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Desktop computers: Line finds niche amid shrinking markets

Makers leverage performance and cost advantage to attract orders. They offer transition products compact enough for portability.

Despite declining global sales volume of desktop PCs in the face of a strengthening portable line, suppliers in China will continue production to serve remaining markets. For the same price, the category offers a practical solution with its better performance than laptops.

In addition, desktop computers are easier and less costly to maintain, making them suitable for enterprise applications, and government and academic organization use. In fact, there is such a requirement to be fi lled in developing economies in the Middle East and Africa, and within China itself.

Desktop computer
  The model Slim-N10 home theater desktop PC from Shenzhen Jiehe has an Atom N330 CPU, and Nvidia Ion chipset and GeForce 9400M GPU.

To offset slumping home PC sales and at the same time cope with changing trends, suppliers are leveraging their expertise to expand to increasingly popular laptops and netbooks. Those with mass manufacturing capability entered the line as early as 2000.

Others are developing transition products such as panel or all-in-one units, which package desktop performance in a space-saving and easy-carry confi guration. Shenzhen Hasee Computer Co. Ltd has four such models featuring mainframes behind the LCD screens. The supplier said exports of this line have already exceeded traditional units.

The industry is also considering breaking into the home theater and gaming PC sectors, which are the predicted future niches of desktop computers. Among the few local suppliers to have released home theater units is Shenzhen Jiehe Technology Development Co. Ltd. Its Slim-N10 model adopts Nvidia's Ion GeForce 9400M GPU, which provides a 1080p output through an HDMI port. The unit runs on an Intel Atom N330 CPU. It carries the in-house Giada brand.

At present, however, market preference is for traditional home entertainment devices such as DVD and Blu-ray players. For the gaming sector, upgrades are usually through DIY or bill-to-order options still.

China produced 17 million desktop PCs from January to August 2009, or a 29 percent drop YoY, based on data from the Ministry of Industry and Information Technology. As early as 2008, Lenovo already reported an 18 percent decrease in sales volume, while it was a 20 percent slump for Founder Technology Group Corp. In contrast, laptop output rose by 32 percent, climbing to 88.1 million units in 2009 from 66.6 million the previous year.

This reflected the shift in the global PC market, which took a small hit postcrisis with a 2 and 19 percent drop in sales volume and value, according to IDC. This was largely due to the 17 percent decline in desktop shipments. The trend is expected to continue in an increasingly mobile environment. In the next three to five years, laptops are expected to gain headway in developing countries as well.

Consolidated industry
Export buildup
Integrated units dominate selection
Taiwan: Features-rich, compact designs

Desktop computer
  Shenzhen Hasee's D300 model has a 32GB SATA HDD and 2GB DDR2. A DVD-ROM drive is included.
Consolidated industry

China's supplier base has shrunk by about 30 percent since 2005. The majority that exited the line comprised small and midsize operations focusing on the local market. Consolidation, however, is considered complete, with no further departures expected in coming years.

Only 10 makers are now actively producing desktop PCs in China, and most are large ventures with a domestic following for their own brands. These are Lenovo, Shenzhen Hasee, Founder, Haier, Greatwall, Hedy Holding Co. Ltd, TCL, Salo, Thunis and Tongfang. The first three companies are the major players. Many operate in Guangdong province, and the others in Beijing.

The country accounts for about 40 percent of global PC output, with desktop units representing 30 percent of exports. The latter excludes DIY or bill-to-order units.

Sales are stronger domestically because of brand recognition and an aftersales advantage. For the majority of suppliers, overseas business generates less than 10 percent of total revenue, with outbound volume ranging from 30,000 to 100,000 units. The key destinations are the Middle East, South America, Asia, Africa and Eastern Europe.

Desktop computer
  The model NC2000 panel PC from Hedy has a Celeron 220 1.2GHz CPU, Intel D201GLY2A ITX motherboard, and audio, video and network cards.
Export buildup

To sustain their desktop computer line, suppliers are strengthening export channels to complement domestic gains. To override cost challenges in offering aftersales support, they work with agencies in destination countries by sending spare parts and providing regular staff training.

These partners also facilitate shipment of products with major defects to service centers in Hong Kong or mainland China. Founder and other companies that market their own brands target volume buyers such as institutions in Africa and the Middle East. Although their deliveries are not large, the returns are acceptable.

Founder exports panel PCs. It has two factories, one in Dongguan, Guangdong, for desktops and the other in Jiangsu's Suzhou for laptops and servers. Its entire operation includes 18 assembly lines with an annual capacity of 9 million units.

Large makers choose the retail market. Shenzhen Hasee, for instance, cooperates with vendors in destination countries. In exchange, it offers lower prices to allow partners to profit from the venture as well. The company ships abroad more panel PCs than traditional desktop units.

It has three factories that also turn out laptops, PC-TVs, motherboards, graphics cards and computer peripherals. The annual capacity for desktop PCs is 2 million units.

Others rely on the OEM conduit, which spares them from aftersales service obligations. Hedy, which produces mainly traditional desktop units, is an example. It also provides computer peripherals.

Desktop computer
  Founder's XYQ-200 model has an 18.5in widescreen TFT and comes with an easy-carry handle. It runs on an Atom CPU.
Integrated units dominate selection

Traditional desktop and panel PCs comprise China's popular exports. Nearly all of them are low-end and midrange models, and more than 90 percent have integrated graphics cards.

Units with 17 or 19in LCD panels are selling well. These run on Intel E3200, E5200 or E6300 CPUs and G31 or G41 chipsets. The typical specifications are 250 or 320GB HDDs, 1 or 2GB DDR2 memory and DVD-ROM drives.

For ultraslim panel types, laptop hardware is used. This includes the Atom T3000 CPU and 945GC chipset.

Common to this variant are a 15in LCD, 2.5in 160GB HDD and 1GB DDR2 memory. Shenzhen Hasee said it will depart from this trend and introduce more panels based on mainstream laptop platforms instead of the Atom series.

The majority of suppliers use Intel motherboard chipsets and CPUs, purchasing GPUs from Nvidia when stand-alone graphics cards are specified. The latter company's 9400 series is widely used, while its latest G210 series is now also available.

The choice of hardware depends largely on the cost-efficiency ratio and adjusts to outlay changes. The 500GB HDD, for example, is expected to enter the mainstream, with rates decreasing accordingly. For memory, suppliers might switch to DDR3 if spending for DDR2 keeps rising and once supporting chipsets become available. The same tack will be adopted in LCDs, especially as panel providers are now upgrading their production lines for the rollout of more 16:9 units. These are $2 to $4 less expensive than their 16:10 counterparts.

CPUs differ, with makers preferring Intel to AMD even as the latter launched quadcore processors for the low-end and midrange markets. This is because of a longstanding cooperation with the former.

For chipsets, the G41 is expected to replace the G31 eventually.

Taiwan: Features-rich, compact designs

In a bid to counter the decreasing demand for desktop PCs, Taiwan suppliers have lined up small form factors and performance enhancements as major product development targets. These have yielded all-in-one or AIO and mini configurations, and value-added functions for home and enterprise applications.

Nettops and home theater PCs are two popular compact solutions for home entertainment and gaming.

The former type is based on Intel Atom CPUs, mainly single-core N230 and N270 and the latest dual-core N330 1.6GHz. Nettops can support up to 7.1-channel HD audio and Gigabit Ethernet LAN. With independent graphics cards, these can be used with HDTVs and for 3D games.

In the AIO category, displays are 18.5, 20 and 21.6in and have a 16:9 aspect ratio. Options include high-definition resolution, WLAN and Ethernet LAN.

The AIO PCs are 35mm thick, including the DVD drive. The design emphasizes low power consumption, with up to 80 percent savings compared with traditional desktop models.

The increasing penetration of LCD TVs in turn has stimulated demand for multimedia devices again. To take advantage of this, ViewSonic Corp. launched its mini series. Targeted at the high end, the VOT550 model features a slot-in Blu-ray combo drive and comes with a Windows MCE remote control. Acer Inc.'s Aspire Revo R3600 model supports HD playback.

The industry is generally hopeful for the desktop market as the line continues to evolve. AIO units are estimated to account for 5 percent of total PC shipments or 5.9 million units this year, increasing from 3 percent YoY, according to the Market Intelligence & Consulting Institute or MIC. It is expected to be at 6 percent in 2010. IDC is more optimistic with a 10 percent projection, or about 12 million units.

Mini tower units dominate with a 60 percent share in 2009, followed by small form factor variants with 23 percent. In 2010, these are projected to shift, dropping to 57 percent for the former type but rising to 24 percent for SFF PCs.

Western Europe, the US and the Asia-Pacific region remain the three major export destinations but it is emerging markets that are fast growing. Overall, considerable development is expected for the PC industry, with MIC predicting it to come from machine replacements in the commercial sector. In the consumer market, the driver will be Windows 7 in coming years.

There is also added encouragement from Intel's introduction in September 2009 of Core i7 processors for high-performance desktop computers and servers. Based on the latest Nehalem microarchitecture, the solution is designed for digital media, productivity, gaming and other demanding applications. It has a complement, the new Intel P55 Express Chipset.

This article "Desktop computers: Line finds niche amid shrinking markets" is originally posted in Global Sources.

Note: All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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