The Greater Chinese Desktop PC Industry, 1Q 2002 and Beyond
July 05, 2002 / Stanley Su / Lina Li / Eric Lin
0 Page, Statistics Report
US$960 (Single User License)
Abstract
Greater Chinese Desktop PC shipments failed to live up to expectations in the first quarter of 2002 for a number of reasons: the uncertainty of whether the proposed merger between HP and Compaq would actually go through negatively impacted the quantity of OEM/ODM orders received by Taiwanese manufacturers, the state of the global economy remained muddled, and replacement purchasing for computers bought in anticipation of the Y2K crisis has yet to commence.
In enduring this less than ideal performance, Taiwanese and Chinese desktop PC makers are facing different challenges, because they have adopted different business models. Taiwanese manufacturers are mainly involved in processing OEM/ODM orders, whereas Chinese companies mainly manufacture own branded products for the Chinese domestic market.
In this report, MIC will review the Taiwanese Desktop PC industry performance in the first quarter of 2002, and provide in-depth analysis of the top ten makers on both sides of the Taiwan Strait
The worldwide desktop PC industry is facing new challenges from all directions. The desktop PC market in developed countries is approaching saturation. In China, which international vendors are targeting as the next major market for development, the DeskNote, a new concept from ECS, is also eating into the desktop PC replacement market. With ECS focus on OEM/ODM production, the Desknote can be regarded more as a new PC platform standard, rather than a new product offering for ECS branded business. The DeskNote is meant to extend ECS position as a leading motherboard maker to the system assembly business, where it is a relatively new entrant compared to established Taiwanese notebook PC makers. The DeskNote has triggered a new battlefield for notebook PC makers, while also posing a potential threat to desktop PC manufacturers.
For most leading worldwide computer vendors, the desktop PC has long been a cash cow. Their strategy in the market is to gain control of distribution channels or provide value-added services. When dealing with suppliers, PC vendors depress purchasing prices as much as possible and some even request that the supply chain be extended to the local for local level. With leading PC vendors pursuing these strategies, Taiwanese and Chinese players are facing markedly different challenges.
Chinese desktop PC manufacturers still concentrate mainly on the Chinese domestic market. The issue for major Chinese companies is how to compete with large international vendors that have extensive marketing expertise and formidable financial backing, and are aggressively encroaching on the Chinese market. Chinese makers are being forced to improve their operations in order to remain competitive. For example, Legend and Founder have both implemented direct sales in response to Dell marketing strategy. Since Taiwanese manufacturers supply both local Chinese and foreign brands with middle and high-end products, the only areas in which it is possible to develop a competitive advantage are in inventory, supply chain, and channel management. Taiwanese OEM/ODMs are looking to leverage a shared heritage to establish a presence in the Chinese market and have been setting up or acquiring distribution channels, because that end of the business affords greater profit margins in the long run.
Some Taiwanese desktop PC makers are endeavoring to establish own branded products in the Chinese market. With demand showing limited growth potential, and threats from new product types, the Greater Chinese desktop PC industry is more complex and competitive than ever.