Sony Looking for Taiwanese JV Partner

Interesting article on Smarthouse suggesting Sony is looking for a Taiwanese company to create a joint venture to manufacture Vaio notebooks. Sony are apparently in a debt laden hot spot and apparently want to form an equity JV with someone here. They have, according to the article, been talking to BenQ and (obviously) Foxconn (who doesn't talk to Foxconn?). I like what the senior BenQ exec. said:

"Sony does not have any significant share of the notebook market and by majority their Vaio products are niche. They are not purchased by business or enterprise organisations as they are too expensive and while they are well designed they are primarily a consumer home purchase which makes it difficult to return a profit especially in today's notebook market. As a result BenQ chose not to form a relationship with Sony"

I have long shunned Sony notebooks for exactly that reason (or though he articulates it better). They are niche, high-end products that people pay a fair buck for. I have never actually used one so cannot speak to its functionality or features, but I don't see the need to pay so much for something that is not going to do any better or worse than something (quite a bit) cheaper. This brings us back to the question of brands (see discussion emerging on Acer launches mobile phones in Asia) and what the brand brings to the consumer.

I will probably never ever buy a Sony notebook (and I am a Sony-guy). I have a Sony Surround Sound DVD player, Sony Handycam, Sony Voice recorder blah blah blah and no doubt the quality of the notebook is probably very high. But this brings me to another point! Although I like my Sony products they have, over the years, turned me off with their indulgent focus on proprietary technologies (even down to the MPEG format used on the handycam) and this would make me concerned about their computer. What properietary crap would I have to fight my way through to make it work properly? Probably none, but I don't know, I just don't know! (This proprietary rubbish turns me off Apple too btw)

Anywyay, look forward to your comments as always! Things to expand on in the comments maybe: Do you think this would be a lucrative JV for a Taiwanese equity partner?

Are Desktop PCs a Spent Force?

Reuters has a very interesting article on the decline of the desktop PC market and the rise of notebooks (laptops). According to Reuters:

The age of the desktop PC appears to be over as its more portable cousin, the laptop, surges ahead with consumers clamoring for light-weight computers in funky designs for use at home, in cafes and on the train to work.

Not a single desktop model figured on online shopping portal Amazon.com's top 10 selling PC and hardware list the weekend before Christmas, while seven laptop models made the list.

It was yet another sign that the former dominance of desktop PCs is fading as wireless advances and lower prices make laptops the preferred option for millions of PC users around the world.

"On both price and performance, laptops are so competitive now it's surprising they weren't able to catch up with desktops even earlier," said iSuppli analyst Peter Lin.

Of course, if this is true, its good for Taiwan. Reuters continues:

Many companies eagerly awaiting the era of the laptop are in Taiwan, maker of about 80 percent of the world's laptop PCs. They include the world's top two contract manufacturers, Quanta and Compal Electronics, and two of the most aggressive laptop brands, Acer and Asustek.

While those firms have seen their market share rise, the world's top two PC makers overall, Hewlett-Packard and Dell, have seen their share shrink.

Other companies that produce parts such as motherboards for bulky desktop PCs are already switching production to parts for other electronic gadgets such as iPhones.

While laptops used to cost more than double that of a desktop with equivalent processing power, advances in technology and economies of scale have dragged prices down so much that little price differentiation exists today for most consumers looking for a daily use PC, analysts say.

"It's just evolutionary I suppose," said Gartner analyst Tracy Tsai. "Things have reached a point where the price difference is no longer as pronounced as before for many consumers, and the average person is more likely to choose the option that offers him portability over the one that doesn't."

The growth in the notebook PC market is good for Taiwanese companies since they do dominate the market globally. Of course there are a few other companies that manufacture notebooks including Inventec. HP and Dell will have to become far more competitive in the notebook market to be able to compete effectively with Asus and Acer, who seem to respond to market demand very quickly.

Reuters: As laptops dominate, desktop PCs face obsolescence

Notebooks Continue to Grow in EMEA

Research group IDC says the notebook industry in EMEA has continued to show strong growth despite the current economic crisis. According to IDC:

Driven by continued buoyancy in the notebook market and the additional momentum created by the new "Mini Notebook" segment, PC shipments recorded a robust 27% increase in EMEA (Europe, Middle East and Africa) in the third quarter of 2008 (3Q08) compared with the same quarter last year, according to preliminary data released by IDC EMEA.

Despite gloomy economic confidence in several European countries, notebooks continued to drive overall market growth at over 52% year on year as consumer demand showed no sign of slowing down in Western Europe and continued to grow in CEE and MEA, while the market also benefited from sustained demand in the business space.

A large portion of this growth has been driven by the introduction of mini PCs into the market a year ago. ASUS first released the Eee PC but was quickly followed into the sector by other players such as ACER. According to IDC, ACER is now the no. 1 supplier of notebooks in the EMEA region. IDC says:

Acer made an explosive entry in the mini notebook market, which, combined with continued growth of its mainstream notebooks as well as desktops, propelled the Taiwanese vendor to the number 1 position in the overall EMEA PC market ranking for the first time. Acer deployed a massive push of its Aspire One across both the retail and telco channels, which contributed to soaring volumes, further strengthening its position in the notebook market. The vendor also continued to gain share in the desktop space, benefiting from the exit of local players from the Western European desktop market.

Asus in the meantime maintained their no. 4 postion in the EMEA region. IDC notes:

Asus stepped further up to fourth place shipping over 2 million units this quarter, leveraging from the unabated success of the Eee PC product range. Boasting the largest mini notebook portfolio with varied spec options, the vendor maintained strong push into the retail channel, whilst sealing a multitude of deals with telco operators across EMEA. The elevated exposure and brand recognition gained through the Eee PC also contributed to strong growth of its mainstream notebook portfolio.

Although this is optimisitic news in declining times, one should remember the average selling price of the mini PCs is much lower than a notebook computer and therefore although per unit sales have grown rapidly, the overall revenue streams would not have grown as quickly.

IDC: Major Push of "Mini Notebooks" Boosts Consumer Demand and Drive A Strong Back-to-School Quarter in EMEA, Says IDC

ASUSTek Sees Notebook Shipment Growth in 2009

ASUSTek are predicting growth in sales during 2009. According to the Taipei Times:

Asustek Computer Inc (華碩電腦) expects its annual notebook and netbook computer shipments to total around 12 million units next year, up from 11 million units this year despite the global economic slowdown and sluggish consumer demand, a company official said yesterday.

The specific forecast will be released in December, Jerry Shen (沈振來) Asustek’s chief executive officer said in a media briefing yesterday.

The company’s notebook sales are expected to reach between 6.2 million and 6.3 million units, Shen said, adding that the Taipei-based company wants to expand its customer base and enter into the middle
and high-end notebook market early next year.

Isn't it great to see optimism by some companies in these dark times of financial market metldowns and credit market concerns? ASUSTek have done well since the launch of the netbook last year and are growing in competitive strength. It is also interesting to see they are broadening their customer base and will be targeting a new market segment next year. The high-end notebook market is certainly where the higher margins can be made but it will be a little more difficult to penetrate this sector I feel. However, if they can use their pre-existing channel to bring these products to market there is no doubt they can succeed.

Taipei Times: Asustek expects shipment growth for notebooks

Half-terrabyte Notebooks from ACER

ACER has launched the industry's first notebooks with 500 GB of storage. Digital Home writes:

Still need more storage on your laptop? If so then you'll be happy to hear that Acer has begun begun shipping with the industry's first half-terabyte notebook hard drives.

The laptops feature Seagate's Momentus 5400.6 500GB hard drive which include G-Force Protection, a free-fall sensor technology that helps prevent drive damage and data loss upon impact if a laptop PC is dropped.

Seagate announced the new laptop drives in July along with their new flagship Barracuda 7200.11 1.5TB desktop hard drive,. Both types of drives provide significantly more storage space than previous laptop and notebook drives thanks to perpendicular magnetic recording (PMR) technology.

500 GB is a lot of space, probably more than most people will ever need unless you are into gaming, videos and photos.

Digital Home: Latest Acer notebooks offer half-terabyte of storage

Taiwan Continues to Dominate Notebook Manufacturing

The China Economic News (CENS) observes Taiwan companies provide over 90% of the world's notebook computers. CENS writes:

Taiwan`s notebook PC manufacturing sector supplied over 90%, or 25.33 million units, of notebook PCs sold in the world in the second quarter of this year, up 4.5% from a quarter earlier and 42% from a year earlier, according to statistics compiled by IDC (International Data Corp.)

In the second quarter, the sector also generated production value of NT$14.81 billion, up 38.5% from a year earlier, with Quanta Computer Inc., Compal Electronics Inc., Wistron Corp., Inventec Corp. and Pegatron Corp. as top five companies in the line.

IDC noted that Intel`s decision to postpone launch of its newest platform Centrino 2 and inflation crunch in some countries of the world caused consumer demand for notebook PCs to languish in the second quarter. Consequently, Taiwanese notebook PC makers` shipment performance was lower than expected by market observers.

What is astounding is the 42% year-on-year growth. Although the quarterly growth was a marginal 4.5% growth, the yearly growth is amazing considering the current state of the global economy.

China Economic News: Taiwan Supplies Over 90% of Global NB PCs Sales in Q2

News from the Notebook Market

Acer is targeting 50% revenue growth in India through the sale of notebooks. The Business Standard writes:

PC vendor Acer expects a 50 per cent growth in its revenue from the Indian market in the current fiscal, a top company official said.

"Our revenue in the last fiscal stood at Rs 1,200-crore. This year, we expect it to grow by 50 per cent to Rs 1,800-crore,' Acer India's Managing Director W S Mukund, said on the sidelines of the launch of Aspire One notebook, the company's first Internet device in the Indian market.

The company was pinning its hope on the newly-launched product, Mukund said, adding that, "Acer is aiming to sell 75,000 units of these notebooks over the next 12-months." In the first month of the launch itself, the company is targeting a sale of 5,000 units, he said.

Compal and other downstream notebook component suppliers are expected to benefit from a new notebook model launched by Dell. The new model will be produced by Compal. China Economic News writes:

Despite a rather conservative outlook for the notebook PC market in the second half this year, Compal Electronics and a number of Taiwanese makers of notebook-PC parts and components are expected to benefit from the rollout of a brand new series of business-use NB PC by Dell Computer, the world`s second largest NB PC vendor.

Michael Dell, chief executive officer of Dell, is scheduled to unveil the new model tomorrow (Aug. 13) in New Delhi, featuring light weight and colorful design, in stark difference from conventional business-use NB PCs, which emphasize function and stability, without much variety in design.

The new model will be contract-produced by Compal Electronics and its magnesium-aluminum alloy case is likely to be supplied by Catcher Technology. Other Taiwanese components and parts suppliers for the model include Shin Zu Shing, Simplo Technology, and Dynapack Battery Pack.

Finally, Trading Markets says notebook sales have surged in China. Trading Markets writes:

China's laptop sales surged 47.5% from a year earlier to 1.897 million units in the second quarters of 2008, showed the data of CCID Consulting, a leading IT market research and consulting company.

The top five computer makers led by Lenovo Group Limited (SEHK: 0992) took 71.4% of the Chinese market.

Dual core processors have become the mainstream configuration for laptops. The hardware tended to have big screens, large capacity, and high definition. VISTA was still unable to beat Windows XP in the operating system market.

Laptops are likely to take the place of desktops in the mounting home computer market, where Dell Inc. (Nasdaq: Dell) was enlarging its share after broadening retail channels, and Samsung was consolidating its foothold after product and price adjustment.

The surge in China will definitely benefit Taiwanese manufacturers. It seems the notebook market has a reasonable future ahead.

The Business Standard: Acer targets 50% revenue growth to 1,200 cr in FY 09
China Economic News: Dell`s New NB PC Will Benefit Compal and Other Taiwanese Makers
Trading Markets: China Laptop Sales Surged 47.5% in Q2

Quanta's Revenue Grows

China Economic News (CENS) reports Quanta saw a huge increase in revenue in Q1. According to CENS:

Quanta Computer Inc., the world`s largest contract supplier of notebook PCs, posted sales revenue of NT$73.175 billion for April and aggregate revenue of NT$269.116 billion for the first four months of this year, up 62.26% and 43.74%, respectively, from a year earlier, according to company sources.

In April, Quanta recorded notebook PC shipment of 3 million units, the same as the corresponding figure posted in March. With newly added orders from Apple Inc., the firm is expected to ship 40 million units for this year, accounting for nearly 30% of the total in the global market. Thus, institutional investors project Quanta`s second-quarter revenue and shipment of notebook PCs to stay brisk, based on such shining sales performance.

The year is looking up for Quanta. However, they are probably exposed to the same pressures as other notebook manufacturers such as Compal and Pegatron and are probably experiencing decreasing profit margins due to increasing costs in China. However to date I have not seen any announcements suggesting Quanta will be negotiating higher prices with their clients.

Article 1: Quanta Computer Posts NT$73.175 B. in Sales Revenue for April

Industrial PC and NB Makers Have a Good March

China Economic News (CENS) reports that many of Taiwans Industrial PC (IPC) manufacturers have done well in March and are looking forward to good sales for the remainder of the year. CENS reports:

With increasing orders from clients, Taiwan`s makers of industrial computers have posted solid sales results for the first quarter of this year and are expected to maintain that performance in the second quarter.

DFI received orders from IBM and many Japanese customers. WinMate Communication has capitalized on increased from Europe for industrial LCD and also gambling machines. IBASE has also benefitted from demand for "gambling machines, motherboards and network security appliances." Meanwhile Portwell has increased sales of their POS machines and European demand for medical products has benefited AAEON.

Good news for me however is (ICP Electronics is my comapany's parent):

Incidentally, ICP Electronics Inc. is scheduled to complete construction of its eight new production lines in Shanghai between April and May and will see its sales significantly grow in the second quarter.

CENS also reports that NB makers also had a stellar March:

Taiwan`s leading contract manufacturers of notebook computers, including Quanta Computer Inc. and Wistron Corp., saw booming sales in March. Domestic institutional investors predicted domestic NB contract manufacturing industry will see shipments continue to grow at the pace of 10% up to 15% year-on-year in the second quarter of this year.

CENS added:

Thanks to the increased orders from such big brands as Apple, Hewlett Packard and Toshiba, Quanta is expected to see annual shipments grow 19% up to 25% year-on-year this year.

Wistron has also done well. CENS says:

Thanks to the injection of orders from such big clients as Acer, Hewlett Packard and Dell Computer, Wistron Corp. saw shipments of PCs grow at a pace faster than anticipated in the first quarter.

Inventec has also done very well with a "3.089% year-on-year and up 5.18% from the preceding month."

So hi-tech Taiwan seems to be going from strength to strentgh, even in this economic slow down. We will see how far they can run. However, it should be noted that Taiwan may be becoming less dependent on sales to the US as new markets have opened up. Perhaps these new markets are driving sales. Whatever is driving sales, right now Taiwan's big players are doing well.

Article 1: Taiwan`s Industrial Computer Makers Post Solid Sales Performance in Q2
Article 2: Taiwan`s Contract NB PC makers Rake in Booming Sales in March

Taiwan EMS Companies Having a Good Year

China Economic News (CENS) reports Hon Hai Precision Technology topped NTD100 billion reaching NTD104 billions. CENS reports:

Hon Hai Precision saw March sales grow 18.8% year-on-year and up 12.7% from the preceding month, achieving the sixth-highest monthly sales in history. The company scored NT$301.8 billion (US$9.89 billion) in cumulative sales in the first quarter of this year, up 22.3% year-on-year but down 27.1% from a historic high in the fourth quarter of last year.

Meanwhile CENS also reports that both Wistron and Inventec have also done well in Q1. CENS says:

Wistron Corporation, one of Taiwan`s leading manufacturers of notebook computers, registered NT$34.268 billion (US$1.12 billion at US$1:NT$30.5) in sales in March, up 63.5% year-on-year and up 41.6% from the preceding month, hitting a historic monthly high.

CENS continued:

Inventec Corp., another large-sized NB manufacturer, registered NT$21.8 billion (US$714.75 million) in March sales, up 17% from the preceding month`s NT$20.75 billion (US$680.32 million) and representing a slight growth of 3% from a year earlier.

The company scored NT$66 billion (US$2.16 billion) in sales in the first quarter of this year and expects to see a 20% year-on-year growth in sales in the second quarter. The optimistic projection for the second quarter is based on the shipment growth in business-type and large-sized NBs.

Article 1: Hon Hai Saw Monthly Sales Rebound NT$100 B. in March
Article 2: Wistron Achieves Highest-ever Sales in March)

News from Computex: Notebooks and STB

According to Computex, the notebook computer industry is set for growth in 2008. Growth is being generated by decreased price differentials between notebooks and desktops. The good news for consumers is that notebooks will become cheaper. Computex reports:

"Followed by the trend of price gap reduction on Notebook (NB) and Desktop (DT) computer and demand of mobility and replacement of DT by NB, global NB market will grow 24.7% in 2008 with total shipping volumes of 11,600 units. As a result, average price of NB will be sliding gradually. In order to seize the trend of multi-media development, seventeen-inch wide screen has become the major force to surpass the volume of standard NB panel with the size of 14 and 15 inches. It is highly anticipated that wide screen panel will rise sharply to fill 89.7% of total NB monitors in 2007, and the share will further mount to 100% to force the standard type out of the market in 2008."

Computex also says the Taiwanese IP STB (internet protocol set top box) industry is expected to continue its prodigious growth. Computex reports:

"...high growth of the Taiwanese IP STB (Internet Protocol Set-Top-Box) industry is expected to continue, boosting the industry's global shipment share, due to the influx of contract-production orders from major branded vendors and more orders from US and European telecom carriers. Shipment volume of the Taiwanese IP STB industry in the fourth quarter of 2007 was estimated at approximately 1.1 million units, representing year-on-year growth of 190.5%. It is expected that shipment volume will increase 178.5% year-on-year in the first quarter of 2008, reaching 1.3 million units. And the IPTV development gradually has become mature in the future."