Taiwan’s Computex, which rapidly expanded as PC OEMs and ODMs flourished over the years, is slowing down. The show organizer’s statement -- issued on the final day of the five-day event Tuesday (June 10) -- indicates that attendance this year was flat compared to a year ago. It has plateaued at around 130,000 people.
You could blame the decline of Computex on an overall weakness in demand for PCs worldwide. But perhaps that’s the easy analysis.
If we probed further, we might note that this year’s Computex was more revealing than met the casual eye, with signs of the changing dynamics in the industry.
1. Taiwan ODMs in a panic
Most notably, Computex showed that “Taiwan ODMs are in a panic,” according to one industry source who spoke on the condition of anonymity. The Taiwan ODMs are trying to get some traction in the world of tablets and smartphones at a time when the space is completely dominated by Samsung and Apple. Microsoft also showed up with the Surface, although it has yet to generate significant volume.
With the smartphone/tablet market pulled in opposite directions, with Samsung and Apple on one end and a number of white-box vendors dominating smartphones in China and elsewhere in Asia, many vendors in the electronics industry – both chips and system ODMs/OEMs — face a tough challenge. They need to find a way to reclaim the value of their own products, whether apps processors or end products.
2. Bad omen for U.S. SoC vendors/Taiwan ODMs
The simple fact is, as Ross Seymore, research analyst at Deutsche Bank, wrote in his research note, “The most remarkable trend from Computex was the rapid shift to low-end tablets and smartphones.”
It’s clear that as unit growth in smartphones/tablets shifts to lower prices, “Chinese SoC vendors are doing extremely well,” wrote the Deutsche Bank report. “Non-branded vendors from China such as Rockchip and Allwinner shipped approximately 25% of all A-series ARM SoCs in 1Q13,” observed Deutche Bank. Because these Chinese SoC vendors differentiate largely on price and accept margins well below US peers, Seymore called the accompanying success of China fabless SoC vendors among white-box tablet/smartphone vendors “a bad omen for US competitors.”
Market share of the top five vendors for China's smartphone market in 2012
source: Strategy Analytics
The same logic applies to system-level suppliers. As China’s homegrown brands such as Lenovo, Huawei and Coolpad gain popularity in China and share on the smartphone market – along with Samsung and Apple — Taiwan ODMs are feeling not only squeezed but also finding it hard to claim a place in the fastest growing segment of the market.