Despite claiming as much as 50 per cent market share in desktop PCs, local OEM assemblers have so far been unable to crack the notebook market in a significant manner. That may all be about to change.
With demand booming and technology commoditising, notebooks represent both a threat and an opportunity to the vibrant local assembly channel. Increasingly the local industry is rising to the challenge. With Intel distributors now packaging the Centrino platform as well as supplying the rest of the components needed, international brands will have to get used to seeing market share in the “Other” category climb.
Hallmark Computer International is one prominent local company set to launch its own range of notebooks under its well-established Viewmaster brand.
Hallmark’s general manager, Michael Ly, said the products would be available to its channel “sometime in September” and a key focus for the business going forward.
“We are convinced that notebook technology has matured to the stage where we can deliver the necessary quality and price competitiveness,” Ly said. “We can no longer afford to ignore the future growth of this market segment. People want portability and wireless capability.
“I anticipate that within 12 months, notebooks will become a commodity product much like PCs and, at Hallmark, we want to be a part of that market.”
Ly said that Hallmark attempted to manufacture notebooks back in 1997 without success. It was then “not a very mature product” and there were a lot of “hiccups” in the supply of components and “faults” with the technology.
“I feel that now is the right time to get back into it,” he said.
Other local systems integrators building whitebox notebooks in reasonable numbers for their direct and indirect customers include ASI, Optima, Pioneer, TPG and Westan.
Intel’s area sales manager, channel and distribution, Philip Cronin, is also adamant that now is the right time for local assemblers to look at introducing whitebox notebooks.
“It’s potentially huge,” Cronin said. “Over the next 3-5 years, notebook sales will start to match desktops. The opportunity is there to be a part of that. You need to go back to the basics of why local assemblers exist.
“That is because they can bring technology to market faster, they can produce products that are as good as the name brands at lower prices, they can support them better and they have far more flexibility in configurations.
Cronin said that “all of these value propositions”, which local assemblers deliver with their desktop labels, “can be replicated in notebooks”. He saw no barriers to entry for them.
“They easily have the technical capability to assemble and support any of the new Centrino-based systems and brand it under their own label,” he said. “The threat is that if they don’t get on board and recognise the rise of notebooks and have an offering to their customers, then part of their natural market will be eaten away.”
Intel’s three national distributors — Ingram Micro, Synnex and TodayTech — all have Centrino offerings available to the channel and offer to just sell the components or to configure systems for the reseller.
Managing director of Synnex, Frank Sheu, said that it offered three different types of whitebox notebook solutions to its channel.
The company would ship all the components required for them to configure their own systems, it can assemble the systems branded as required for the resellers or it can supply them fully configured with established whitebox brands such as Mitac and Gigabyte.
There is “tremendous interest” building in whitebox notebooks, according to Sheu.
He wants Synnex to be at the forefront of catering to channel demand.
“This Centrino platform is something that people want and problems in the past that made local assembly difficult have been addressed,” he said. “In the past there were problems such as service issues and battery power which deterred users from buying locally-assembled notebooks.
“Intel have made the whole thing a lot more modular. The product now has the same sort of reliability as desktops and has excellent wireless connection and battery power. Now there is no difference between name brand and whitebox.”
General manager, operations and distribution for TodayTech, Michael Chong, said that it also offered kits or pre-configured whitebox notebooks with a customer’s own brand or TodayTech’s Moebius brand.
It brought in “bare bones” notebooks and then added the processor, memory, hard-disk drive and operating system.
Chong said the market had “grown significantly in the last three months” since the launch and marketing blitz surrounding Centrino.
“The market is definitely ready for locally-branded notebooks especially since the quality of the notebooks has improved so much,” Chong said. “I think the notebook market of today is similar to where desktop PCs were in about 1992 or 1993 when local systems integrators started to significantly eat into the market share of the international brands.”
Chong claimed that TodayTech alone was selling “more than 1000 units per month” when combining its components and configured products numbers.
“I believe locally-assembled products will eventually take close to 40 per cent of the notebook market in Australia,” he said.
According to the most recently available data from channel research organisation Inform, sales of notebooks via indirect channels from sources other than the big brands tally less than 3 per cent. However, it does include products from Ipex and Optima in its “branded” category. In the 12 months up to and including May 2003, the highest figure recorded was 2.8 per cent in May this year.
Research manager for Inform, Claire Tavener, said that Inform was “starting to see a few notebook sales that fall into the other category” and that it was “tracking the growth” of this market segment.
She said the notebook was “maturing as a product” and that customers would be happy to embrace the “value propositions introduced by local assemblers” in much the same way as they do desktops.
“I think that the market is ready [for whitebox notebooks],” Taverner said. “In the past the channel would not have been able to get away with supplying a non-branded notebook but the technology has definitely become a more stable and trusted.
“It no longer needs to have a brand on it. Whiteboxes are such a big part of the desktop space, so it won’t surprise us to see the market share grow substantially in notebooks. The price is coming down a lot and the local assemblers can help that even further.
Synnex’s Sheu said market share was currently closer to 5 per cent and was expecting it to “reach 10 per cent within six months” as Intel’s whitebox distribution strategies bedded in.
“It is not just us taking [notebook] market share away from the international brands, the whole pie is getting much bigger very quickly,” he said. Intel’s Cronin said that it was not that hard for large or small local assemblers to get involved in the notebook market as a result of the programs it is supporting through distributors.
He warned that unless some of these players embraced the whitebox notebook concept they would just become another reseller of Toshibas or some other name brand when their customers want the technology.
“There may be a reasonable margin in Toshibas at the moment but in 3-4 years when everybody is selling them, margin will be non-existent,” Cronin said. “It will be like selling an HP laser printer and that is scary for a local assembler because suddenly there is a revenue stream that has dried up for them.
“Instead they can go out and do it [assemble notebooks] tomorrow. There are already guys out there buying ones and twos from a distributor and putting them together for their customers.”
TodayTech’s Chong agrees that is not that difficult to build notebooks and the prices will be very attractive for customers.
“These days it is much easier to assemble a notebook than a desktop,” he said. “When comparing feature for feature and the dollar value available, the whitebox notebook will definitely be a winner against the branded models.”