As the PC Industry is having trouble achieving growth, transformation has become a new trend among the industry players, Wistron chairman Simon Lin has told Digitimes in a recent interview. Dell's privatization is just a start, and PC brand vendors are seemingly driving faster and faster on a steep, narrow, winding mountain road. If Taiwan's PC supply chain players fail to keep up, they may be left behind or fall off the cliff at a sharp turn trying to catch up; however, such crises may turn out to be new opportunities for the Taiwan players, Lin believes.
First-tier PC brand vendor Dell is expected to accelerate its transformation process in the future and if Taiwan players continue placing their focus solely on hardware manufacturing, they will only face even more difficulties trying to increase their profits in the future, Lin said.
Changes in labor environment
As rising labor costs in China continue to impact the manufacturing industry, investing in new plants in the Southeast Asia region should become an viable option for the supply chain makers, judging from the region's current labor conditions. Lin estimates that these makers will start seeking new locations for their future plants in the next 1-2 years. However, he believes cost-down is not a good long-term strategy and what players should consider is how to provide additional value to their clients.
For the past two years, Wistron has been focusing on creating value in industries such as after-sales services, IT recycling and cloud computing services, and believes these industries may become new directions for Taiwan players' transformation. In addition to Wistron, players such as Quanta Computer, Compal Electronics, Pegatron Technology, Inventec and Foxconn Electronics (Hon Hai Precision Industry), all have plans for their own transformation.
Although most market watchers speak negatively about the PC manufacturing industry's shrinking gross margin, Lin believes the declining margin is not really a critical problem because such a situation tends to happen in more developed sectors. What PC makers should really focus on is to find a business model that can boost its value for clients for the next 10 years.
Privatization of Dell
Lin refused to comment on Dell's latest move, but pointed out that the PC industry's low price-to-earnings ratio will push more PC players to privatize their companies. Lin believes that the PC is still an important platform, but it will take some time for it to find a right transformation direction.
In the past 10 years, the development of the PC industry has had very weak progress because PC players have relied only on Wintel, failing to create their own value. Apple's products have already shown that the PC industry can no longer solely depend on technology advances, but will also need to understand and satisfy consumers' needs.
The new concept will have a long-term effect on the PC industry and Lin believes that PC brand vendors will become more aggressive trying to understand consumers' needs. But companies will eventually encounter contradictions between their business models and the new strategies, and how these companies can maintain flexibility to overcome such crises will be key to their staying competitive.
As for the supply chain, Lin believes that the PC manufacturing processes are still rather complicated for newcomers. But PC makers should always try to improve themselves and vertical integration will offer a major breakthrough for notebook ODMs.
Vertical integration can create very high value for clients, noted Lin, citing touch panel maker TPK as an example. He pointed out that TPK enjoys strong profits compared to its competitors because of its solid vertical integration, which requires a lot of technological breakthroughs, and that is where TPK's value lies.
Creating value is a road filled with challenges. Technologies that are valuable now may not be so in the future, as they will eventually become standardized. Once a technology loses its value, the only competitiveness left is its pricing. Therefore industry players must constantly develop new technologies. Lin also pointed out that vertical integration without gaining any technology will be meaningless.
Simon Lin, Wistron chairman
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