June 09, 2004

Outsourcing Extreme

Taiwanese companies have been making a living as Original Equipment Manufacturers ever since Taiwan was a third-world speck of an island gluing together shoes and plastic toys. They've climbed up the value chain ever since, until they've become high-tech powerhouses in their own right. Nevertheless, an OEM still only takes orders from their overseas masters, churning out whatever widget that's demanded of them. However, as they gain technical expertise (and becomes threatened by mainland Chinese manufacturers), Taiwan business have moved into the Original Design Manufacturing space, taking another step up the supply chain.

For example, Gateway is buying LCD TVs from Quanta Computer on an ODM basis, with Quanta responsible for product design, manufacturing, testing and logistics services, said the sources. Quanta also produces Siemens ST55 handsets and Panasonic X300 handsets on the same conditions, the sources added.

It's one thing to ship a few code-monkey jobs offshore, but if you're letting someone else do the design, manufacturing, testing, and logistics, then is it really your product at all? Now that Gateway's closed all their retail stores, they don't even have a physical presence as an advantage. All that's left is a hollow brand and some cow-themed cardboard boxes (do they still have those?). Companies in Taiwan are starting to establish their own brand presence here in Asia. How much longer before they start selling the products that they designed under their own label? If only they could hire some copywriters that spoke decent English.

Posted by mikewang on 03:46 PM