Take a walk around Computex Taipei 2002 and it's easy to see why Palm and Handspring are having such a hard time turning a profit on personal digital assistants (PDAs) -- a lot of Taiwanese companies are making them too, and for much cheaper.
Even companies not associated with manufacturing electronics products, such as CMC Magnetics Corp (
Other companies, like Compal Electronics Inc (
PHOTO: GEORGE TSORNG, TAIPEI TIMES
Both companies produce PDAs in China, with designing and engineering in Taiwan. In both cases, these companies are able to drive prices down. Taiwanese engineers cost far less than their counterparts in the West or Japan, and few places in the world offer lower cost manufacturing than China.
Compaq Computer Corp, now taken over by Hewlett-Packard Co, saw the writing on the wall years ago and hired High Tech Computer Corp (
A factory in China churns out the iPaqs, while labs in Taiwan help with the design work. The company's sales have increased an average of 253 percent each of the past three years.
Last year, High Tech's net sales reached NT$15.5 billion and its earnings per share NT$7.62, a whopping 530 percent increase over the previous year.
Palm may be trying the same kind of partnership with Acer Inc's (宏電) spin-off company, Wistron Inc (緯創資通). Acer is marketing a Chinese-language version of the Palm software with its own PDA in China and Taiwan, while Wistron -- the former manufacturing arm of Acer -- is making PDAs for Acer.
The Market Intelligence Center in Taiwan forecasts the production value of Internet appliances, including PDAs, Web Pads and other hand held computers, will reach as high as US$50 billion by 2006, up from US$23.2 billion in the year 2000.
Some analysts are questioning whether the PDA business will ever reach the profit margins attained in 2000, because hardware is becoming dominated by low-cost producers entering the market.
Palm Inc said in a statement last week that slow sales would push it to another loss in the quarter ending May 31 and predicted another loss would follow. The company has seen four straight losing quarters already.
Palm said it is on target to split the hardware and software sides of its business into two separate companies by the end of this year in an effort to avoid competing with its own customers.
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