Who really makes it?

[tw]

From The Economist of 13 Jul 2002
... Mr Lam is hardly a household name. If you have not heard of him or of Quanta, that is because it suits him commercially to keep a low profile. If you own a Dell laptop, there is a better-than-evens chance that it was made in Quanta's factory near Taipei's airport. If you have an IBM, Apple, Compaq—in fact, any big brand except Toshiba—there's a fighting chance that it was made only metres away under the same roof. Quanta, in other words, is a contract manufacturer—a company that designs and makes gadgets but leaves the marketing (and increasingly only that) to companies with famous brands.

... ODMs [Original Design Manufacturers] such as Quanta invest in research, and design machines as well as making them, so they can command a premium for their services. That does not shield them from margin pressure as the industry matures. But Quanta, for one, was rare in keeping its gross profit margin above 10% even during last year's downturn.

Nonetheless, laptop manufacturing is rapidly becoming a mature, low-margin industry, just as the making of desktop computers has done. The kingdom, in other words, will soon start shrinking, which explains why Mr Lam now covets new realms. His latest target, storage systems, makes some sense. Most people accept that computing power and storage are moving away from desktop and laptop computers, and on to servers stacked in back rooms. Profit margins on these powerful computers, while shrinking, are higher than on desktops and laptops. ...

Wireless gadgets, the second realm in Mr Lam's sights, are consumer products. But here the problem is that much depends on the uncertainties of consumer demand for third-generation (3G) technology. Even if take-up is good, the queue of competitors is already long. As for artificial intelligence, Mr Lam's third target, this industry remains speculative, and is unlikely to produce much by way of profit in the near future. Even the king of the laptop may thus find it hard to conquer new territories.