Original Link: http://www.anandtech.com/show/1120

CEO Forum - Q3/2003

by Andrew Ku on July 20, 2003 12:16 PM EST


The controversies in the PC industries have a life unto their own. Take for instance the motherboard industry, which was relatively quiet during the RDRAM fiasco. Had companies or their CEOs spoken out back then, it probably would have ended the argument much sooner. The lack of immediate input from the motherboard industry may have been one of the contributing factors to the prolonged hold out of RDRAM for mainstream applications, which resulted in some consumer and investor confusion.

Taking a step back, we can somewhat see the motherboard industry scattered, disorganized, and reserved when it comes to controversies or any touchy subject. Many times this can be attributed to a fear of backlash from a corporate partner (i.e. chipset manufacturer) or the fall in their company stock. Additionally for many cultural reasons, business executives in Taiwan are introverted and competitive, sometimes even more so than their US counterparts. Realistically, this is often counterproductive to the PC industry, because it blockades information from passing onto end-user and institutions. Moreover, one CEO doesn't understand what his peers are thinking, and results in two companies often not understanding one another. This also leaves the public with a very one sided view of current topics related to the motherboard segment, because only chipset makers and other for-profit-organizations have their own motivations when they lend their thoughts.

The fact of the matter is that the balance of power in the motherboard industry is more dynamic, than any other. The processor market and the graphics market each have two major players. Depending on how you look at the motherboard industry, you can count upwards of 20 contenders, and a minimum of 3 major competitors. This split of power leaves each motherboard manufacturer handicapped, when it comes to confronting other industry partners or taking a stand on controversial issues.

AnandTech is seeking to help bring a certain balance of power and input to the PC industry, and it is with great excitement that we launch AnandTech's CEO Forum. We have gathered 13 of the motherboard industry's CEOs for what can be viewed as a virtual conference room once every quarter. This is an opportunity for CEOs of the motherboard board industry to bring a single voice to much of what is going on in the current marketplace on behalf of their respective companies.

The CEO Forum has been structured to give CEOs the ability to interact seamlessly with one another and the public with complete anonymity. Since it is anonymous, the significant risks for these CEOs to speak out on controversial and sensitive topics are eliminated, which leaves them free to exchange views on the current position of the industry and on the most relevant topics to the motherboard segment. By conducting this openly, it allows the motherboard industry, as a whole, to help shape the future of the PC industry and bring some much needed insight to the public's eye.

We presented the CEOs with a selection of 10 questions, the answers to which you will find in the coming pages. Our format has made it so that CEO #1 for question 1 is not the same CEO #1 for question 2 and so on. Comments made by each CEO have not been attributed to them and have been purposely jumbled around, so as to give a reasonably high level of anonymity to all participants.

Technically, all of the participants are not CEOs. Many of the Taiwanese companies don't use multiple titles (i.e. CEO, President, and Chairman of the Board) for a one person like many US based companies. Instead, they often use one of the three titles to designate their lead executive. Official titles aside, all participants are in the highest office at their company.

Participant - Official Title, Company.

Remond Lu - CEO, ABIT Computer
Jack Ko - CEO, Albatron Technology Co., LTD.
Bernie Tsai - President, AOpen Inc.
Jonney Shih - Chairman and CEO, Asustek Computer Inc.
Simon Ho - Chairman of the Board, Chaintech Computer
Yen-Chi Lu - Chairman of the Board, DFI
Johnson Chiang - Chairman of the Board, Elitegroup Computer Systems
Jerry C. Ferng - CEO, Epox Computer Co., LTD.
Richard Ma - Executive Vice President, Giga-Byte Technology
Joseph Hsu - CEO and President, Micro-Star International Co., LTD.
David Yu - President, Shuttle Inc.
Andy Cheu - President, SOYO Computer Inc.
Symon Chang - CEO, Tyan Computer

We would like to thank all of the aforementioned participants for their time, effort and cooperation. Without further ado, we present you AnandTech's first ever CEO Forum...



1. Ultimately, do you feel that your company's future hinges on diversifying into other markets outside of motherboards, such as wireless, IA, storage, video, etc…?

CEO #1: We will diversify our product line based on its core competence: motherboard design and manufacturing.

CEO #2: Our core business now is motherboards and graphic cards…

CEO #3: Our company has been investing in ACP (Applied Computing Platform) business for years, products including touch panel PC, PC system, server system, NAS, ACP board, Media Center…and so on. We can see the rapid growth constantly. For the other product lines, we always keep on researching and will implement new programs in the near future.

CEO #4: …we will still invest resources on our core competence of motherboard business. This is the basic of new business.

CEO #5: Our core competency is motherboards. We have vertically integrated to include control over all production and have relocated to China for cost benefits. Demand for motherboards in our clone market remains strong. As the market matures, we will further strengthen our hold on this segment as the strong get stronger and the weak look to survive. We will experience growth through this strengthening and also through emerging markets. However, a maturing market also means our company has to look elsewhere for growth opportunities. You could say that our future will use motherboards/VGA as the base and new products such as miniPC as a means of accelerating growth.

As the motherboard market has started to reach its full maturity, it wasn't unexpected to see all of the CEOs answering, "Yes," in one manner or another. One CEO answered no, but did acknowledge that motherboards were an avenue for future proliferation into other markets.

The most notable diversification in recent news has been the large success of Shuttle at the Small Form Factor. They may have perhaps struggled at motherboard sales, but the advent of the XPC has given add security to Shuttle's place in the market. Profit margins are getting thinner, and new sources of revenue must be sought out. It seems inevitable that diversification will occur for all motherboard manufacturers, but when will be key to the success of any innovation. Pointing back to SFF, Shuttle's first dive into this market has given them a distinct advantage. Recent attempts by several other major manufacturers have yielded some success in niche markets, but Shuttle still takes the majority of this market. Timing can turn out to be a company's biggest ally or foe.

We followed up by asking, "Where do you see the emerging markets?" The responses we got back were fairly expected, as SFF and wireless were the most mentioned.

CEO #1: Server/Storage, Wireless, Notebook.

CEO #2: Wireless, IA, Video.

CEO #3: Barebone Desktop, Barebone (Channel) Notebook, Special purpose XC, Consumer PC.

CEO #4: We think "wireless" has the most potential Enterprise will need it, and then family users will follow.

CEO #5: We see great opportunity especially in barebone system and wireless LAN. The PC market will break into 2 fringes: the high-end product for gamers or people pursuing performance and the small-sized with multi-function that for common or office user. MiniPC satisfied the second group, and the market is booming. Wireless LAN is another killer application for the PC market. The market is surging rapidly, and when Intel is really to integrate it to their motherboard chip, it will become the standard specification eventually.

CEO #6: Bare bone (white box) servers; security servers with built-in encryption devices; optimized server platform for the HPC market, e.g. built-in infinite band controllers; storage products using iSCSI protocol.

CEO #7: DTP, Barebone systems, N/B, Servers, Graphic Cards, Optical storage, Wireless LAN & WAN Devices, and Network switches.

CEO #8: There is always a market demand which request high quality service. We will focus on new product innovation and exact production management to catch the eyes of the worldwide IT industry.



2. One year from now, do you see a stronger worldwide economy?

CEO #1: Growth is in the Asia and Pacific market, especially China.

CEO #2: Economic indicators are showing some positive signs. I think that mid-July will see Q2 earnings from the US companies. Should the results be good, we will look to certain strengthening of the world-wide economy by end of year. If results are not strong, it may be another difficult year for the economy.

CEO #3: After a long-term worldwide economy decline, enterprises start on internal adjustment. For the IT industry, as long as the infrastructure and integration of networking, broadband and wireless coming to be mature, new applications will bring new market demand. We believe the worldwide economy will ramp up soon.

CEO #4: But it won't be sky-rocketed. We foresee a low single digit growth in 2003.

CEO #5: I am more modest for the coming year. Yes, the war is over, and this can bring up the consuming power. But the recovery and business spending seems to be slow. After SARS, the Asia and Pacific market seems to have gotten better than expect, and we expect the post-millennium upgrade market growing this year.

CEO #6: All governments worldwide are devoting themselves to creating a stronger economy.

The health of the worldwide economy will have an impact on the status of the PC industry. In down times, consumers will tend to hold back, as PCs aren't necessities, and the commercial section will try to stretch out their upgrade cycles. At the moment, many analysts can't agree on the current status of the US economy and where it is headed, which just seems to reiterate some of the mixed signals in the US marketplace. The jobless rate is at an all time high, but stocks and business seem to be steadily recovering. The general consensus seems to be recovery, but outside of stocks and profits, the jobless rate and consumer confidence will be the biggest things that overseas manufacturers keep their eyes. The worldwide the economy seems like it is in recovery, and many analysts point to the move of manufacturing companies to overseas countries like China for the jobless rate in the US. However, demand will most likely need to pick up for an immediate effect.



3. AMD has recently introduced their Opteron processor for the server market. Do you foresee AMD as a long term player in the server market, a segment that Intel has traditionally dominated?

CEO #1: AMD has a great chance in the entry level / dual server board, and we believe AMD will gain more share in this segment.

CEO #2: We are happy to see there is another well-known core logic designer to join this market. It seems that Opteron will provide an advanced architecture for entry-level server solutions. But Intel has dominated so much in this field; for catching up on integration ability, AMD has a long way to go.

CEO #3:

1.Major players in the iA server market are IBM, HP, and Dell. It will take time for AMD to design-in.
2. In fields, Corporate concerns are reliability, stability and service - total cost of ownership. AMD hasn't gained the position in commercial space.

CEO #4: I do not think AMD will be a long term player in the server market. However, they will give a short-term influence to the market.

CEO #5: It is hard to change brand/quality image in the server business. AMD has a long way to go.

CEO #6: We consider AMD to be one of contenders in server segment just like what it is in the Desktop PC market, taking a certain market share gain. But the key player in server segment will be Intel, still.

CEO #7: X86-64 makes sense.

CEO #8: The server market is a difficult one to jump into and has different demands on CPU makers. AMD has made a good start with Opteron but not a strong one in terms of sales. They have many issues to still work out, and their limited tech support is certainly an issue that needs to be addressed if they are to be taken seriously by the server market. AMD will not be a dominate player in this market at least over the next few years, but have a good chance at occupying a niche segment.

CEO #9: It's still quite a tough challenge for AMD.

It should be noted that at the time of the survey, IBM had not announced their server line that utilized AMD's Opteron processor. The majority of the CEOs are confident that AMD is going to be a long term player in the server market. But all of them pretty much agree that AMD has yet to prove their abilities to the market and still has a long way to go.

The server market is consistently seeing a shift to cost, particularly as the struggling economy demands it. However, no large corporation is going to be willing to trade stability or longevity for cost. Downtime at VISA, even for a short duration, can create losses in the millions and or billions, all because of an unreliable server. In order for AMD to be successful on a large scale in this market, it must be able deliver everything Intel can (performance, longevity, stability, etc…) and still be able to focus on their price point. For commercial servers, reliability will be an ongoing key factor that AMD will need to prove.



4. NVIDIA is relatively new to the chipset market, and right now we know they are eating into the production of VIA on the AMD side for motherboard manufactures. Would you and your company support NVIDIA plans to produce an Intel compatible chipset?

CEO #1: NVIDIA integrated graphics can be a plus for Intel platform.

CEO #2: I do not see how NVIDIA can have any edge over Intel on chipsets for Intel platforms.

CEO #3: But NVIDIA has got to come up with its plan first. At this moment, we have not been told about this project by NVIDIA yet.

CEO #4: We'd certainly look at the chipset and test and make a decision based on cost and performance and demand from the market. The chipset market has stabilized and motherboard makers prefer a stable market with stable pricing policies rather than a blood-letting like that which took place at the start of 2002 as a result of fierce competition.

CEO #5: It's depends on what product and marketing strategy that NVIDIA will propose. The background of Intel's product line compared with AMD's product line is totally different, after all.

CEO #6: We are a customer-oriented company, and we do our best to fulfill customers' demand in every aspect of PC components. Also, we have kept good relationships with all vendors such as Intel, AMD, VIA, SiS, NVIDIA, and so on for many years.
If customers are interesting in a new technology or product, we will always try our best to make it available.

CEO #7: Patent issues not resolved yet.

CEO #8: Such support will bring reasonable competition into the market, and we will benefit from it.

CEO #9: If NVIDIA has plans to do so, we would be happy to support them. But of course, NVIDIA has to get Intel's support first.

Opinions aside, the patent issues for NVIDIA to produce an Intel compatible chipset have not been resolved, as one CEO simply put it. A serious consideration for this type of product is there, but all of this hinges on NVIDIA's collaboration with Intel.

Coincidentally during the survey, ATI announced that they had reached an agreement with Intel, in which ATI has the rights to build integrated graphic processors that support the 800MHz FSB. This comes on the heels of ATI's announcement of the RS300 back in late June. It is hard to say if this will affect NVIDIA's chances for procuring a license agreement with Intel. If NVIDIA is able to get a license anyways, we may be on hand to see the accelerated maturing of the integrated graphics market, as the two significant graphics players compete in a whole new avenue.

At a glance, NVIDIA's success in the chipset market has been relatively quick, as they have begun to oust VIA in terms of total production at the major motherboard manufacturers. Our own inquires have given us numbers that run in the 40-60% range of NVIDIA's make up for AMD platform production at the Tier 1 manufacturers. This brought us to follow up by asking, "How do you see the roles of ALI, ATI, SiS, and or VIA in the market, going forward?"

CEO #1: VIA will always be a threat to Intel, due to CPU capability.

CEO #2: In general, ALI already switched their focus to optical solution (DVD). ATI may be a new player if their graphic performance can compete with NVIDIA. SIS is somehow fixed at low price position. VIA's position in AMD platforms is eating by NVIDIA. For Intel platforms, let's wait and see.

CEO #3: For the Pentium 4 Platform, by quantity, SiS > VIA > ATI. For the K7 Platform, by quantity, VIA > SiS > ATI

CEO #4:

ALI: Wait and see the war of K8 platform
ATI: Keep on watching RV300. Because of the close relationship with Intel, there maybe a deal about exchanging patients and sharing desktop market in the near future.
SiS: Much more aggressive product plan and product performance this year, but weak in channel market, branding is an issue from the viewpoint of the motherboard manufacturer.
VIA: Very tough situation at this moment, we are waiting their product strategy for the next step.

CEO #5: They have to focus on certain field out of the PC industry. Right policies & plentiful resources from their management will be key factor to decide whether or not they should succeed.

CEO #6: For the Intel platform, especially for mainstream market and above, Intel chipsets will be able to retain their dominance. Other players, such as SiS and VIA, would be only allowed to share the rest of the market.

CEO #7: Fighting for low end segment. VIA has potential to surprise with a hot chipset offering great performance, but with the more mature market, it looks like they have been delegated as a lower-end segment.

CEO #8: As we see it, all these vendors are good partners in business. In the last few years, our company does also provide products on the basis of their chipset. With outstanding R&D and marketing power, we believe they will do well in the future market.

CEO #9: VIA will be the only survivor in this group; SiS will be folded into the foundry business.

CEO #10: ATI may gain some share in the integrated chipset market. VIA is going to share the market with SIS on the Intel platform.

CEO #11: ALI is no longer a core logic player. SiS and VIA will gradually lose market share to NVIDIA and ATI, especially in the integrated graphics market.



5. In the late 90's, companies often enjoyed high sales even with a high priced product. Now as the economy struggles, many are revaluating their costs. In the past few quarters, we have seen a renewed emphasis by consumers on cost. Is this going to be a temporary trend?

CEO #1: With the tech boom, cost was of no issue. With the end of the tech boom and the maturing of the industry, cost becomes more of a factor. This is typical of a maturing life cycle. However, the product will continue to have a high end segment and a mainstream segment with high, mid and low ends and the value segment. … We made improvements to our production and design to be more competitive at the more price sensitive main mid and low and entry levels.

CEO #2: The trend of lowering cost of IT products should be continued by asking by consumers - motherboards are becoming mature. New technology and creativity of new products is the way to avoid that.

CEO #3: As end users are more aware of the cost issue and non-differentiation on product features, the renewed emphasis you mentioned won't be only a temporary trend. It would be a long-term tendency.

CEO #4: Basically, we believe cost is not everything that consumers care about. A balance among cost, performance, and product features is the key issue that they consider about before making decisions on purchasing. Our company dedicated itself in providing reasonably priced, performance enhanced, and feature enriched products for many years, and we will keep on this direction in the future, as well.

CEO #5: Cost down is always the "must" topic in running a company, but a healthy and positive direction should be revaluating the cost to provide a product with quality. So, how to define the "acceptable quality" will be a task for consideration.

CEO #6: This is not a temporary trend; it will be a long-term phenomenon.

CEO #7: We hope it is a temporary trend.

CEO #8: Consumers will enjoy low prices; there is way too much capacity for the manufacturing houses, who will compete hard with no margin.

If you were to look at commercial and consumer buying habits 5 years ago, you would probably have seen price as a consideration on the bottom half of the list. With the economy struggling and consumer confidence faltering, it is hard to predict where this will lead buying habits. Some would think that as the economy recovers and comes full swing, high priced products will begin to enjoy high sales again, because there is more free capital to work with. However, it is hard to say if this will actually happen. Many companies and consumers will be cautiously eyeing the recovery and may be looking to prepare for the next economic slump, and might hold back on capital expenditures. This would mean a continued focus on cost even when the economy is strong. While the emphasis on cost will not go away, it is unknown if it will still remain a primary concern/buying habit.

Differentiation among recent products has certainly been lacking, as much of the market matures, and this will be something to keep our eyes. If new innovation can keep products differentiated enough, we may see something of high sales for high priced products. How large the spectrum of differentiation will be is going to be what much of this boils down to.



6. Profit margins are getting smaller, and everything is becoming more and more integrated (LAN, Audio, SATA, Graphics, Wireless, etc…). Currently, it is hard to see that many feature differences between tier 1 and tier 2 motherboards. Is this year going to be one in which the biggest motherboard manufacturers get bigger and the smallest motherboard manufacturers get smaller?

CEO #1: …wasn't IBM the biggest computer company 20 years ago? We believe a company with creative mindset and innovation tradition can always find a way to differentiate products.

CEO #2: … the biggest get bigger and smallest get smaller. However I think it won't be an ever continuing trend. Somehow the "bigger or smaller" will end in a level where there is a balance among players in the market.

CEO #3: The bigger get bigger and smaller get smaller should be changed to the stronger get stronger and the weaker get weaker. Sometimes the biggest will not get bigger, but get smaller as they have a weakness. … You have to look at each individual company and be able to determine its main strength and how strong that strength is. If a company has lost its strength, it will fall regardless of size. … There are always ways to differentiate a product.

CEO #4: Most of 2nd tiers need to find a way out this year, since there is no room for them to play in terms of brand name, products line, economic scale and….etc.

CEO #5: That's why all the tier 2 motherboard makers are eager to diversify into other markets outside of motherboards. Smaller doesn't mean fewer profits, the point is what is the "right size" for getting the best profit.

CEO #6: Tier-1 will dominate the desktop; other survivors are the high-end players…

CEO #7: It's become a worldwide trend in every industry that manufacturers which have larger economical scale, stronger R&D capability, better yield and quality and so on will be bigger and stronger…

CEO #8: Most incorporating with brand image and greater manufacturing capacity, the situation you mentioned in your question quite fit my own observation in this industry. Smaller manufacturers should shoot for niche market to get their own profit.

This question ties in with question 5. As high priced products have been phased out, we have started to see a smaller spectrum of price. This has been increasingly prevalent for motherboards, where prices are being slashed and profit margins are getting thinner. If this is to continue, it will mean that the mainstream market will most likely see the strengthening of Tier 1 manufacturers, while other tier companies must find success in niche markets. SFF is a good example of the migration from true motherboard sales to something of a niche market.

In terms of motherboards, it is clear that Tier 2 and Tier 3 manufacturers must find their own key to success outside of motherboard sales or find innovative ways to continue to be profitable. All of the CEOs said they planned to diversify into other markets, but those with the greatest sense of urgency seemed to be those Tier 2 and Tier 3 manufacturers.



7. The worldwide economy is struggling a bit, particularly due to the US economy. What is the overall outlook for your company in Q3-03/Q4-03/Q1-04?

CEO #1: Organization adjustment and strategy re-consideration are the most important tasks at this moment; the internal improvement will influence the business for following quarters.

CEO #2: Our company expects sales growth in Q3/Q4 of 2003.

CEO #3: All companies would like to see this [growth]. Our sales are increasing month over month … with expectations to continue throughout the year.

No CEO saw their overall company outlook shrinking in the current quarter and the next two quarters. It is possible that a few were being reserved in their responses. The most pessimistic period was for the current quarter, where 38% of CEOs said their company was going to be stagnant.

There seems to be much higher hopes for the next quarter, where all but one CEO thought their company was going to grow. Quarter 1 of 2004 is still very much up in the air, as it much of it depends on the economic outlook at the time. At the moment, most of the CEOs seemed to be in good spirits about what Quarter 1 2004 will have in store for their company.

Quarter 4 2003 seemed to be something that all but one CEO had their eyes on for growth. Several important industry announcements are expected to be made from chipset manufacturers, whether if this had some affect on the outlook for the next quarter remains unknown.



8. What is your company's future outlook for international investments from North America, Europe, South America & Asia?

CEO #1: Our biz will grow in every region, so we will continue invest in Europe, S. America, and Asia. However, N. America's clone market is relatively small.

 

No Response

Falling/Shrinking

Stagnant

Growing

North America

15%

 

46%

38%

Europe

15%

8%

38%

38%

South America

15%

23%

16%

46%

Asia

15%

 

8%

77%

Geographically, everywhere across the globe seemed to be up in the air. Asia was the only clear place where CEOs felt more capital coming from. Interestingly enough, 23% of the CEOs expressed their pessimistic outlook for South America, where they actually saw the capital shrinking.

When the economy fully bounces back will play a big role in this and where companies are willing to sink their capital into. Asia has the most confidence among the CEOs mainly because of China, and the shift of manufacturing to that area. The move to other areas will largely depend whether the company feels any immediate or potential business expansion, the country's policies on factors such as labor, other business cost factors, and the area's readiness for technology. Africa certainly has a lower labor cost factor, but the readiness for much of what is to take place in technology over the next 5 to 10 years isn't there now. And with civil war in many areas, manufacturers are definitely willing to forego some lower labor cost for regional stability.



9. Over the last few years, we have seen manufacturing shift from Taiwan to China. How have the Chinese government and businesses received this new influx of manufacturing, and do you see it continuing to flourish in China? Do you see other emerging markets? If so where?

CEO #1: Since the Chinese government has implemented the policy of capitalized socialism, they are glad to see manufacturing shift from Taiwan to China.

CEO #2: Chinese government and businesses have been receiving this new influx of manufacturing very well, and we see it continuing to flourish.

CEO #3: … India.

CEO #4: … China will be the biggest market.

CEO #5: China's government will provide lots of favorable policies to cope with the growing influx of manufacturing facilities. And I do see it continuing to flourish in China. Another emerging market will be Eastern Europe, I believe.

CEO #6: If companies are not producing in China, they are operating with a 50% higher labor cost. Production in China is a given. It is a very complicated, yet simple arrangement between Taiwan and China in terms of business.

CEO #7: Manufacturing in China has been improving a lot in the last few years. China's government and the society are now mature enough for all the rapid changes. This is where opportunity is. Generally, more and more manufacturing will shift to China, and the key to success is management. The third world is another booming market, especially the Middle East after the war, East Europe, India and S. America.

CEO #8: I believe that China will dominate in the manufacturing sector for another generation, i.e. 20 years.

CEO #9: … the emerging markets, we found India and Russia to hold potential.

CEO #10: …we will move 60% of manufacturing to China, and 40% will remain in Taiwan. Sale's revenue in mainland China remains flat so far.

CEO #11: In terms of manufacturing, China is still the best place for investment.

CEO #12: The Chinese government has planned several science and technology fields for industries, since few years ago. Passing through these years, the supply-chain is complete there, and it's not easy to be substituted in short-term. The issue, SARS, of course will force the traders' hand to review global strategies and raise risk management, but it's only a survey after all. We don't see other emerging markets now.

All of the CEOs pretty much agreed that China was the place to be over the next several years, as the Chinese government has become much more accommodating to capitalistic industries. One CEO even went as far to mention that the majority of their manufacturing will shift to China. Another said, "If companies are not producing in China, they are operating with a 50% higher labor cost." No doubt, this 50% higher overhead cost for labor is definitely going to cut into net profits, now and in the future. We don't know the exact proportion of labor cost in Taiwan to China at this time, but if this is indeed the case, manufacturing in China will be very critical to the future growth and the health of a Taiwanese manufacturer, namely those making motherboards. As it is with most things, the timing in which the shift occurs will effect the company. With costs still low in China, manufacturers understand it is good to make the transition now. Maturity in China will bring along high labor costs among other things, and this will be stumbling block for any fail to see the benefits of moving with in the next 5 to 10 years.

It isn't clear how long China will remain the hub of the manufacturing sector, but it does look like it will be for quite sometime. Three places come up as possible future manufacturing areas that hold potential: Eastern Europe, India, and Russia. A significant shift in manufacturing down the road will definitely be dependent on the economic situation of the country in question, and other supply-chain factors, such as cost of labor.



10. How have the events of 9/11 affected the world wide PC market? We have seen a global recession in sales, but what specifically has inhibited growth in the PC community (particularly with US to Asia relegations)?

CEO #1: Logistics have been impacted for a while. The economy impacted by 9/11 event might be the major factor to have inhibited the growth of the PC market, but it should not be that long.

CEO #2: I do not believe that 9/11 is a major factor for the slow down. There is no urgency to upgrade PCs. Interest is shifted to PDAs, smart phones, etc...

CEO #3: Basically, of course, major accidents and events do affect every industry including PC. 911 and the Iraq war caused the PC sales dropped down for a short term like 3 months or so. The major factors included shipping processes, costs, and demand of the areas where it got affected. However, the economy will eventually come back to its normal scale.

CEO #4: 9/11 affected the PC market ONLY in two consecutive years. It is pure economic recession and uncertainty of the Mid-East area.

CEO #5: The business in the rest of the world is still growing, but for the USA, sales are indeed decreasing after 9/11.

CEO #6: People are getting conservative towards spend money.

CEO #7: In the commercial sector, most of companies cut IT expenditures because the WW (worldwide) economy has been quite slow in the past two years. In the consumer sector, there is no … applications to match today's PC power. No specific impact from 9/11, but we did see Asia's PC market impact by SARS in the past few months.

CEO #8: The "911" impacted the real purchasing activities. However, I think the major reason of the recession in the PC community is due to product life cycles being too short. New items had been brought to the market in huge [quantities], while practical applications didn't really come out enough. Situations like 'the Internet not having been put to full use' also leads to the lack of more applicable features/functions of the PC to be brought up.

CEO #9: Customers are likely to be conservative. In light of that, total IT spending or CapEx (capital expenditures) has decreased. The PC growth is limited. Currently, hardware performance is sufficient for applications. Demand for replacing PCs will drop.

CEO #10: I think the global economy situation would be more relevant, rather than a particular event happened almost 2 years ago.

CEO #11: I don't think the PC slump can be attributable to 9/11. There were many variables behind the PC slump.

We would like to make clear that this question is not to take away any of the outrage or travesty for September 11th, 2001. We along with others and the CEOs in this survey give our sympathy to the victims. The only thing this question asks is the effect of the event to the worldwide PC industry.

Many of the CEOs seemed to be indicating that 9/11 had a short-term impact on the worldwide PC market, if anything. The recession of sales worldwide was primarily blamed on other factors such as practical applications of technology and longer life cycles for products. Several CEOs saw 9/11 influencing immediate buying habits because of uncertainty, but it didn't do much other than curtail demand. They acknowledged the slow down of sales, but saw it limited to the United States. In their responses, there was not too much talk about how soon sales will bounce back, partially because they didn't see it decline because of 9/11 in the first place. Outside of 9/11, the bounce back of sales on other reasons will largely depend on consumer confidence and the practical applications of technology. At the moment, the fastest PC on the market is still a good deal ahead of any software on the market. Until software catches up, many will not feel the need to upgrade beyond what may just be necessary for them.

Interestingly in the minds of the CEOs, SARS seemed to be something that affected the PC industry more than 9/11. 9/11 may have affected demand, but SARS affected both supply and demand, since virtually all manufacturing of motherboards takes place in China and Taiwan. SARS made people physically scared to leave their homes and thereby affected immediate sales of most anything. Granted, China is very large geographically, but many of the areas that SARS afflicted were the places that much of the manufacturing for motherboard companies take place or have operations in (i.e. Guangzhou, Beijing, Shanghai, and Hong Kong).

Final Words

We would like to once again thank all of the participants for making this CEO Forum a reality. We hope that together we can improve the industry for you all to enjoy.

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