The Laptop Supply Chain

Carl Bialik from the WSJ writes "When a U.S. consumer orders a laptop from HP or other big sellers, how does the machine get made? Often via a complex supply chain in Taiwan and China, shaped by rocky cross-Strait relations, according to the Wall Street Journal: 'Outsourcing to low-cost, high-quality Taiwanese manufacturers has helped make Dell and H-P the world's top two PC companies in terms of sales...But the relationship between U.S. computer firms and their third-party manufacturers can be tricky. In the struggle to retain an element of control over their suppliers, H-P, Dell and others play contract manufacturers against each other to keep prices falling and ensure no supplier gains too much leverage.'"

Comments

Re:Build

[ID000001]

There are barebone notebook with just the case and motherboard these day (Many avaialble at www.newegg.com for instant) and let you have some flexiablity in setting up a notebook yourself as far as component goes. Brand like Acer, ECS are very popular.
Still much more limiting then a desktop PC, but it is a far cry from a few years ago where you can only have one model of video card and one properity casing CD-Rom drive you can upgrade to a writer for $200.

Re:Interesting...

[lucabrasi999]

Lets put it this way, if IBM had upped their prices to the level they needed to in order to make the same money as HP and Dell, would you pay that extra money to get the quality? And would enough people pay that extra to help IBM succeed in a volume business, or would their prices have to rise still further to ensure profits in a niche.

Pre-Lenovo, the IBM laptop tended to be significanly more expensive than any of it's major competitors (not counting Apple). Therefore, IBM had already included the higher quality of their laptop in the price. The ThinkPad is a very popular purchase amongst corporations. Companies were willing to pay the extra price for the perceived quality and service that IBM provided.

IBM products were good, but too cheap for IBM to make money on it.

Last year, IBM made a profit on the PC and laptop business. But, they only made 1 or 2 percentage points profit on that hardware. I just checked HP's web site and they reported a profit margin of 2.1% on their PC's and Laptops for the first quarter of 2005. So, the margins IBM was making were comparable to at least one of it's main competitors.

And their opinion was clearly that technical superiority meant nothing in a market that appears to be dominated by price.

I think you are right on this point, but I would have phrased it differently. IBM's opinion was that laptops and PC's have become a commodity and the profit margins were too thin to justify remaining in that line of business. IBM does still has a "toe-hold" in the PC/laptop business, since it owns a minority share of Lenovo.

Manufacturer designs making headway

[poity]

While large manufacturers build machines on exclusive designs from resellers like Dell, IBM, HP, Sony, etc., many of these same manufacturers have thier own branded designs available through smaller resellers.

These manufacturer designs are cheaper because they are often sold unbranded. They also experience shorter timespans between hardware revisions because they don't have to wait for those exclusive design specs from resellers, and thus often have the latest components in their models months ahead of those from the major resellers.

ASUS, one of the largest manufacturers in Asia, supplies Apple with Powerbooks, iPod shuffle & minis, Sony with many of their laptops, and have been an on-and-off builder for IBM in the past (there was a report in March of ASUS in major talks with Lenovo to be their supplier in the future), among other famous names. This is one of the many well-kept secrets in the laptop industry.

ASUS has seen their own laptop line more than double in sales since last year, mainly due to word of mouth between computer enthusiasts venturing into the laptop market.

Major manufacturers who supply brand name resellers as well as popular specialty shops:

ASUS
Mitac
Uniwill
Clevo
Compal

Some resellers (VoodooPC, Falcon Northwest, Hypersonic, ABS, and Alienware among others) add some paint and a label (and, like good captalists, at least $500 to the pricetag) to these machines to come up with their own specialty models. Many other less visible resellers (MWave, Discountlaptops, ISTNC, Proportable, and others) sell the exact same machines unbranded in customizable barebone configurations for incredibly low prices.

As computer enthusiasts ditch their unwieldy desktops for portable solutions, we will find manufacturer brands becoming more and more visible to the general public, and large brands will have even more competition.