ribution as a way to expand their capacity, reduce costs, and find ways to tap into new markets.
In the past, many PC companies attempted to assemble and distribute everything themselves, but it's difficult to make a b
uck under this model. "It appears that Acer may have a global agreement to manufacture and distribute a variety of products for IBM," says Donald Floyd, research analyst with Asia Securities in Taipei. "If IBM and other major PC companies follow this path, they may be able to reduce their manufacturing costs by about 15 percent instead of doing it all by themselves."
The first company to explore this global-outsourcing model was Compaq, which in 1995 signed a manufacturing alliance with Taiwan's Mitac. At present, Compaq's low-end PCs are made and distributed in various markets by Mitac -- a move that has kept the U.S. company in a leadership role in the PC business.
Packard Bell/NEC also has a global manufacturing and distribution alliance. In fact, the partnership procures a large number of PC boards from Intel, but it also has a significant OEM alliance with Taiwan's GVC. In addition, NEC and GVC have a joint venture in China to produce color monitors.
IBM is also no stranger to outsourcing in
Taiwan, but it's mum about its new alliance with Acer. For more than two decades, IBM has procured components and peripherals in Taiwan. But it has obtained only a small portion of finished PCs from Taiwan, mainly notebooks made on an OEM basis by a company called ASE.
Acer is also reluctant to talk about its partnership with IBM, which goes far beyond the typical OEM contract. For example, Acer will not only manufacture -- and perhaps design -- PCs for IBM, it will also be put in charge of global logistics and distribution for the U.S. company. "For IBM, Acer can be viewed as a competitor or partner -- or both," comments Jason Lin, industry analyst with Dataquest Taiwan in Taipei. "However, IBM and other U.S. companies know they are under severe pressure to bring down their manufacturing costs."
Until recently, Acer had been making finished PCs for Fujitsu/ICL, Hitachi, and others. But the Japanese companies have discontinued buying finished PCs and instead will buy only boards from Acer in the futur
e. Acer's OEM business is larger than its own name-brand PC segment. Its total OEM business hit $1.176 billion in 1995, compared to $642 million in 1994.
Acer walks on a delicate path of pushing its own brand name while selling PCs and component-level products to competitive OEMs. Acer has major plans to boost its OEM and non-OEM businesses. To do so, in 1996 it expanded its total production capabilities, nearly doubling its output of PC-related products. In 1996, Acer had the capacity to churn out 700,000 PCs, 100,000 notebook PCs, and 350,000 CD-ROM drives per month.
Acer, IBM Forge Deeper Partnership
