Re ASUS will not be the next Samsung...

CNet Asia's Jonathan Gardner has posted a not-too-flattering perspective on why Asus will not succeed in its quest to become an established brand like Samsung or Acer.

While some may regard the article as border-line racism in that it stereotypes Taiwanese companies as rudderless re-active operations chasing trends after trends, I tend to agree with him on his assessment.

The thing is Taiwan's PC (personal computer) industry got started in the mid-80s when the Taiwan government developed a legal compatible BIOS (ERSO) that enabled mom-and-pop's to cheaply manufacture IBM PC motherboard clones. When these became a big hit overseas, add-on cards soon followed. And after that, cheap peripherals such as mice, keyboards, speakers, etc. As the PC market uptake exploded worldwide, a lot of these mom-and-pop's became very successful and transformed into big corporations - at least in terms of sales and size. But a lot of these are still run by the original entrepreneurs, and the "merchant" mentality persists and is manifested through the product lines.

Side note: Most Taiwanese trace their roots to Fujian province, where traditionally people have earned their living as traders or merchants, and often deal in commodities or merchants that happen to be in demand.

Thus, with the "merchant" mindset, these companies often introduce "me-too" products rather than undertake serious R&D. They count on suppliers like Intel to provide them with reference designs instead. Other component makers (LCD, keyboards, SSD, etc.) are naturally all too happy with standardization as well - less SKUs, more sales - and readily support the set-up. This is one reason why barely six months into the release of the trendsetting Asus Eee PC 701, competing products began popping up left and right, with little distinguishing features from one another.

And as Gardner correctly pointed out, most companies with an OEM background, such as Asus, actually made their money (and are still making their money) producing hits of the moment, as dictated by their various clients. Of course, OEMs never really have to map out a product line covering a number of years in the way that Apple does. They simply produce what their clients ask them to do.

And that is precisely the quandary that Asus is caught in right now. While it has achieved a degree of success with its branded motherboards and notebook lines, the company has never really established its name beyond the techies of the industry. The Eee PC brand, in spite of Asus' flaky marketing efforts, is the first and nearest to being a Asus brand recognized by ordinary consumers. But apparently, the Eee PC's huge success has caught Asus by surprise.

Without a well-defined product follow-up, it made a big blunder when competing products began appearing in the market. Instead of pushing the envelope and coming out with a newer model that provided even more bang for lesser bucks, it introduced models that tried to compete with the competing products that, in the first place, failed to match up with the original Asus Eee PC 701. The disastrous move quickly eroded Asus' early dominance in the very market segment it has created.

As to why Asus introduced those models is anyone's guess. Mine is it was merely continuing the "merchant" mindset. Someone at Asus must have surveyed the market landscape, saw all these look-alike products, concluded it is an emerging trend, and decided Asus must have a me-too product, notwithstanding the fact they already have the original.

Having also lost its early market dominance, Asus must have decided the best way to gain it back is to flood the market with Eee PC products - again, a "merchant" mindset. Although, somehow I wouldn't be surprised if someone at Asus actually took a look at Nokia's product strategy - swamp the market with tons of models to confuse the competition (and the consumer) - and decided to do the same. After all, Nokia has been among the leaders in mobile phones for quite sometime now.

Unfortunately for Asus, Nokia phones go as low as $40 (and as high as $800). The range means genuine variety for consumers. It also means impulse buys for a good number. Asus Eee PC products, on the other hand, have a higher price range. Meaning they are not as much of an impulse buy for most people. Rather, netbook purchases are often informed decisions. And based on trends, it appears the Eee PC is fast losing its top position, if it has not lost it yet. Given the low-cost netbook market is price driven, this implies consumers increasingly do not consider the Eee PC brand as the best value for money - which the 701 had represented.

So, unless Asus gets it act together, Gardner is right in that Asus will not be the next Samsung. At least not in the near future.