Kenneth, Article...Further indication of booming asian Markets..
investors.com
PC Makers Turn To The East For Next Boom In Computers
Date: 4/24/97
Author: Russ Britt
Go east, young nerd. Far East, that is.
Now that computer companies have conquered the West, they're turning to the populous Asia-Pacific region to find new fortunes.
And unlike the Old West, it doesn't look like many companies will come up empty in their rush to the region for electronic riches.
''The market is exploding - no doubt about that,'' said Steve Haslett, a director of Palo Alto, Calif.-based Hewlett-Packard Co.'s Far East operation. ''Our business is about double what it was last year.''
Indeed, the computer industry is finding gold in the islands and coastal nations of Asia, as well as in Australia and New Zealand. While it only represents a small portion of most companies' business, firms believe the region is the key to future growth.
In '96, Asia-Pacific was the fastest-growing PC market in the world, with overall sales growth in the mid-30% range, analysts say. Other regions, including the U.S., offer higher volume but slower growth - in the mid-teens or single digits.
''We expect (the rapid growth in Asia) to continue through the end of the century,'' said Dennis Philbin, an analyst with market researcher International Data Corp. of Framingham, Mass. Huge countries like the People's Republic of China and its 1.2 billion people could take years to fully tap.
Computer makers tend to separate Japan from the rest of the Asia-Pacific market because of that nation's unique PC market. Japan's spending on computers beats all other Asian countries combined, but much of that spending is on computers made at home.
Other developed nations such as Korea and Australia are sophisticated markets as well. ''In the home market, people are going more for the higher-end (machines) than in the U.S.,'' said Huantsent Lim, managing director of closely held Packard Bell NEC Inc.'s Asia-Pacific business. ''Anything less than a Pentium (running at) 166 megahertz is no longer popular.''
Asia-Pacific's market leader is Compaq Computer Corp. of Houston, Texas. Korean electronics giant Samsung Group is second, followed by International Business Machines Corp. of Armonk, N.Y.
For now, it seems companies that have better relations with their distributors are more successful, says Phillippe de Marcillac, an IDC analyst.
Many computer companies are setting up Asian manufacturing facilities to get ready for the expected boom in sales. Packard Bell's Lim says his company is setting up a temporary 80,000-square-foot factory in Penang, Malaysia.
In '99, the company plans to move into a permanent 400,000- square-foot plant, Lim says.
For companies such as Packard Bell, which is struggling to maintain its market share in the U.S., the Asia-Pacific region represents potential salvation.
Packard Bell, based in Sacramento, Calif., is tenth among all companies doing business in Asia, excluding Japan. The firm also has an advantage over other companies in that it acquired much of Tokyo-based NEC Inc.'s computer business last year.
''The NEC name is stronger in Asia-Pacific than in the U.S.,'' said Lim.
It also allows the company to use NEC's distribution network in the region, Lim says. Setting up channels of distribution in the region is difficult for many firms due to cultural nuances and the distances involved.
According to market researcher Dataquest Inc. of San Jose, Calif., Dell Computer Corp. in Austin, Texas, has yet to crack the top 10 among companies in Asia-Pacific. But Dell is certainly positioned for growth. Back in '95, it rushed to build a 238,000-square-foot factory in Penang in five months.
''We fast-tracked it,'' said Phil Kelly, president of Dell's Asia-Pacific group. ''Clearly, there has to be factories (there) over the long term.''
As one might expect, distribution is tricky for Dell. In the U.S., the firm specializes in selling computers without channel partners. But it can't always stick to that direct business model in the complicated Asia-Pacific market.
Of the 50 countries where Dell sells computers, it has distribution partnerships in 40 of them.
''Each country requires its own unique strategy,'' said Kelly. The more-developed nations generally are better suited for direct sales, while distribution partners are needed in such countries as India and China, he adds.
Because of its size, China is considered to hold the most potential for PC makers, analysts say. IDC predicts China will spend nearly $35 billion annually on information technology by 2001. In '96, it spent slightly more than $10 billion.
Today, IDC estimates there is one computer per 200 people in China, compared with one computer per 3 1/2 people in the U.S.
''Even if you get to 100 people per PC, you still have a massive market relative to other countries of the world,'' Kelly said.
HP's Haslett warns that wiring Asia will not be a simple task. HP installed 3,000 servers for a major bank in China recently, a task made more difficult by the country's primitive infrastructure.
''You're lucky if there are roads to some of these places,'' Haslett said. ''The phone lines don't always work. You've got some challenges that some people in the West wouldn't believe.''
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I wonder how big Intel would be if 20% of the Chinese homes had a computer! My prediction...it's only 7 years away!!!
They better builds more Fabs!
Michael |
