Barclays Capital's Kirk Yang:
Mergers the Only Way for Taiwanese Tech Sector
Do the flagging fortunes of Acer spell peril for Taiwan's entire tech sector? The chief technology analyst at Barclays insists the dangers are real, and the solutions may need to be radical.
Mergers the Only Way for Taiwanese Tech SectorBy Liang-Rong Chen
From CommonWealth Magazine (vol. 535 )
Acer's woes have cast a pall over Taiwan's high tech industry. However, in a paper issued in late September, Kirk Yang, managing director and head of technology hardware research for Asia ex-Japan at Barclays Capital, offered an antidote.
Yang calls upon Taiwan's high tech sector to follow the recent wave of mergers across the US high tech field, and to pursue mergers with gusto.
Yang recently sat down for a chat with CommonWealth Magazine.
Following are highlights from the interview.
Q: Some people in the industry fret that if Acer dies it will leave Taiwan without a local brand to lead the way. If Lenovo ends up alone at the top, would that send a ripple of crisis through Taiwan's notebook ODM sector?
A: Most certainly! And that has actually already happened.
Not only has Lenovo captured considerable market share, it manufactures an increasingly larger proportion of components in house. Now that it has steadily become self-sufficient, Taiwan's ODM vendors are becoming marginalized. And once China's own component makers get up to speed, Taiwan (i.e., her computer industry) is doomed.
The only way to give it a shot is consolidation, which would require the government to step in. Without it, everybody is in for a rough ride.
Q: Recently word has it that growth has resumed in the business computer market. Are the worst times over for PCs?
A: It is still very early. Business customers are good right now because of Microsoft's announcement that it will no longer support Windows XP, which forced everyone to update their machines. Once that wave subsides next year, we will be left with the same situation.
The current personal computer demand worldwide is around 300 million units, which we anticipate dropping to around 200 million before stabilizing. This will not happen suddenly, but we will see a slow decline over three or four years.
This is the biggest threat to Taiwan's computer industry, as the TAM (Total Addressable Market) will shrink considerably.
Everyone will still buy PCs in the future, just not every year; more like once every five years.
With the number of options out there now, including smart phones, tablets, and even e-books, you don't buy a new PC every year.
For high tech companies it means they have to do everything, like Samsung and Apple, so that no matter how people buy in cycles, you make your money.
This is also one of the reasons why I urge Taiwanese vendors to get involved in mergers. Manufacturers of smart phones and notebooks need to combine in order to expand their potential market.
Translated from the Chinese by David Toman