Or… The Vendors Never Learn
It’s been a full 2 weeks now since the end of Computex, and the associated roaming around Greater China and certain (mostly Chinese speaking too) neighboring realms. This being at the very least fifteenth Computex for me, I didn’t bother much with press conferences and such, but checking the show floor to see what’s really going on, and then do a real check with selected vendors after the event is done with.
The Taiwanese, with diminishing focus on high end ‘added value’ PC stuff, moving towards mainstream consumer things with corresponding reduction in differentiation and ability to charge larger margins, in some cases increasingly relying on reference designs - tablets could be a repeat of the same story as graphics cards here. The Asus Transformer tablet range is still one of rare exceptions to at least aim there where higher margin Samsung or LG offerings are entrenched, for example.
Asus doesn’t seem to be so lucky with the ROG enthusiast board line, where Gigabyte has, according to more than one insider, claimed the quality prize and is now at the very least on an equal footing for the high end PC market board dominance race prior to the September Haswell-E next-gen Socket 2011 platform launch (the socket is NOT compatible with the current Socket 2011, just to state one more time).
So… The Big Four: Intel, Nvidia, Qualcomm and (still for now) AMD, all US vendors, still carry the innovation torch and, willingly or not, have to lead the OEMs into what to design and manufacture to a great extent. Ultrabooks and 2-in-1 convertibles were just an example, other stuff is just the same. Intel lost billions in the last financial year investing in an attempt to lead the mobile phone and tablet segments. Of course, they have the size & strength to ride over it without much impact thanks to over divisions, but a loss is still a loss, something very uncommon for Intel.
It’s funny… even despite all the Computex announcements, the best tablet announced at the time was not in Taipei, but in New York – Microsoft Surface 3 Pro (which we’re currently reviewing). It sports a proper Intel Core processor, proper 3:2 ratio display, proper (for tablet at least) keyboard cover, and proper OS, as much as one can call Windows 8.1 that – at least vs Android. Even though, Intel did have a Surface Pro 3 at their suite at Computex.
Then we come to the sea of mainland China vendors from Shenzhen, Dongguan and other cities, in their little booths at the old Taipei WTC hall. Plenty of them offering plenty of stuff, but it seems they aren’t willing to learn the key lesson from their Taiwan brethren: don’t you all want to avoid making the same cheap crap, trying to make a dollar a piece and then bleeding each other’s margins to death with endless fights for every customer? While only the SoC and IP license owners make any money from it all?
When I asked Intel if they have a role to play in this situation, one of their regional honchos in-charge, Leighton Phillips, Director Product Marketing, Intel Asia Pacific & Japan, explained that Intel is not the one restricting the components ecosystem for Intel-based tablets and such, but the choice is mostly on vendors themselves. After all, in his words, “Shenzhen city is like one really big company itself.” where certain “departments” decide to focus on repeating the low-cost stuff en masse and, hopefully, some bigger boys – or the daring ones with guts – decide to do unique things. Like it or not, after being in that city for years now on-and-off, I find it hard to disagree with this: many attempts to convince even the large groups there – even with ready buyers – to do something beyond the el cheapo fare, hit the risk-aversion wall. It’s a pity, as the Chinese government itself is more strategically focused on developing core technologies than, say, Taiwan.
After all, even outside the Intel world, a good example where a ‘me too’ strategy leads long term is one really big long time OEM in Hong Kong that survives – pitifully at that – basically selling their boards and cards at material cost. Yet, for years now, their very survival depends on their single principal vendors’ marketing money – which could be shut off anytime knowing that principal’s own survival issues.
Intel is, of course, investing a lot in Shenzhen: having (quite rightfully) selected it to be their next major hardware design center worldwide, after the USA and Taiwan. The rumors I hear from the insiders are for close to 700 engineering staff to be hired in Intel’s coming new space, likely in one of city’s many modern science & tech parks, within this year and early next – far more than the official 150 staff mentioned up to now. Whether this will encourage the local companies to do more daring product designs as Intel helps them offload the engineering risks to some extent, remains to be seen soon. The city really must not repeat the mistakes of Taipei, cornered now into doing low-margin ecosystem stuff for the real technology principals.
They aren’t the only ones – Nvidia is also strongly present here, even organizing organic farming fun for its Shenzhen staff, and Qualcomm is preparing their positions in the new hardware Mecca. After all, everything from smartphones to supercomputers are both designed and used here. Only AMD is missing, without even an office to call home here… tells you something, doesn’t it?
That also serves as a warning to Taipei, that – irrespective of the simple cheap stuff shown in their little booths – Shenzhen is on target to take more and more of Taiwan’s IT pie in the near future; you will be looking at reports from their IT fairs here in the next year and beyond as well. So, Taiwan must do what Japan did as well, and boldly go to the top end of technology and produce stuff for the top tier of the users, willing to pay stuff for it. A good reference are Japanese products shown at Singapore’s BroadcastAsia show last week – cameras and monitors for US$ 30K and above EACH, and workstations controlling them costing not much less. And, they sell well… why bother selling million Fiats when thousand Ferraris could make more?