Taiwan's New Economy is Sink or Swim

Expand & Conquer

ECS is a very good example of a Taiwanese hardware maker that has expanded into the PC and notebook business to broaden its activities - for the sake of maximum growth. If people think of components and system OEM, they will likely name Asus and Foxconn among others. ECS did lots of low-cost products in the past, but has been changing its profile in recent years and it is a larger player than many people would realize. Asus wants to build 60+ million motherboards this year, Foxconn targets 40+ million. Right after that comes ECS with a projected 30+ million boards. The other popular brands, Gigabyte and MSI, are both in the area of 15 million boards and thus play in a different league.

To expand its component business, ECS made two major acquisitions this year : Tatung and Uniwell. Tatung is a system builder, Uniwell builds notebooks. The acquisition of Tatung added facilities in China, Mexico and Czech Republic to ECS, Uniwell is based in Suzhou, China. In the notebook space, ECS now competes with the second-tier companies Mitac, Clevo and Arima, but won’t be able to attack Quanta, Compal, Wistron, Inventek or Asus.

Growth Strategy

A successful mammoth company needs to find a balanced mix of OEM and channel business. Foxconn has realized this a couple of years ago, and ECS is going the same direction. You need deals with the big PC and notebook brands to accelerate your OEM business. As a result, you can also go into the channel business, because you will be able to purchase components in vast quantities and thus harvest better profit margins (as long as your products are good enough to do so).

Quality Up !

If a system manufacturer wants to produce those systems most of us buy in retail, it has to be able to answer to all quality-related requirements from its customers. Think of HP, Dell or Gateway again : These heavyweights will only go for highest quality to not threaten their reputation by using lousy components.

Building motherboards or graphics cards doesn’t require secret sauces. It requires diligent engineers, state-of-the-art machinery, a stringent production process and a tracking system that allows to trace back to components, workers and machines - and it requires fierce cost control. This is the main reason why production has been shifted from Taiwan to China. Eventually, other countries such as Vietnam will be more attractive, as China is not considered a cheap ground any more.

But there are two issues that drive small and medium-size manufacturers out of business : They cannot offer competitive prices due to insufficient production quantities and they might not even be able to afford the equipment you need for QA nowadays : System builders need EMI chambers, ESD testing equipment, sophisticated inspection machinery for components, temperature chambers, and so on.

Let’s have a look at the quality insurance measures that are required for state-of-the-art component and system manufacturing today.