Talking Heads: Motherboard Manager Edition, Q4'10, Part 2

The Future Of Motherboards And Their Makers

Question: A few motherboard manufacturers have exited the industry. We are continually seeing profit margins on components drop. As consumers, how will we see motherboard manufacturers continue to drive their brand?

  • Since the motherboard industry is mature, the cost/performance ratio of the product and speed of technology adoption are going to be the final keys to success.
  • As the desktop total available market growth rate is shrinking, only those motherboard manufacturers who occupy leading brand positions will survive. Innovation and product quality are both key to brand image. However, both need long-term resource investment.
  • The continuing drop of profit margins isn’t necessarily bad. We see this as a positive move, because manufacturers now have the know-how to keep the same functionality by removing unnecessary components. This will start with motherboard manufacturers and end with the consumers. Lower production cost means lower MSRP. Everyone is a winner.
  • Specification: Higher price for more delicate features and more added-value, Support: Focus on good product maintenance and after-service, Marketing: Cooperate with vendors from well-known brands.
  • For us, we are dedicated to delivering high-quality components, innovative technologies, and implementing the latest industrial technologies on our products. In addition, we see the overclocking and gaming community as an important market, and therefore will keep focus on providing the best overclocking and gaming solutions.
  • We think there are only two ways to drive the motherboard business: cheaper price or special features.
  • We're more focused on advanced engineering [research] and developing leading edge time-to-market products that customers will see greater value in.
  • Focus on the technical trends and new features.
  • After some makers exited, it is good there are fewer competitors in the arena. Driving brand name takes differentiation in product offerings and strong channel coverage.

Over the past decade, the motherboard industry has gone through a few rough patches. The economic recessions over the past few years really show in the number of players left in the game. As far as consumer brands go, we at looking at the scene without Abit, AOpen, Albatron, Chaintech, DFI, Epox, Shuttle, Soltek, and Soyo. And if the current economic climate has anything to say about it, it is possible that this is not the end of the list. It is important to point out that some of these brands are not the result of dead companies. Some have just simply exited from the channel motherboard business. Others, like Shuttle, have simply just carved out their little patch of the earth elsewhere.

The players that remain are still facing the simple challenge of relevancy. Part of the reason for the previously-large number of motherboard makers was decent profit margins. As margins dropped, fewer players could financially afford to stay in the industry. Now that the industry is basically mature, how do these makers continue to separate themselves from the pack?

Over the next few years, we will see continuing pressures on price as manufacturers weather the changing economic climate. However, this has not abated the consumer thirst for well-designed products. It seems to us that manufacturers will need to focus on delivering better feature sets with an eye on time-to-market. For example, one or two brands are in a vulnerable state because their products were released more than a month behind the rest of the pack. A high-price feature-laden motherboard can justify an early entry as much as a low-price barebones design can justify a late entry. However, motherboard manufactures will find this is going to be a careful balancing act. In fact, winning is about doing both.

Most of the profit in the motherboard industry isn’t at the budget or high-end product-levels. If you consider the volume, it is really in the mainstream product. However, everything we usually associate with the high-end spectrum of the motherboard business: overclockability, big feature sets, bundle packages, next-generation technology is also trickling down into the mainstream product. The lines are becoming more and more blurred. As consumers, this is great news. This means having a small budget can’t stop you from building a reasonably heavy-duty computer. If you don’t believe us, look at our latest $400 System Builder Marathon configuration.

Going forward, it'll be interesting to watch is how companies keep their mainstream and premium products separate. At the higher end of the spectrum, we are looking at a situation where $300 translates into the difference between 4-way SLI with USB 3.0 over 3-way SLI and USB 2.0. 

On the business side, this means there has to be a careful evaluation of the margin/product cost ratio and the price/performance ratio along with sales volume. Careful planning of an entire product line will be essential to healthy sales, and in return a healthy quarterly report. There is less room for product line overlap as the margins tighten, so decisions on which features to include need to be very conscious and deliberate.

If you look at the balance sheet, every company seems to be healthier in 2010. Since only Q1 data is in, we are left wondering about some of the more recent events: increasing wages in China and the appreciation of the yuan. Quarter to quarter, the operating margin and net revenue reports are up, and we are eager to see more of the 2010 data. However in a two-year window, one tier-one company’s estimates for global motherboard shipments have fallen by almost 25%, which really puts into perspective the global economic climate and the current price war between Asus and Gigabyte.

The market share numbers for everyone are in flux, but keep in mind that this is not really due to a major decline in unit sales. Over the past few years, everyone was hit fairly proportionately by the economic downturns. If you look at the numbers, the total available motherboard market is experiencing slow growth, but is not shrinking. This is an important distinction to make. The shifting numbers are not a result of giving up market share; it is more a result of a company taking a share of the growing market disproportionate to its current market share. So this makes for a major shift in the market share landscape, even though the total market and individual companies both may see some degree of growth.

Chris Angelini
Chris Angelini is an Editor Emeritus at Tom's Hardware US. He edits hardware reviews and covers high-profile CPU and GPU launches.
  • pandemonium_ctp
    Excellent read. I love seeing you guys get real world answers from companies willing to participate. It really shows where the industry is heading.

    This means having a small budget can’t stop you from building a reasonably heavy-duty computer. If you don’t believe us, look at our latest $400 System Builder Marathon configuration.
    Absolutely agree. This is basically where I've been placing my builds for the last 10 years; at the bottom of the price curve where performance hits the sweet spot for price. I alone typify that logic.

    The industry has always been on a smaller, faster, cheaper trend, and that's never going to change. Netbooks are here to stay, until something smaller, faster, and cheaper replaces them.
    Smartphones/PDA? They've existed for a long time now. The problem is the technology wasn't around to give them the power they needed to do everything a Netbook can do. That is rapidly changing. I hate to say it, but I disagree with Netbooks being a long-term investment. The consumer now is driven by convenience. If my smartphone can be my multimedia outlet, document editor, day planner, browser, camera, accessory portal (ear pieces/headsets, printers, scanners, etc...) and telephone, they why would I want to lug around seperate devices for each of those?

    If you can play 720p and 480p with decent bit-rates for $100 to $200 less, why not? This type of buying decision is naturally going to be a short term phenomenon.
    Very short-term. At the way things are going, that will be one to two years worth of earnings at the most. Hardly worth the R&D IMHO.

    I think the most valuable feature for future motherboards is saving power and enhanced performance.
    This is the bottom line for everything, basically. This motto can not falter.

    The fact that hybrids migrate graphic functionality to the processor might not actually change that much. As one person noted, the construction of the motherboard hasn’t gotten any simpler. Quite the opposite, in fact. We are now looking at motherboards that are more complex than ever before.
    Complexity is definitely the direction the industry has taken. However, I would think if a manufacturer wanted to baseline a board with IGPs, they would do so in terms of finding a way to allow additional discrete GPU and/or CPU installments for those that tinker. I know this has been tried in the past, but I'm not talking about simple onboard graphics processors.

    The baseline board would be for the general consumer and could handle day-to-day tasks found in every household. While additional GPU and CPU configurations that would work in conjuction with the onboard processors appeals to the specializing category. We just need a manufacturer to take that step to allow them to co-exist in the same environment and provide that extra benefit of accessorizing.
  • dennisburke
    The Future Of Motherboads And Their Makers
    The P55 is a great middle of the road platform, and if one graphics card (even two) is enough to wet your whistle, you could'nt ask for more.

    I think brand loyalty comes about by great customer support and innovation, and it doesn't hurt to have a well used and supportive attached forum.

    I've hide my eggs with Intel, WD, Corsair, ASUS, and EVGA for many years now, and they are safe.
  • Onus
    I agree with everything the first poster said, except for one STRONG disagreement; that he is the only one who typifies that logic. "How low can you go" is a recurring theme in every build I do, especially for myself. If I want more future resistance, I'll go a step or three above that, but the base thinking still tends to be at the bottom in terms of cost (including power usage).
    In an economy where it is more important that things last, what I want to see is a focus on durability. Gigabyte advertises this very well, but I find that ASRock has many of the same elements (e.g. all-solid, Japanese caps, ferrite chokes) and costs a lot less.
  • nutriment6464
    fix the manfucaturer graph ;)
  • Th-z
    I am surprised MB makers didn't talk about speeding up the boot process, or UEFI, if it can speed up the boot time. I think really fast boot up is what everybody really wants. Now we can get SSD to speed up the loading for the OS part, but the very first thing when you turn on the computer, you still have to wait couple seconds for the slow BIOS to finish its tests, etc. That's probably the one thing that hasn't improved a lot when comparing to the speed improvement in other components.
  • WarraWarra
    Wow extremely confusing heading for this article.
    Thought it is some software that does what with motherboards ?
    And talking heads music band has got what to do with this ?

    If not for the weird article name the rest is very nice.

    Good to see Toms getting serious about hardware and reality from a users point of view.

  • Stardude82
    I don't know if competition in motherboards has decreased that much.. Zotac and EVGA are new. It's not like the CPU market which went from 4 competitors to 2.
  • palladin9479
    Hm might want to look at that ULV comment in reference to Intel. With such small and highly integrated parts you can't just use a processors wattage requirements but instead use the platforms requirements. In this case I believe Via's Nano processor wins.
  • chumly
    I am impatiently waiting for UEFI as well. I think it would be amazing to have a 4TB single hard drive. BIOS is ancient, it needs an update. I also don't believe that the competition in the market of GPUs is reflected at all in the Motherboard market, especially on the AMD side. Nforce boards are terrible in both price and features. It seriously affects my decision on which new GPU to purchase.
  • dEAne
    I can count on this, thanks tom - more to do.