You're a Taiwanese tech executive who has succeeded for years making inexpensive computers. The PCs were a bit dull, to be sure, but what they lacked in excitement they made up for in affordability. That tradeoff is no longer working so well. With computer sales slowing and companies like Dell slashing prices relentlessly, your business model is showing its age. What do you do?
If you're an executive at Asustek Computer (AKSPY), the answer is easy—go for glitz. The Taiwanese company, a leading producer of finished PCs as well as important but unexciting computer components like motherboards, has teamed up with Italian sports car maker Automobili Lamborghini to sell a line of notebook computers with design touches that evoke the legendary brand.
Launched early this month and displayed at last week's Computex trade show in Taipei, the new Lamborghini laptops are shiny black or gold, with the Italian carmaker's logo on the exterior.
EMPHASIS ON DESIGN
The keyboard is surrounded not by plastic, but black aluminum with a fine hairline pattern. "We are trying to create a brand image," explains Tom Ho, an Asustek sales and marketing manager. The point is to connect Asustek's computers with the speed and glamour of the Italian brand. "Lamborghini is a luxury car that's very fast. Our product is the same. It's not just for daily use."
Asustek's Lamborghini gambit is the latest attempt by the Taiwanese to focus more on design in order to escape from the commoditization of the computer business. At the Computex show in early June—the biggest of its kind in Asia—many of the island's most important electronics companies were showing off products that had a heavy emphasis on snazzy design.
Indeed, Asustek isn't even the first Taiwanese company to try to shed its humdrum image by joining forces with an Italian luxury carmaker. Acer (ACGY), Taiwan's leading PC maker and the No. 4 computer brand worldwide, last year teamed up with Ferrari. The duo launched a co-designed Acer-Ferrari notebook PC, with the Ferrari logo and colors to impress fans of hot cars.
PEDAL TO THE METAL
Acer is now trying to maintain its lead by launching several more Ferrari products. At Computex, the Taiwanese company displayed several new Ferrari models, including a 15-in. notebook that ships this month and a 12-in. that ships in July. The machines (powered by AMD (AMD) microprocessors) feature the Ferrari red stripes and yellow shield with black horse.
The keyboard lights up like the dashboard in a racing car and is surrounded by a rubber-like, soft-touch surface. The touch pad is designed to resemble the gas pedals of a car. And Acer is taking its Ferrari collaboration beyond the notebook PC, branching out with a new Ferrari PC monitor, a 20-in. widescreen.
The innovations at Computex weren't just about aesthetics. In the battle between rival Japanese camps over next-generation DVD standards, Acer is betting on Toshiba's (TOSBF) HD DVD. The Taiwanese company is showing several models that support HD DVD, which Toshiba's group has recently launched. According to Acer, it is the leader in its support of HD DVD, with four models available either now or within the next few weeks.
PLAYING BOTH SIDES
Rival Asustek is also working on HD DVD machines, says Ho, the Asustek marketing manager. Asustek has two notebooks that are HD DVD ready, he says, one of them a 15-in. and the other a 17-in. Asustek will launch the 15-in. machine next month and the 17-in. in September.
Asustek is not placing all of its bets on HD DVD. The company is working on coming up with products for the rival Blu-ray standard, championed by Sony (SNE), as well. So, too, is former Acer subsidiary and current Acer rival BenQ (BNQCF).
Ben Q, a leading maker of consumer electronics, computers, and PC peripherals, was showing at Computex two Blu-ray disc drives, one internal and one external. The company plans on selling the drives in the third quarter this year. BenQ also is launching new TVs and PC monitors with improved sound and faster response time.
For instance, in July the company will begin selling a 24-in. monitor with so-called advanced motion accelerator technology, which makes it easier for LCDs to handle fast-moving action. Many LCDs have trouble with sudden movement, which creates a lag on the screen.
BenQ also boasts that the response time on its monitors is the fastest around, just six milliseconds compared to an industry average of eight. Don't underestimate the importance of those two milliseconds, says BenQ spokesman Albert Lin. "Response time is the main thing that gamers are interested in," he says.
Companies like Acer, Asustek, and BenQ get more attention because they have their own brand names, but many of Taiwan's most important electronics companies design parts, not the final product. Many of them are also putting more emphasis on innovative design. For instance, Sunplus Technology (SNPLY) is one of the island's top designers of semiconductors. The company, based in the Hsinchu science park, made a name for itself in the 1990s with its chips used in toys. (Remember Furby, the odd-shaped talking toy from Hasbro (HAS)? Its chip was from Sunplus.)
The problem is, focusing on toys was a bit of a dead end. "The toy business is a niche market with small volumes," says Wayne Shen, special assistant to the president and Sunplus corporate spokesman. "The potential for growth is limited."
Now Sunplus has spun off its toy operation into a subsidiary called Generalplus and is focusing on more advanced designs for consumer electronics. "One of the key points is that we need some killer applications," says Shen. "“If there isn't one, then all the industry develops the same products. That's the challenge. Companies have to develop something unique to be successful."
That's why Sunplus, which used to avoid the spotlight, went to Computex this year for the first time. Among the designs Sunplus showcased: a chip for digital camera that can take four 5 million-pixel pictures in one second and also does video recording up to 30 frames per second.
Sunplus, like so many other Taiwanese companies looking to boost their innovation reputations, isn't having an easy time of it. The company reported a nice jump in sales last year, up 43% to $832 million. But profits sank 12% to $74 million. "In the toy industry, we know who the customers are. "We don't have to do promotion. We just go and press the bell of the customers," says Shen. "But in the home entertainment market there are so many brand names."
Working through the clutter and getting some recognition is a challenge that the Taiwanese need to face in order to be taken more seriously as innovators.