White box builders need a niche

Margins have been razor thin for local assemblers for quite a few years, but as the multinational brands continue to cut prices it is getting increasingly more difficult to see where white box builders will be able to find a profitable market not survive in, let alone thrive.

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By  Mark Sutton Published  September 19, 2003

Margins have been razor thin for local assemblers for quite a few years, but as the multinational brands continue to cut prices it is getting increasingly more difficult to see where white box builders will be able to find a profitable market not survive in, let alone thrive.

While the Middle East is home to many diverse markets, the ever-growing presence of big names is putting local assemblers under even more pressure, making it inevitable that more and more of them are going to disappear.

There are no shortage of suggestions of how local assemblers can survive though, but the question is whether they are feasible. Currently there are quite a few players looking to build regional brands to compete with the multinationals. But while a few have managed to win some tender deals to help them really hit the numbers, these few are the exception to rule. Any local assembler looking to take on the multinationals will need the volumes of project business to survive.

Intel has been active in trying to push assemblers towards more profitable areas. It has had some success in helping assemblers get into server building, but for the most part the success stories from this market have come from solution providers who are able to go the customer with a more rounded sales proposition than just a cheaper server than a big name brand. With a growing number of brand vendors also looking to create low-cost server lines, locally assembled servers could prove to be a short-lived market for pure assemblers.

Intel has also began pushing assemblers towards notebook assembly, presumably with one eye on sales of its Centrino and mobile processors. Notebook assembly is a lot simpler than it was in previous years, with barebone systems that require a minimum of expertise to assemble making the segment look more attractive to system builders.

Again though, the notebook market is dominated by brands, and while consumer demand is growing rapidly, the consumers are predominantly after a brad they know and trust. Notebook components are also still in shorter supply and more costly than comparative desktop components, making stocking of notebook parts more difficult for assemblers that don't have high volumes.

But while notebooks and servers might be getting all the attention from white box builders, they could be missing an opportunity closer to home, in high end PCs and PC workstations. Demand for high performance PCs is growing from computer design professionals and from gamers.

Both groups want PCs that are capable of turning in a superior graphics performance, meaning systems that require not just a high end graphics card but also high end motherboard, fast memory, fast hard drives, and an above average display. The cost of a high end branded machine is way over that of an average PC, and yet they don't offer the customisation that the power user demands.

A local assembler can provide complete build to order for the customer, and make better margins while doing it. Gamers and business power users still represent a niche market, and they will never be a volume proposition, but for the white box assembler they could be just the sort of niche that can provide a profitable business without moving too far away from their core expertise.

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