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Who Really Made Your Laptop?

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I read an article back in August by Brooke Meyer titled "Who Made Your Notebook?" Mr. Meyer's article so interested me that I wanted to share some of it with you today. You can keep up with Brooke Meyer's reporting on technology by browsing to his web site called Brooke's View.

According to Mr. Meyers, the answer to the question he posed is:

- Not the company whose name is on it. Why? "...competition for orders is also expected to further lower notebook makers' gross margins in 2011 from 4% in 2010." After the OEM/ODM 4% profit, "manufacturers" like Dell make 5% and HP earns 9%.

- Apple's profit on each iPad ranges from 40 to 55%. (Who makes iPads? FoxConn.) Selling 2 million units each month, Apple wins.

Competition is so tight that the big name labels with which we are all familiar cannot afford to manufacture their branded laptops. As can be clearly seen the profit margins are thin and are expected to further decline in 2011. The exception is the Apple iPad, which boasts profits that make other companies salivate. Is that a surprise? No, not really. Apple is adept at squeezing out profits, which of course makes Apple investors very happy indeed.

So who really does make your favorite laptop? Whether you have an HP, Sony, Lenovo, Dell, Toshiba, Apple, Acer, Asus or another brand name, all the laptops in the world are manufactured by seven corporations in the Far East. All but one of these ODMs (Original Design Manufacturers are headquartered in Taiwan. Flextronics, the seventh ODM, is based in Singapore. When you buy your next laptop, check the box and you will see "Made in China" printed close to the bar code label. Taiwan is what has historically been known as Nationalist China, and is an island nation off mainland China that continues to enjoy the protection of the United States. Most of the ODMs have manufacturing plants in mainland China, which shows the power of economics. The government of mainland China has never recognized the legitimacy of Taiwan as an independent Chinese state, and bitterly resents the United States for its support of Taiwan. Remember too that mainland China is the single largest holder of American debt, and we are also one of China's largest markets. Regardless of the intertwining of our economies, there are tremendous tensions between our two governments, and it will be interesting to see how things develop over the next decade.

Compal Electronics is currently the largest laptop manufacturer in the world. Compal has set its shipment goal for 2011 at 60 million units, which is a 20% increase over 2010. This projection is based on confirmed orders from Acer, Dell, Lenovo, and Toshiba. Compal also makes laptops for HP, Compaq and Fujitsu Siemens. Check out this link and this link here.

Quanta is the second largest laptop manufacturer in the world. They make laptops for Dell, Compaq, Gateway, Apple, Sony, HP, and Sharp among others. Dell is supposedly Quanta's most important customer, accounting for half of their annual sales. See the following sources at this link and this one.

Foxconn manufactures HP laptops, as well as the Apple iPhone, iPod, and the iPad. Foxconn also manufactures Nintendo, Sony, and Microsoft game consoles, meaning of course the Wii, PS3, and Xbox 360. Foxconn is the largest exporter of manufactured electronics in Greater China, and accounted for 44.2% of electronics manufacturing in 2009. See this link here, and this one for information.

The other players in the arena are Inventec, Flextronics, Pegatron (AsusTek), and Wistron, who manufacture a mix of the brands already mentioned as well as Western Digital hard drives, Cisco Systems Linksys routers, HP Inkjet Printers, LG Electronics and others.

All the big names in the laptop industry obtain their laptops from the aforementioned ODMs. So what makes the difference in quality from brand to brand? Apple, Dell, HP, Sony, Toshiba, and others all have a hand in the design their respective laptops, and spec in the components they want included in specific models. Design is a very important element in the process. Just ask users who purchased a laptop that ran hot all the time and quickly died due to a design that inhibited proper heat dissipation.

It is generally the case that you get what you pay for. Really low priced laptops are made of less costly materials and less powerful components. Conversely, expensive laptops tend to be made of better materials and more powerful components. Some of these same ODMs that manufacture laptops for everyone else also manufacture many of the components that go into those laptops. AsusTek is a prime example. Pegatron, also known as Asustek and Asus, manufactures motherboards and video cards used in a multitude of laptop and desktop computers all over the world. Therefore, it is safe to conclude that laptops of different brand names at the same price point use pretty much the same components, or at least equal quality components, even though they may be from varying manufacturers. Therefore the greatest differences, aside from the aesthetics of the various designs, are in reliability and customer service, or lack thereof, when you have to call the "manufacturers" of your chosen laptop for support.

PCWorld conducts an annual survey of real world users in January of each year. On January 25, 2010, PCWorld released the result of the 2009 survey for laptop PCs, desktop PCs, HDTVs and more. You can review the results of the survey here.

Apple took first place, followed by Toshiba in second place, coming close to Apple in key categories. The real surprises were Dell and HP, both of whom are found at the bottom of the list with HP taking the top honors for last place. Keep in mind that this is a survey of 45,000 real world users. It is equally important to bear in mind that things could look very different for some of these vendors when the 2010 survey results are forthcoming in January, 2011.

What are your thoughts? Any comments are very welcome.

Edited by Joe V

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