The Mobile Device Wars
Rise of the B-Listers
In the fight for mobile electronic device supremacy, Taiwan's second-tier manufacturers are quietly staking a claim. Collectively, these "B-Listers" now account for a share of the tablet PC market second only to Apple.
Rise of the B-ListersBy Elaine Huang
From CommonWealth Magazine (vol. 479 )
The mobile electronic devices market, encompassing both the 470 million smartphones shipped annually worldwide and tablet PCs, is not merely an exclusive club for "A-List" companies.
What the free Android platform has really achieved is the creation of opportunities for "B-List" companies in the Taiwanese electronics industry and even for unbranded Chinese-made tablet PCs.
A succession of second-tier Taiwanese notebook computer makers including Gigabyte Technology, Shuttle Inc., and Elitegroup Computer Systems have made the move into the tablet PC market this year, formally joining the ranks of the "non-Apple camp" employing the Android operating system platform, alongside the likes of Asus, Acer, Lenovo and other top-tier companies.
According to statistics from U.S. market research and consulting firm DisplaySearch, 1.9 million unbranded tablet PCs in the US$75-US$300 price range were produced in the first quarter of this year. With a market share trailing close behind Apple's iPad, it's a growth trajectory that cannot be easily ignored.
Entry Ticket to New Stage of Global Competition
"Android has lowered the threshold, giving even small entrepreneurs a chance," Gigabyte Technology senior vice president Richard Ma said at his headquarters in the Taipei suburb of Sindian.
Gigabyte Technology was initially one of Taiwan's top three motherboard makers, trailing Asus. Yet given its later entry into the game than Asus and its limited production capacity, it was always relegated to the status of a second-tier company. The assistance their supply chain receives from Wintel falls far short of that available to Asus and other top-tier companies.
In the age of notebook computers, Microsoft set the rules of the game, and only A-List companies were invited to play.
"For use of the Microsoft operating platform, they (Microsoft) demanded a contract be signed guaranteeing shipment of 100,000 units annually, something that only the world's top 10 (notebook computer) companies could possibly achieve," Ma says.
The open source Android platform carries no such preconditions, and thus even resource-limited "B-Listers" have a chance. Android represents an entry ticket into the mobile electronic device market for such companies.
Two years ago, Gigabyte got into OEM manufacturing of smartphones, and now sells to telecom service providers in Southeast Asia and Russia, who often give away the devices for free to customers signing up for new accounts.
And Gigabyte is not the only B-Lister taking a ride on Android's coattails.
In June, reporters swarmed Shuttle Inc. president and CEO David Chen outside the new products pavilion on the periphery of the Taipei Computex exhibition. The one question they repeatedly fired at Chen?
"Has Shuttle taken tablet PC orders from China's Hasee Computer?
He merely smiled without offering a denial.
Shuttle Inc., a second-tier maker of motherboards and computer peripherals, lured Chen away from Elitegroup Computer Systems two years ago. His mission was to turn things around at Shuttle, which had been operating in the red for years.
His first act was to lead Shuttle into notebook computer contract manufacturing. As a second-tier OEM manufacturer, Shuttle pursued local brands in newly emerging markets. Positivo, Brazil's largest PC brand, is a Shuttle customer.
With the appearance of the Android operating system, Chen next plotted to move into mobile electronic devices. He was well aware that his company's scale would not permit it to go head-to-head with A-Listers like Hewlett-Packard or Acer. He had also observed that Wintel operating systems were not particularly user-friendly in the age of mobile electronic devices.
"Who ever made a rule saying you had to use Wintel? Look around you – there are ARM and Nvidia. Intel no longer has a monopoly," Chen says, revealing that the resources Shuttle sinks into non-Wintel development long ago surpassed those of its Wintel development efforts.
At midyear, Shuttle received orders to make tablet PCs for China's Hasee Computer Co. The Brazilian PC powerhouse Positivo has also ordered OEM tablets from Shuttle.
How Big Is the Pie?
But just how much are all these Android mobile device orders going to contribute to these companies' operating revenue growth? The B-Listers are taking a collective wait-and-see approach.
First, updated versions of Android appear with lightening speed, and even the A-Listers evaluate them with caution.
"Although Google doesn't charge you to use it, unlike Microsoft, they also won't spend any money or manpower to help you develop it," says one major A-List company vice president. "They are actually not good about investing their own resources (in Android)."
For B-List companies with even more limited resources, the challenge is far greater.
"We're still considering which version of Android we'll use," Gigabyte's Richard Ma admits.
Another crucial problem is insufficient preparedness on the part of upstream supply chains. Ma relates that he has received some large orders but then has discovered his supply chain could deliver on just 30 to 40 percent of needed components, creating frustrating bottlenecks in delivery. The commercial opportunities are there, but remain just out of reach.
Finally, there is the quality-price ratio of the goods.
As one Taiwanese technology company spokesperson says, of all the major A-List companies currently engaged in Android tablet PC production, only the Asus Eee Pad Transformer is selling relatively well. The others, including Samsung's Galaxy, have not met sales forecasts made at the start of the year, and none can rival Apple in the tablet market.
"Users buy cheaper products and find them difficult to use. Maybe they will be willing to spend a little more to purchase a not outrageously expensive tablet PC from a top-tier manufacturer," the spokesperson avers, adding that the power of the B-List, second-tier companies to drive low-cost tablet PC growth may be merely bluster and have no real effect.
But the potential threat from the second tier may have real teeth in it, as the mobile devices market continues to evolve.
"It is not completely without opportunity," Ma believes.
At the very least, Android offers an entry ticket to the competition. What transpires next will depend on the differences in the products each company has to sell.
Translated from the Chinese by Brian Kennedy