the onda

The NYTimes has a nice piece on the success of Acer, a Taiwanese computer maker, in becoming the #2 laptop/netbook supplier behind HP. The piece is worth reading for all of the digs that the more established players take at the underdog alone, but it makes two things very clear:

1. If I was betting in this sector, I'd say that Acer, Asus, and any of the other Taiwanese makers are going to take over both the laptop and the netbook market in the next 3-5 years. The key statistic here is that Acer is willing to survive in the market with as little as 2% margins across its product line— which is sometimes less than what the channel makes. More importantly, a 2% net margin business is not something that big American companies like HP are going to play seriously in.

2. It's amazing to see how much all of these laptops and netbooks look like each other— across manufacturers. I guess this is what you get as the ODMs (Original Design Manufacturers) like Foxconn and Quanta take on more of the basic product engineering. When you've got the same engineers working on things like thermal envelope and clamshell design and working with the same raw materials (CPU, SSD, etc.), it's no wonder everything starts looking the same after just a few iterations.

If I were trying to compete with these Taiwanese companies, I'd try very hard to get out of banana handling— simply speccing and branding these machines— to more substantial sources of value-add through software and service differentiation. Investing serious resources in this area is very challenging to do, especially as the price premium of these portable computers plummets— but the only real alternative at this point seems to be to exit the business, or get ready for the bumpy 2% banana handler's ride.

And it can't just be about slapping Android on these machines either— real differentiation in software and services needs to start from the most common emergent use cases for the portable clamshell computing devices of today. These use cases then need to be used to rethink the computing experience from the ground up. Efforts like Jolicloud (a startup trying to put some real meat behind the term "netbook") or Ubuntu One seem like a step in the right direction, albeit bite-sized ones.

In the short term though, the one thing that is for sure is that consumers will benefit from the plummeting prices for what used to be a premium computing experience.