All companies like moving up the value chain (do they?).
This is particularly true of contract manufacturers that want to vertically integrate and potentially compete with their former clients. Here was my reasoning for Foxconn wanting to do so (in addition to rising labor costs in China), recently:
…as many say, the cost of labor for each iPhone = Foxconn’s revenue for each iPhone, is between $12.50 and $30. If materials cost another $200 or so, and Apple sells each iPhone for $600 (unsubsidized carrier buying price), Apple captures more than 50% of the total selling price. Foxconn? 2 to 5%. Wouldn’t Foxconn want to be more like Apple?
Today, an article in the WSJ (paywall) talks about Asus, the maker of innovative yet low cost PCs, Laptops and Tablets, looking at expanding its presence in the US PC market and increasing its marketshare beyond its current 7.2% number.
Of course, in Asus’ case, it has moved away from being a contract manufacturer since 2010, but its electronics are still largely unknown to the majority of US consumers. (The brand drew blank stares wherever I went, when I toted my 12.1″ ultra-book-like laptop around, a couple of years ago…I still think it was one of the best Windows laptops I ever had/used).
And the way it got to where it is today in the US is possibly because of its Transformer Tablets and the Google partnership that resulted in the Nexus 7 tablet – both of which endowed it with the “halo effect”.
But growing beyond this point will call for a re-think, especially because Asian brands are somehow (culturally?) not very good at brand building and marketing. Samsung and Hyundai/Kia are exceptions…but those are Korean brands, and they seem to have learnt their marketing and brand-building lessons from the Japanese.
As the article says:
At Asus, Mr. Shih (its CEO) …has also sought to become the brand’s face, honing his stage presentation and making speeches in English. Asus remains the only top five global PC maker with no marketing chief. Instead, Mr. Shih and his vice presidents oversee the area personally.
HP and Dell, though troubled, still have significant marketshares in the US – both in the consumer space and the business PC market. Lenovo, of course, is looking to increase its marketshare as well. So Asus will have its hands full fighting HP and Dell and fending off challenges from Lenovo, with those three companies enjoying brand recognition and a strong distribution system already in place.
Still, every company starts somewhere. Asus’ journey to higher marketshare will be interesting to watch.