New Race for 0.8-Inch Notebooks
Battle of the Ultra-Thins
With its MacBook Air, Apple fired the first salvo in the ultra-thin notebook war. Intel fired back with its Ultrabook. Behind the lighter loads in our briefcases, a battle is being waged, and some Taiwanese companies may be the big winners.
Battle of the Ultra-ThinsBy Elaine Huang
From CommonWealth Magazine (vol. 479 )
MBA… Isn't that the abbreviation for a "master of business administration" degree? Not necessarily.
As a vice president at a major computer case maker recently found while attending numerous corporate investment conferences, the tablet PCs in the hands of fashion-conscious Taiwanese and foreign tech executives have stealthily turned toward the MBA.
"This is the coolest recent invention," Drew Houston, the 28 year-old cofounder and CEO of U.S.-based cloud data storage software service DropBox, a new darling of Bay Area venture capitalists, told CommonWealth Magazine reporters of his recently purchased MBA.
"MBA" is shorthand for "MacBook Air," the silver colored, wafer-thin notebook PC that at less than 0.8 of an inch thick, or less than 2 cm, is currently the sleekest out there. Following on the heels of the iPad's creation of the craze and market segment for tablet PCs, Apple is once again reorienting the market toward "super thin" notebook computers.
In the final quarter of 2010, shipments of the MBA registered startling growth of 300 percent over the same quarter of the previous year.
Not content to see Apple gain the upper hand at its expense, in August 2011 Intel announced that it would invest US$300 million into development of the Ultrabook, its own wafer-thin notebook PC at less than 0.8 of an inch thick, while drumming up fanfare for a confab of the industry ecosphere in Taiwan. Representatives along the entire supply chain of the non-Apple camp were all in attendance.
The winds of war among the 0.8-inch "ultra-thins" were blowing.
"It feels as if the showdown between Apple and Wintel is now being fought on the ultra-thin notebook front," observes Ryan Lee, an analyst with Topology Research Institute.
Behind all this is the extension of Apple's mobile electronic device battle lines and, more to the point, Intel's leading the charge of the non-Apple camp in their battle for market position and bragging rights. This in turn is driving innovation and revolutionary advances of the supply chain in terms of external appearance, weight and price. (See Table)
"Design applications for notebooks have definitely been affected," says Compal Electronics senior vice president Kung Shao-tsu, commenting on Apple's impact on the market. "Everything was about specifications before. From now on, the key will center around the circumstances of the user."
Once again, the instigator of the "thin" wars is Apple.
Apple released its first-generation MBA three years ago. At the launch, Apple chairman and CEO Steve Jobs pulled a wafer-thin notebook computer from a manila envelope, prompting cries of amazement from those gathered. But performance was lackluster, and with a price tag of nearly NT$60,000, sales were not up to expectations. Not long thereafter, Apple released the second-generation MBA. Suddenly, the price had been slashed to US$999, or roughly on a par with conventional notebooks, and the MBA's market position made an immediate turnabout.
Meanwhile, hot sales of the iPad attracted a new wave of Apple enthusiasts. Many among this group who came to know Apple through the iPad were working people with a need for a full, keyboard-equipped notebook.
At Studio A, the Apple store in Taipei 101, many of those taking the demo MBAs for a test drive are young, stylish white-collar workers. It is these Apple fans, new and old, who have driven the current 300-percent growth in MBA shipments.
Intel is determined to seize product bragging rights.
In the PC era, Intel's core position was undisputed. When the company spoke, people listened. But the Intel hegemony has come under threat of late from the rise of ARM Ltd.
At two of the year's biggest electronics trade shows, the International Consumer Electronics Show in Las Vegas and Computex in Taipei, ARM turned out to be the surreptitious star. The president of one electronics firm bluntly stated: "Just do the basic math – it's like mushrooms sprouting after a rainstorm. The beating heart of more than 80 percent of 100-plus different makes of smartphones and tablet PCs is not Intel, it's ARM."
What's more, Microsoft has shattered the decades-long tacit agreement at the heart of "Wintel." Beginning next year, notebook computers loaded with Windows 8 will also support ARM systems, which will allow ARM architecture to smoothly transition from mobile devices to Intel's domain of notebooks.
"Of course Intel is worried, and it's riding the ultra-thin notebook wave to connect itself to the entire notebook ecosphere," a vice president at one electronics maker says candidly. "On the surface they tell branded makers they'll help them develop ultra-thin notebooks to counter Apple, but what they're really after is for everyone to use their chipsets so they can solidify their bragging rights in the notebook segment of the market."
The battle of the ultra-thins is largely a fight by the traditional technology A-Listers to defend their market interests.
Taiwanese Component Makers Big Winners
But as the ultra-thin wave continues to crest, Taiwanese manufacturers of key components are destined to play a big role.
"If notebooks are to be made ultra-thin, then everything from external cases to heat dispersal modules, batteries and other internal components must all be made thinner," Ryan Lee says. He thinks those components makers that have made investments in innovative new materials stand to benefit as a result.
At the previous Intel-organized industry confab, Intel invited the Greater China regional manager of Getac Technology Corp., which has invested in development of glass and carbon fiber materials technology, to address the gathering.
Due to a knock-on effect of the advent of the ultra-thins, even as the downgrading of the U.S. credit rating sent Taiwanese stocks into a tailspin, shares in Getac Technology soared.
As for those components makers that have already broken into the Apple MBA supply chain, they now seem to be the apple of everyone's eye, actively sought as business partners by those in the non-Apple camp.
'Costs No Object' Scramble
"Apple has already warned us," says Y.S. Lin, chairman of Auras Technology Co., Ltd., supplier of heat dispersion modules for the Apple MBA and the only Taiwanese company in the supply chain.
The key for ultra-thin notebooks, including Apple's MBA, to slim down without sacrificing performance lies in heat dissipation. And Auras's razor-thin heat dissipation module contains no fan, relying entirely on the company's independently developed heat conduction cylinders to control heat dispersion.
Lin and company spent 18 months taking their previous-generation heat dispersion module that was used on conventional mainstream notebooks and whittling it down from about three centimeters thick to about 1.5 centimeters thick. Auras's effort caused a stir in the non-Apple camp and even led to imitators. This aroused great concern at Apple, Auras's major customer.
But the fiercest battle in the scramble for components is computer cases.
The key to the sleekly stylish MBA lies in the excellent rigidity and heat dispersion properties of its metal case. The case generally accounts for about 10 percent of the cost structure of a mainstream notebook computer. In the realm of the ultra-thin, however, that figure rises to 18 percent, despite no increase in the overall unit cost of the ultra-thin. The significance is clear.
And consequently, there have been those in the non-Apple camp that have taken to approaching primary MBA case suppliers Catcher Technology Co., Ltd. and Foxconn Technology Co., Ltd., who together account for 90 percent of global production, with a "costs are no object" pitch.
"Do you know what a 'costs are no object' pitch is? It's offering the conditions for a 'charter service.' And they're not chartering an airplane – they're chartering the next two years of future production on a CNC machine," says one top executive at a computer case maker.
Ultra-thin notebook cases must be honed, cut and formed by computerized numerical control (CNC) machine tools, which can easily run NT$2 million to NT$3 million a pop. Reaching a monthly production scale of one million units would require at least 2,000 CNC machines, or a capital investment of about NT$4 billion.
"The problem is, manufacture of the world's CNC equipment capable of producing cases for ultra-thin notebooks is all done in Japan, and their order books are filled until next year. What's more, it's all being monopolized by Catcher and Foxconn," the computer case executive concedes. "Even if you have the money, you can't buy one."
As the ultra-thin notebook trends clarify, brand makers will naturally scramble to "charter machines," otherwise they'll be short of parts when the time comes. Whether it'll be the MBA or the Ultrabook that drives the ultra-thin revolution, "We're happy with these developments either way," Y.S. Lin says.
It would appear that in the showdown between the rival ultra-thin camps, the biggest winners might just be this group of highly capable Taiwanese components makers along the supply chain.
Translated from the Chinese by Brian Kennedy