Tablet ‘Victory’ Not an Easy Call

“Will Tablets Kill the PC Star?”

That’s the provocative headline of this piece in Barron’s today, which discusses a recent Citigroup report asserting that hidden inside the otherwise overwhelming volume of PC shipments (400 million next year) is the makings of an ugly trend: tablet computer shipments (35 million next year) eliminate one PC for every 2.5 tablets sold.

That would translate into eliminate about 11 million lost PC sales next year, the analysts say.

What is not commented on — but should be — is the effect of smartphones on both markets. Smartphones currently outsell by more than tablets 4 to 1, and that market is growing much faster than those for tablets or PCs, for good reason. The 4G phones are fast — faster than broadband, in my experience — and obviously highly portable. Given that anyone under the age of 30 seems to have innate texting skills, not to mention a preference for that medium, the advantage of the standard (read: larger) PC keyboard is somewhat neutralized. Cost? Advantage smartphone.

If anything, I think this suggests the vast potential of cloud computing is very real. Users could, as needed, simply plug in their phones to dummy terminals: storage and applications software would reside elsewhere.

Unfortunately, except for a relative handful of players, no matter which way the end-market shifts most EMS companies will be left in the cold. These are very-high volume arenas in which few have the capacity to play.

Focus? Who Needs It?

From Jim Collins to Michael Porter, the latest generation of management gurus argued companies must focus on core competencies and shed all other activities.

Just what makes a “core competency,” however, is always in flux. And as electronics companies see sales plunging like cliff divers, they are quickly redefining the terms.

With today’s launch of Nokia Booklet 3G,Nokia, long synonymous with mobile phones, has now officially entered the netbook market.

But Nokia is just the latest in a string of high-profile OEMs that are seemingly trying to jump-start their revenues by going after what are increasingly commodity markets.

Dell, in conjunction with China Mobile, is said to be looking at jumping in the mobile phone wars. In doing so, the world’s No. 2 computer maker would join Hewlett-Packard, Acer and Asustek as PC OEMs that either have launched or are planning to debut smartphones.

Meanwhile, China Mobile, AT&T and Far EasTone Telecommunications are among the mobile providers now pitching netbooks.

In today’s Wall Street Journal, Roger Yuen, Acer’s vice president of Asia-Pacific smart handheld business group, is quoted as saying “it is relatively easy for PC makers to make smartphones because the two devices share similar components and software.”

Which makes sense to analysts, I suppose, but is something of an insider’s joke in electronics manufacturing. After all, what doesn’t have Intel Inside?

The moves are highly questionable. As this article today in the Wall Street Journal notes, “Analysts say PC makers are unlikely to reap significant benefits in the near term as they need to develop better relationships with mobile operators to sell their products. It will also take time to develop differentiated products and market their own brands in a segment where consumers already have many choices.”

The WSJ hedges, adding, “[M]any agree that longer-term, PC makers have a chance to gain share which would generate a new source of revenue growth and improve overall profitability.”

I don’t see it. These are extraordinarily competitive markets, flush with big-name brands with deep pockets. IBM. Nokia. Samsung. Dell. H-P. The list goes on. None is going to give in without a (very expensive) fight.

Meanwhile, the broader markets are showing some signs of leveling: Worldwide mobile phone sales fell 6.1% year-over-year to 286.1 million units during the second quarter. And the battle for the niche markets – like smartphones – may already be over. Nokia holds a 47% share of that market, and RIM has been entrenched in second place.

New players have found the going bumpy. Take for example, Apple’s much-ballyhooed entry, the iPhone. Measured in terms of style and pizzazz, it has performed exceedingly well. In terms of units sold, it’s another story. Apple shipped 5.4 million units in the second quarter, Gartner says, good for 2.4% market share. Very likely, Apple makes the equipment as a medium to sell its highly profitable catalog of digital music.

Given that, and given that few companies boast Apple’s marketing and design savvy, it’s hard to fathom why a company would risk dominance in one market to attempt to conquer such foreboding – and possibly worthless – terrain.

It brings to mind one more business truism: That the grass – and the profits – is always greener on the other side of the fence.

The Obvious and Not So Obvious About Yields

It was Charles Talbert’s first major assignment after graduating from Tech top in his Industrial Engineering class. He was excited and didn’t want to blow it, but how hard could it be? All he had to do was select the contract manufacturer with the best yields. His company, Excalibur, has rapidly become a leader in designing premier laptops and mobile phones. Excalibur’s exciting and highly functional designs have made it the envy of the industry and a great place to work. So Charles wanted to add value by helping Excalibur find the best EMS firm. To make his job even easier, senior management performed preliminary screening, limiting the candidates to two: ACME and AJAX. Charles visited both and found they both had excellent quality systems in place including an effective continuous improvement program founded on statistical process control. It looks like it would come down to the yield numbers.

ACME argued that it was clearly the best choice as it had superior yield in both laptop and mobile phone manufacturing. AJAX argued that, while that was true, AJAX’s overall yield beat ACME’s 96.6 to 95.4% (table). How is this possible? And which vendor would you choose?

No. Built Yield (%)
ACME 90,000 95
AJAX 10,000 93

Mobile Phones

No. Built Yield (%)
ACME 10,000 99
AJAX 90,000 97

Overall Yield (%)

ACME 95.4

Standards, How They Should Be Done

This week at the annual GSMA Mobile World Congress, 17 of the top mobile operators and manufacturers agreed to adopt Micro-USB as the universal charger interface for new mobile phones.

The initiative, says GSMA, centers on having a universal charger interface by 2012. The group further agreed that the majority of chargers shipped at that time will meet the high efficiency targets set out by the OMTP (Open Mobile Terminal Platform). The move could reduce the number of chargers built each year by as much as 50% — a whopping half a billion units.

“The mobile industry has a pivotal role to play in tackling environmental issues and this program is an important step that could lead to huge savings in resources, not to mention convenience for consumers,” said Rob Conway, CEO of the GSMA. “There is enormous potential in mobile to help people live and work in an ecofriendly way and with the backing of some or the biggest names in the industry, this initiative will lead the way.”

This is great news for consumers, who will no longer have to ditch their working chargers every time they upgrade phones.

The initial group of companies that have signed on include AT&T, LG, Motorola, Nokia, Qualcomm, Samsung, Sony Ericsson, T-Mobile and Vodafone, among others. There are a couple big exceptions: Apple and RIM, so far, are not playing ball.
Here’s hoping they eventually enter the fold.

But what’s really nice to see is the number of competitors working together in a way that should lower the end-product and usage costs for the consumer while also enhancing the convenience, all while ensuring millions of old chargers won’t be headed to the world’s landfills. That’s what good standards development should do.