Apparently, Michael Dell wasn't all smiles when he came through Asia a few weeks ago. Looks like he slapped Asustek around a bit, telling the Taiwan motherboard maker to choose between its branded PC business or Dell, and pronto.
That's bad news for Asustek's budding branded PCs. The company makes a mighty fine notebook PC (have one myself) and sells them for a relatively cheap price. So it's no wonder that Dell feels spooked. Looks better, costs less " that's a no-brainer.
This comes back to the same old phenomena I like to call the Acer Syndrome. It's when a no-name contract manufacturer starts a side business in branded products, figuring he can fatten up the bottom line. Problem is that success breeds problems. Acer eventually had to spin off its contract manufacturing arm, now known as Wistron, to avoid a conflict of interest. Others have come under similar pressure, including BenQ Corp " itself an Acer spin-off.
It's been at least a year since Asustek floated the idea of spinning of its contract OEM business, and there's little to show from it. So it's not totally surprising to see Dell lighting a fire under chief executive Johnny Shih. Reports say Dell set a deadline of Q1, 2008.
Asustek must make a move if it wants to keep from losing more business to the likes of Hon Hai and Quanta. Dell is supposedly offering an order of 1 million notebook PCs to Asustek, and is making future orders conditional on the spin-off.
Asustek will still do well in the branded motherboard and graphics card business, but I suspect that orphaning its branded notebook PCs means this business will suffer. It's too bad. Not only does a good product with good value get quashed, but we also once again see that Taiwan remains pigeonholed in the dog-eat-dog world of contract manufacturing.
I hold out some hope that Asustek can pull off an Acer. After dumping its contract business, Acer has emerged as a PC powerhouse. It's already No.4 globally and may overtake Lenovo this year. I can see why Dell is worried.
--Mike Clendenin is EE Times' Asia Bureau Chief