Print

Mail

wiki links

Diversifying to stay alive

Motherboard manufacturing used to be the goose that laid the golden egg for Taiwan's electronics manufacturers, but market saturation and differing consumer demands have sent companies scrambling recently to diversify products in order to stay competitive.

Taiwan once turned out more than 90 percent of the world's motherboards, but in recent years output has slowed to single digit growth. As a result of this local manufacturers have had to diversify their product lines to keep afloat. The amount of revenue coming from motherboard production has dipped to less than 50 percent of major local producers' overall incomes.

International Data Corp (IDC) has forecast a 10 percent global growth in the personal computer market this year, with an output of 195 million units, including 130 million desktop computers, 58 million notebooks, and 64 million servers.

Taiwan is expected to take the lion's share of this in light of its huge production capacity and well-developed supply chain.

However, fierce competition among manufacturers has driven down profits significantly, and Asustek Computer Inc (華碩電腦), the giant motherboard manufacturer, has vowed to hunker down and fight hard against all competitors from low to high-end products. It is also keeping an eye on the progress of Hon Hai Precision Industry Co (鴻海精密), which previously only made motherboards for well-known brands.

Asustek traditionally concentrated on the high-end market, which presented the opportunity to make bigger profits, rather than fight for a broad market share, but company Chairman Johnny Shih (施崇棠) found that the policy of bypassing the low-end market was taking its toll on his company's revenues and decided to expand its market share.

Citing Intel Corp and Samsung Electronics Co as examples, Shih said he believes only by leading its competitors and dominating the market can a company survive in an environment where profits have been cut to a trickle.

Therefore, Asustek is diversifying its products in the hope of getting toeholds in what is commonly referred to in Chinese as the "3Cs": computers, communications and consumer electronics.

Asustek, which already leads all competitors in output of motherboards, graphic cards and optical disk players, is now aggressively expanding its capacity to manufacture notebook computers, servers, broadband equipment, wireless broadband communications and mobile phones.

As a result, revenues from the sale of motherboards now account for only about 30 percent of Asustek's overall income.

As the world's production of motherboards is increasingly concentrated in just a few giant producers, and the profit margins are small, many manufacturers that lack sufficient economies of scale have to change or alter their products or face the possibility of being swallowed up by bigger producers.

Take Gigabyte Technology Co (技嘉科技). It is devoted to developing its own brands and has now decided to shift production of its motherboards to Hon Hai to cut production costs and make up for its shortfall in output capacity.

As for its notebook computer business, Gigabyte decided to spin the unit off through setting up another company and then farmed out its production to other large manufacturers.

Micro-Star International Co (微星科技), which used to manufacture motherboards for other brands, is now developing its own MEGA brand of MP3 personal media players, notebooks and other consumer electronic devices. The company is expected to turn out 1.5 million MP3 players, and 300,000 to 400,000 notebooks this year, which would represent a significant growth over the previous year.

Elitegroup Computer Systems Co (精英電腦), which is also a contracted motherboard manufacturer, is helping its clients, mainly middle and small-sized computer makers, to diversify their products.

The company has won orders from Wal-Mart Stores Inc in the US and Haier Group (海爾) in China, and is also cooperating with Lenovo Group Ltd (聯想) in producing servers.
This story has been viewed 2209 times.