Built for battle

Middle East PC assembly space continues to challenge

Tags: DesktopsFoxconn Technology GroupGOODRAMIntel CorporationKingston TechnologyLaptopsMicrosoft Corporation
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Built for battle Nader Redjeb, Foxconn.
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By  Andrew Seymour Published  January 8, 2011

The Middle East PC assembly space remains an incredibly fragmented and notoriously difficult place to operate, yet for all the challenges it faces it still continues to attract the attention of the region’s top components vendors.

Even the most avid admirer of domestic PC manufacturing would have a tough time arguing that the Middle East is a hotbed for local integration. Browse the shelves of any reputable IT retail outlet or check out the PCs being used in the next office you visit and the chances are the logo of HP, Dell or another recognisable MNC will adorn the first machine you see.

Multinationals are understood to dominate 70% of the PC market in some Middle East countries — even more in the notebook space — illustrating the scale of competition that local integrators find themselves up against. Middle East assemblers are not alone in finding the conditions challenging though. Local desktop producers around the world have been forced to radically overhaul their business models in recent years in a bid to fend off the twin perils of commoditisation and wafer-thin margins.

What’s more, the general failure of assemblers to conceive effective laptop PC strategies when the mobile market first took off — not to mention the actual technical constraints of notebook manufacturing — has led to A-brands taking firm control of this burgeoning form factor. It is perhaps no surprise, then, that market onlookers argue the landscape has quite an unstable look about it these days.

“We have seen the number of local assemblers decrease during the last few years,” says Nader Redjeb, sales manager for the Middle East at motherboard ace Foxconn. “The OS and CPU vendors provide more global support for A-brands and that is one of the major reasons why A-brands are getting more share of the PC and hardware market.”

Redjeb does not hold back in his assessment of the local PC assembly space, voicing concerns that a general lack of innovation is indicative of the rigid strategies many assemblers have become confined by. “So far, none of them have done anything very innovative,” he says. “It would really help them if they focused more on barebones rather than taking the components separately and assembling by themselves.”

Antoine Harb, business development manager for the MEA region at memory vendor Kingston, also fails to give the names of any assemblers in the Middle East that he feels are innovating, except to say: “In our opinion, assemblers are always looking for innovation tailored to their customers’ needs.”

Identifying a regional PC integration assembly king is an impossible task, but then that has always been the case. Although outsiders may view the Middle East as a solitary market, the reality is that each individual country has its own share of key players whose fortunes are linked to a variety of demographic and historical factors.

Names such as Touchmate, Sky Electronics, Shuttle and Hicom in the UAE, Zai in Saudi Arabia, and Boraq and Emak in Egypt, have all stood the test of time. Companies like Kobian, which builds the Mercury brand, meanwhile, are assembling locally but rely heavily on export sales, while further afield Casper in Turkey and Logycom in Kazakhstan can count themselves as sizable players in their respective markets.

The number of assemblers possessing top-level ‘Premier Provider’ status on CPU vendor Intel’s channel programme offers a useful barometer of how many truly significant local players exist today. In the UAE, for instance, Intel has six Premier Providers, while the number in Saudi Arabia is 10. Egypt and Lebanon have eight apiece. Variations in market structure illustrate why components vendors need to develop a local distribution network and sales presence that adequately supports system builder partners.

“Countries like Algeria and Egypt can be considered the top markets in North Africa, while Saudi Arabia is a big market for the Middle East and the Syrian market is also doing quite well,” says Foxconn’s Redjeb.

Kingston’s Harb agrees that the larger markets, such as the UAE, Egypt and Saudi Arabia, have historically harboured the most vibrant local assembly scenes. He suggests the successful players are the ones who actively embrace the latest technologies, but cites population size and government support as factors shaping market performance. “If you take Egypt as an example, it enjoys very strong support from the government, especially when it comes to large projects involving schools and students,” he points out.

Hard drive vendor Seagate also spies opportunities in the Egyptian market, according to Christian Assaf, its regional channel manager. “A-brands have grabbed share in some countries but the biggest assembly business is still coming from Egypt, which represents around 20% of the internal [hard drive] business in the Middle East,” he says. “We have global programmes like Seagate Premier Partner as well as local tailor-made rebate programmes to support local assemblers in different countries.”

While it is hard to deny that the local assembly scene finds itself under pressure, there are still opportunities for companies that understand the value of a flexible business model and know who their customers are.

Components vendors, unsurprisingly, are queuing up to offer their words of advice. Redjeb at Foxconn, for instance, urges assemblers to “rework their strategies” by focusing on L6/L10 barebones from different vendors and putting more emphasis on marketing and channel activities.

“A-brands are offering a limited range of products whereas local assemblers can offer more models and can have flexibility on specs,” he says. “The real advantage of a local assembler is that it can target the SMBs in the local market and offer customised products suiting their demands. A-brands can focus only on the mass demand, so the local SIs will still be there in the hardware market.”

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