Thursday, November 29, 2007

Asus Turns a White Box Play into Branded Success

Asustek Computer (Asus) capitalized on the U.S. pre-holiday news lull by generating coverage on the Eee PC. This PC solution seems to be catapulting Asus ahead of its low-cost computing competition. Announcements ranged from the introduction of new channel partners, to rollout into new geographies, and the availability of a Windows version of the Eee PC. An announcement of an increased sales forecast for 2008 to 5 million units of the Eee PC followed this week. But, in spite of the attention and growing forecasts, Asus’ CEO and President, Jonney Shih and Jonathan Tseng, claim Asus is not concerned that low-cost devices will cannibalize its more profitable PC business.

Asus’ sudden visibility in the low-cost laptop market may mislead business managers and industry watchers into overlooking the company’s primary business. Asus is, in fact, cited as the “mother of all motherboard producers”. With highly diversified manufacturing services, Asus produces components for cell phones, desktop and notebook computers, graphics cards, optical drives, servers, and networking devices for some of the world's leading ICT companies. One country-specific success story for Asus is in the Russian PC market where more than 80% of desktops are sold through the white box (unbranded) channel. The company entered this strategic growth market through this white box channel and developed a reputation for providing value and quality desktop PC components. Capitalizing on its brand recognition as a high-quality component provider, Asus has also become a highly competitive manufacturer of branded PCs in the Russian market.

HP, Dell and other hardware companies can take a page from the Asus playbook. To date, direct competition with white-box assemblers in emerging markets has proved largely unsuccessful for most global brands. Hardware companies could, instead, participate in this dominant emerging-market channel. With careful mapping of the value chain, global PC manufacturers can identify opportunities to provide aspects of their own competitive advantage (e.g. economies of scale, efficient tools and processes, pre-kitted and branded components, and even support services). With the white box market dominating the emerging-market PC business, hardware companies would do well to learn how to participate profitably in the revenue stream rather than swimming against the current.

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