methanol, Millennium Cell's prototype absorbs hydrogen, which provides more energy than methanol, from sodium hydride; future versions will use a metal-hydrogen compound.

A plastic 3x5x1-inch box sits beside the notebook, and after the metallic hydride is converted into hydrogen, the hydrogen is sent through a large membrane behind the notebook PC's display. The company expects to be able to integrate the box into the body of the notebook in the future.

The fuel cell is said to continuously provide 20 watts of power and peak bursts of 25 watts. In the end market, consumers would buy replacement cartridges containing the metallic hydride.

120GB 2.5" Drives Unveiled

Fujitsu announced that sampling had begun for 120GB 2.5" notebook PC hard drives, with commercialization expected for the second quarter of 2005. The 20% increase in capacity was achieved through a high areal density of 104G bits per square inch. Other improvements include lower power consumption, higher shock absorption, and a doubling of load/unload speed to 600,000 cycles.

Winbond Acquiring National Semiconductor Unit

Winbond announced that it has signed an definitive agreement for a NT$2 billion (US$64.4 million) acquisition of National Semiconductor's Advanced PC Business Division, which supplies I/O controllers, embedded controllers, and TPM (Trusted Platform Module) controllers. Winbond will gain the division's intellectual property, assets, and approximately 150 employees. National Semiconductor has said that it will henceforth focus more resources on its core analog portfolio. The deal is expected to be completed during May 2005.