The Show Goes On

Despite the global economic slowdown and the rise in status of the Chinese export industry, Taiwanese PC hardware manufacturers remain optimistic, and Computex 2001 was testament to this. The manufacturers are looking towards the Middle East region as a major growth area, and are planning distributor and channel strategies right now.

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By  Michelle Sturman Published  June 27, 2001

I|~||~||~|The worldwide economic slowdown attributed in part to US IT companies has affected the Far East. After recovering from the 1998 Asian economic crisis, Taiwan is once again feeling the effects of a decline in its global exports, especially for IT products. “The world economic situation at the moment is quite bad, and there are a few countries that just keep going down and down,” Ralph Liu, director, Networking and Information Group, FIC told CRN.

In 1999 for example, total production value from the hardware IT industry rose 18.1% to US$39.9 billion over the previous year. Complete figures for 2000 and this year are as yet unavailable, although orders for April 2001, by Taiwan’s exporters totalled $11.59 billion showing a decline of 6.63% compared to the same period last year. According to the Ministry of Economic Affairs (MOEA), this decline is worse than experienced in 1998 at the height of the economic crisis. “Taiwan’s economy is not so good, but I believe that we can ride it out as it is not as serious as some other countries,” says Joseph Lee, sales manager, Asia-Pacific Operation, Iwill.

Taiwan’s main export partners are from Europe, Hong Kong, Japan and the US, and orders this year have declined sharply, says MOEA. There are over 900 computer hardware manufacturers with over 100,000 employees, and recent years have seen Taiwan’s IT industry grow to become a major contributor to the country’s overall economy.

||**||II|~||~||~|The economic situation has led many manufacturers to set up factories on the Chinese mainland due to a cheaper cost structure, but the neighbour is expected to become a possible threat to Taiwanese manufacturers in the future. “A lot of motherboard manufacturers have already set-up facilities in China because there is a big difference in cost,” says Jason Teng, regional manager, Acorp.

“If the World Trade Organisation (WTO) open China, then we will have some competition, but unless the motherboards made there can be of the same quality as those made in Taiwan, it should not be a problem,” says Lee.
“If that happens it could be dangerous,” he added.

The economic pinch was evident at last month’s Computex held in Taiwan, as many manufacturers noted that attendance was down from last year. One important factor to note is the Middle East was not included in the declining markets importing IT products from Taipei.

In fact, the majority of Taiwanese manufacturers are looking to expand operations in the region, buoyed by the fact that the economic slowdown does not seem to have affected the Middle East. “Our business is growing in the Middle East, and the market is growing in general. This is why I decided to put more resources into the region,” says FIC’s Liu. MSI’s sales specialist, Peter Wang agrees: “The Middle East market is growing despite the worldwide economic slowdown, this is because Iran and Saudi Arabia are growing up.”

A handful of Taiwanese companies sit on top of the computer hardware heap and pump money into research and development, while the rest are content to push products out of the door on an OEM basis. It is the few manufacturers sitting at the top of the pyramid that have pushed for business in the region, but the smaller Taiwanese companies are ready to start banging on the door. Only FIC has a local office in the region, and the results of its efforts are starting to bear fruit, including deals with local ISPs and local assemblers. “In the Middle East we started with the motherboards, and that is still our core business, but now we have notebooks and PDAs etc,” says Liu.

||**||III|~||~||~|Manufacturers are scrutinising the Middle East market closely and looking to move into the region, and those that have existing customers are looking to consolidate and expand the channel. Iwill for example, has a distributor covering markets such as Iran, UAE, Kuwait, but is looking to move into Saudi Arabia. Asus is looking for distributors and resellers across the whole of the region, including specialist notebook resellers. MSI is looking for a pan-gulf or regional distributor to take care of its business in the region. “For the region I want more distributors and resellers and increase volume by 15%,” says MSI’s Wang.

However, concerns are plaguing Taiwanese companies and many are wary of investing large sums considering the current economic climate. In a region where grey marketing is rife, counterfeit products openly sold, product knowledge is lacking, and price is still the most important issue of the day, it is a shock to the system after dealing with the European, US, Japanese and Hong Kong markets. “I recently went to visit some resellers based in Dubai, and I noticed that a lot of them do not have any product knowledge; they are based on price and nothing else. There is a reason why some boards cost more than others,” says Teng.

“We want to get in touch with the distributors and dealers for our components side, but they are still very price-orientated and do not really care about quality,” agrees Danielle Chang, marketing specialist, Asustek Computer.
“In Europe and the US they are more concerned with quality than price, but this message has not got across to the Middle East yet,” she added.

||**||IV|~||~||~|Due to the lack of knowledge presented to the manufacturers, resellers with expertise in the motherboard industry are in demand, especially those with access to markets across the Middle East. “I am looking for a channel that knows the motherboard industry and trends,” says Wang.

Manufacturers such as Asus are prepared to accommodate the channel and provide training and information to keep up-to-date with the latest trends in the industry, including services across the Internet. “What I am trying to do is educate the resellers as I have found that in most Middle East countries, they are not really being educated properly,” says Chang.

“I have set-up a reseller Web site to gain information and I also send out articles about the latest technology, trends and what they should look out for,” adds Chang.

Iran and Saudi Arabia are the biggest markets for the Taiwanese manufacturers at the moment, and companies such as Iwill are waiting patiently to move into the Egyptian market. “Egypt is a big market, but so far there has been no way to ship the high-technology products for the high-end desktop PCs and workstation motherboards there,” says Lee.

The Middle East market is a major focus for Taiwanese manufacturers as many are clamouring for business due to circumstances in the current economic climate. Distributors are being sought, channel strategies being finalised, and support programmes put in place. It is now up to Middle East resellers to understand the trends in the components industry—especially motherboards—and to make sure that quality becomes an issue, rather than price. “In the Middle East market, it is very price conscious, but I trust that as technology changes, people will look for quality,” says Lee. ||**||

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