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In 2011, laptop computer vendors encountered two major difficulties. First, Eurozone debt crisis deteriorated, while Europe is one of major laptop computer markets; second, the Thailand flood in October hit the HDD disk industry severely and impacted laptop computer shipment in best-season Q4 since nearly half of the hard disks worldwide were produced there. As a result, the laptop shipment registered 195 million? units in 2011, just up 1.6% from 2010.
94% of global laptop computers are assembled by Taiwanese vendors, mostly ODMs instead of OEMs. Majority of vendors just define the product positioning, rather than design. ODMs assume not only design and production but component procurement. So, laptop ODM is not the field for which ordinary EMS manufacturers are competent, and only a few ones can do that.
In 2011, laptops witnessed two biggest changes. Above all, the traditional EMS corporations-- Flextronics quitted the laptop contract manufacture. Flextronics tapped into the field in 2009, but within two years, it only received HP’s orders, and HP’s order price was much lower than that of other vendors. Therefore, most of ODMs are reluctant to deal with HP’s orders. Though Flextronics received orders, it suffered huge losses.
Hon Hai, quite similar to Flextronics, persevered in developing the laptop contract manufacture, but it strictly controlled the contract scale. Many believe Hon Hai will retreat from the laptop contract manufacture sooner or later. The withdrawal of EMS players brought a reprieve to laptop ODMs who competed fiercely for meager profit.
Second, the laptop production transferred to western China. Although all laptop ODMs are from Taiwan, their production bases are located in Mainland China. According to the data of the Ministry of Industry and Information Technology (MIIT), China's laptop output was 244 million in 2011, of which 230 million ones were exported. Herein, laptops cover Tablet PCs and Kindle Fire e-book readers.
In 2010, laptop manufacturers accessed to Chongqing successively. Their production bases put into production in 2011 when 25,478, 200 computers were produced in Chongqing (an 11.9-fold rise), including 24,073, 900 laptops (up 25.4-fold). However, Chengdu became the iPad production base, with the output of close to 20 million units in 2011.
Traditional laptop production bases are located in Shanghai and Kunshan. In 2011, 89.54 million laptops were produced in Shanghai and 89.07 million ones in Jiangsu Kunshan. The laptop production transferred to western China because of the rising labor costs in the Yangtze River Delta. For production staff and management personnel, the wages rose year by year, which made laptop ODMs with the gross margin of 3-4% be overwhelmed.
In western provinces of China, the labor costs are lower, but the logistics costs are higher. Moreover, the western labor costs are growing rapidly. Therefore, Chongqing is the second base at most; the Yangtze River Delta is still the first base. The future production base of Taiwanese laptop ODMs may be Viet Nam. The laptop supporting industrial chain in the Yangtze River Delta is the most perfect, and the logistics costs are the lowest, so the region will still be the main production base in the upcoming 2-3 years.
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In 2011, Tablet PCs made great strides. Apple's iPad shipment reached 47.6 million, a substantial rise of 2.2 times. In fact, the biggest difference between Tablet PC and laptop lies in processors and screens. It is hard to make product differentiation in processors, while it is easier to differentiate screens, especially touch screens.
OGS (One Glass Solution) is most discussed and recognized as the development direction of touch screens. OGS has three kinds. To keep the independent industry chain, touch screen manufacturers integrate upstream tempered glass cover lens to propose TOL (Touch On Lens) solutions. Panel makers prefer in-house touch process, so they propose On-cell solutions and In-cell solutions. Under the guide of Apple, On-Cell and In-Cell solutions have grown mature.
The monopoly of Samsung in AMOLED forces Apple to seek cooperation with the panel makers such as Sharp and TMD, and Apple projects huge capital in R&D of screen and touch technology. It is very possible that Apple will accept On-Cell and In-Cell solutions of panel makers. Most people believe that In-Cell solutions will be adopted. At present, only TPK and Wintek supply touch screens for iPad, neither of which are panel manufacturers; if In-Cell solutions are employed, both of them will lose the business opportunities valued at USD8 billion, but it is out of the question. It is still unknown that whether TOL or In-Cell will win.
iPad 3 will be launched in March 2012. To reduce its over-reliance on Hon Hai, Apple has cooperated with Pegatron and it also considers the cooperation with Quanta Computer that is the largest laptop ODM.
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