Mobile Revolution Buffets Taiwan PC Rivals

TAIPEI — Two computer-making neighbors in the technologically inclined economy of Taiwan seem headed in opposite directions.

Personal computer sales have slumped worldwide as smartphones and tablets have proliferated and gained in popularity. One Taiwan heavyweight, Acer, has shared in the suffering: It is expected to report a second straight annual loss in 2012 after losing 6.6 billion Taiwan dollars, or $223 million at the current exchange rate, in 2011.

But another Taiwan-based PC company, Asustek, which sells computers under the Asus name, grew 43 percent in the quarter that ended in September, to 6.7 billion dollars in net income. The company’s PC sales rose 6.4 percent even as industrywide PC shipments declined 4.9 percent in the last three months of 2012, according to the research firm Gartner.

The companies’ divergent fortunes expose both the mistakes and the opportunities for PC makers in an epic shift in the way consumers use technology.

For more than a decade, with no serious alternatives for consumers, Acer, Dell and Hewlett-Packard treated the PC as a commodity: All of their machines used the same Intel chips and Microsoft software and even looked similar, analysts said. In that environment, PC makers made money by focusing on marketing and by cutting costs.

For Acer, much of that strategy was driven by the former chief executive, Gianfranco Lanci, who led the company from 2004 to 2011. During his tenure, the company focused only on marketing and distribution, while gutting research and development and outsourcing design and production, analysts said.

The spread of smartphones and tablets has challenged that business model. Consumers have more choices and increasingly focus on how their devices look and feel, how mobile they are and what content they can provide access to.

“At the moment, the PC market is saturated,” said Tracy Tsai, an analyst at Gartner. “When most users have a PC already, they are not looking for just a cheaper notebook. They want something better.”

That has meant meager profits or none for global PC brands. H.P. reported a $12.7 billion loss in the business year that ended in September 2012, while Dell’s poor performance has resulted in an effort to take the company private.

It is a problem that has manifested itself on the street as well. Stam Chuang, a manager at a retail shop in the Guanghua Digital Plaza in Taipei, said notebook sales at his store had dropped 10 percent during the past year.

“There’s only a set amount of demand for computing out there,” Mr. Chuang said. “So if consumers decide they want a tablet or smartphone, that share will get taken out of PCs.”

Because of its research and development cuts, Acer has struggled to produce smartphones and tablets that can compete with the sleek products from mobile powerhouses like Amazon.com, Apple and Samsung, analysts said.

Asustek, however, followed a strategy that emphasized design and innovation. Its personal computer growth in 2012 was driven by the Zenbook, an ultrathin laptop with a metallic finish, stereo speakers and backlit keys.

Jonney Shih, the chairman of Asustek, said he had foreseen the mobile revolution and wanted his company to differentiate itself from the competition.

“Even 10 years ago, I knew I had to be prepared,” Mr. Shih said.

He added that with computer architecture and chips shrinking, he had recognized that “the ‘phone computer’ was going to happen.”

Mr. Shih has become a cheerleader for what he calls “design thinking,” pushing his employees to be creative about building products that enrich the experience for consumers. Asustek incorporated a design and artistry category into its employee evaluation system.

The two companies’ revenue numbers are similar: In the third quarter of 2012, Acer brought in 87.4 billion dollars in revenue, compared with 96 billion dollars for Asustek, according to Bloomberg data.

Article source: http://www.nytimes.com/2013/02/25/technology/mobile-revolution-buffets-taiwan-pc-rivals.html?partner=rss&emc=rss