"Taiwan Tech"- Asustek
Thursday, February 21, 2008SUZANNE PRATT: Taiwan-based high-tech firms are making great strides in the global marketplace. Tonight, we begin a series called "Taiwan Tech." Our first stop is Taipei, home of Asustek. It's a company that once only built parts for other PC makers. But as Lucy Craft reports, it is now creating its own computers, targeting a different kind of laptop user.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Grandma's out here with her friends, she wants to show off the pictures of the grandchildren, so what does she do? OK, first go to photo manager.
Rugged micro-laptops for grandmas, third-graders and other non-techie consumers, so cheap they're almost disposable, yet powerful enough to web- surf or run popular applications. It's the brainchild of a Taiwanese company called Asustek Computer. Asus ranks ninth in the global PC market, but CEO Jonney Shih has outsized ambitions, some might say outrageous ambitions.
JONNEY SHIH, CHAIRMAN, ASUSTEK COMPUTER INC: We set up a target, we try to get into the top five in three years and we try to get into the top three in another three years. That's our target, yes.
CRAFT: Hyperbole? Perhaps. Yet the company has introduced a range of models from entry to high-end, and vows to grab one-fifth of the worldwide market for laptops in the next few years.
SHIH: We still think it's a kind of disruptive innovation, both for low-cost and so-called the new market innovation, try to penetrate another one billion potential users.
CRAFT: Analysts like CLSA's Ming-Kai Cheng, applaud the tack of building computers for non-geeks.
MING-KAI CHENG, HEAD, TECHNOLOGY RESEARCH, CLSA LTD., TAIPEI BRANCH: Now a parent or parents can buy a notebook computer for their nine-year- old, 10-year-old. So it's again creating a new demand category where it wasn't there before. And therefore, they're not really competing head to head with the Dells or Sonys and Toshibas of the world.
SHIH: We try to encourage them to have any kind of crazy ideas.
CRAFT: Asus designers dreamed up this 'Mona Lisa,' actually a giant motherboard. Motherboards, the backbone of every computer, are what Asus built its fortune on. Even today, it's still the world's leading supplier for this component. But declining desktop sales have hurt Asus's motherboard business, forcing it to reinvent itself as a laptop maker. Citigroup analyst Peter Kurz says the company's bargain-basement notebooks highlight the virtues of Taiwan's hyper-efficient production system.
PETER KURZ, MANAGING DIR., HEAD TAIWAN COUNTRY RESEARCH, CITIGROUP GLOBAL MARKETS: Established brands probably won't be able to compete and probably won't want to compete and yet it could be enough that it actually changes the momentum in the market so that people start moving away from notebook PCs that are basically more powerful than they really need, to something that's much cheaper and basically gets them on the Internet, does a few basic client level functions. And if they lose it, if it breaks, so what, they can replace it.
CRAFT: Observers like Nomura Securities' Ellen Tseng say making some of the world's cheapest laptops will prove less significant for lifting the bottom line, than for raising the Asus brand profile.
ELLEN TSENG, HEAD EQUITY RESEARCH TEAM, NOMURA INTERNATIONAL, TAIPEI: I do think the more important thing is making more brand awareness, about launching the low-cost PC initiative. That showing that the company does have some products innovation capability. That's very important.
CRAFT: Asus Computer is among an elite group of Taiwanese brands that have a shot at becoming household names in the U.S. But analysts say most Taiwanese brands will find their biggest success and profits far from U.S. shores, in emerging markets like India, China and the Mideast. Lucy Craft, NIGHTLY BUSINESS REPORT, Taipei.
