Monday, January 31, 2011

In the PC Wars, the Asians Have a Clear Advantage

According to Roger K.Lay

As the balance of power in many domains shifts from the U.S. to China, computer makers are also refocusing their strategies to include a larger China component. China is critical as both a market and a supply base. And Asian vendors have become serious rivals to the top U.S. companies, many of which are beset by persistent management dramas and palace intrigue.

For years, the equation was clear: Large PC brands were American, the big makers were Taiwanese, and China was, at best, a low-cost production site. Today several of the former Taiwanese makers have become international brands, and mainland China has risen to become a full player as both customer and supplier. The Chinese leader, Lenovo Group, is the fourth-largest PC vendor in the world. No. 2 is Taiwan's Acer.

So who's winning? My call is that the Asian brands have a long-term advantage. Top-ranked Hewlett-Packard (HPQ) and No. 3 Dell (DELL) share characteristics absent in the Asian vendors: Both face various legal troubles and leadership turmoil. Both have seen a string of executive and board departures. Dell has been able to settle most, but not all, of its lawsuits. HP faces yet another regulatory probe over its split with former chief Mark Hurd. Both continuously bleed high-level talent. Meanwhile, Acer, Lenovo, and Asus, another Taiwanese firm, now in the sixth spot, slowly and steadily build their international presence.

The U.S. and China represent big battlegrounds for all these vendors, must-wins in the market share wars.

ACROSS THE STRAIT


In China, the Taiwanese are striving to overcome an important long-term handicap: They are identified with what Chinese political leadership regards as a renegade Chinese province. Recently, however, commercial relations between Taiwan and the mainland have become so intermingled that money, people, and technology now flow between the two relatively freely, characterized by the resumption of direct air service in 2008.

Principal competitors in China include Lenovo, with a 29 percent share, and HP and Dell, with about 10 percent each, according to IDC. Acer, Asus, and domestic players Tongfang (600100:CH) and Founder Group all have market shares in the single digits. In the U.S., the picture is quite different: HP and Dell are the clear leaders, Acer is half as large as either of them, Lenovo is half the size of Acer, and Asus is half that figure.
The path the Asians are on does not lead straight to the top, however. Until about six months ago, they were on a steady march, gaining in share and making an early mark in a new popular category, netbooks. These low-cost notebooks added substantially to unit shipment numbers but little sales or profit. Meanwhile, the U.S. companies, struggling with management departures, boardroom issues, and federal investigations, appeared to be losing focus.

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