| dc.description.abstract | The economy of Taiwan is export-oriented, with a high proportion of electronic products. According to the Market intelligence & Consulting institute (MIC), the volume of global notebook sales was 124 million units in 2008, with 112 million units manufactured by Taiwanese ODM companies, a 90 percent of global notebook market share. The total output value reached 51.3 billion U.S. dollars, so the notebook industry plays an important role in Taiwan’’s economy.
OBM (Own-Branding & Manufacturing) and ODM are the two main subcontracting operations in the notebook industry. The most representative OBM companies in Taiwan are Acer and Asus. After expanding into European market, Acer has become number one in the European notebook market. Acer also expanded aggressively into the North American and Asian markets from 2006 to 2008. Since then, , its market shares have increased significantly, and even reached the second in the global market. In fact, most well-know notebooks are manufactured by Taiwanese ODM companies. With economies of scale, the ODM market has demonstrated the advantage of being big and that small scale manufacturers have no room for survival.
Notebook ODM companies have the advantage in economies of scale; however, with increasingly fierce price competition, the gross margins of all manufacturers has dropped sharply since 2004. The recent situation in the notebook market indicates that all manufacturers hope to just keep the 4% gross margin. Due to the difficulty of increasing gross margins, most ODMs tend to integrate vertically in order to increase their profit. Nevertheless, the major raw material suppliers are multinational companies (such as Samsung, LG, and AUO for LCD and Intel for CPU), which have very strong hold in their markets. For instant, Quanta had invested in Quanta display Inc. and Quanta Storage Inc., and Compal in TPO and Yuji. These investments were largely failed. Do ODMs learn the lesson and should they give up the strategy of vertical integration? If not, what would be the strategy of vertical integration for them to pursue? This thesis addresses these issues.
First of all, many statistics indicate that notebook ODMs kept implementing the vertical integration strategy, but they did not focus on key components. Instead, they focused on the materials that are often in shortage so as to cause production disruptions. As the Compal case study shows in this thesis, it invested in magnesium alloy casing in 2007 by establishing a strategic alliance in order to meet the customer demands. This strategy not only enhances its competitive advantage and profitability, but also maintains its leading position in the notebook ODM industry.
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