The name game

Practically the entire infrastructure of the PC and electronics industry is based on a complex web of largely unknown Asian suppliers, which themselves are at the mercy of well-known, and mostly US-based, brand names seeking to cut costs in a market already suffering from its biggest downturn since 1985.

The powerhouse driving the PC industry is mainly the tiny island of Taiwan, although other Far Eastern countries also play their part in manufacturing low-cost components and peripherals, with multinationals such as IBM, Compaq, Hewlett Packard and Dell forcing their suppliers to cut costs and increase quality.

Taiwan's electronics and computer exports amount to around $5b (£3.3b) per month, according to its government's Ministry of Economic Affairs.

Many of these products feature in notebook, desktop and server computers or PC peripherals. Taiwan was formerly home to the numerous factories making these parts but, in the past year, many of the firms have set up factories in China, attracted by low labour costs and incentives from the Chinese government. A worker in a PC factory can expect to be paid $30 (£20) a month in China, while labour costs in Taiwan rival those in western Europe or the US.

Some of these firms, such as Asustek, which makes motherboards, notebooks and other PC components, have become sizeable thanks to the business they get from the multinationals. In June, Asustek reported revenues of $2.5bn (£1.67b).

Other Taiwanese giants in this sector of the business include Gigabyte, Chaintech, Microstar International, Abit and the Elite Group, which are brands that are little known here except among hardware enthusiasts and the PC integrators that buy their products.

Asus, along with two other Taiwanese firms, Mitac and Clevo, is one of Intel's preferred notebook suppliers and is recommended to its big distributors, such as Tech Data and Ingram Micro. The distributors sell near-complete notebooks to systems integrators or dealers, which customise them by adding microprocessors and memory and rebrand them as their own.

Chip company AMD operates in a similar way, helping to produce a so-called reference design which will eventually be manufactured to specification in one of the Taiwanese factories. This is big business, with companies such as First International Corporation (FIC), Abit, Acer and Mitac making a large proportion of the notebooks sold in stores or rebranded.

Bigger manufacturers, such as Compaq, IBM and Dell, have the clout to engage Taiwanese firms to make notebooks to their specifications, but such deals are not mutually exclusive. Quanta and Compal, for example, each make notebooks for bitter rivals Dell and Compaq. The production lines for these machines are run separately from each other in Taiwan, and the end result will look completely different, with the cases being designed in the US and manufactured abroad.

One of Compaq's biggest notebook manufacturers is Inventec, which makes its Armada. It was so close to Compaq that it had offices near to Compaq's HQ in Houston, as well as its Scottish plant. Last year, it had the lion's share of Compaq's notebook business, manufacturing an estimated 1.6 million machines.

The popular Compaq iPaq is manufactured by several Taiwanese firms, including HTC, which builds a million of the PDAs a month, according to local Taiwanese press reports.

Many Taiwanese manufacturers started off as family affairs before the massive explosion of PCs during the 1990s catapulted them from outfits assembling components and machines in shacks into very large firms. HTC, for example, is a subsidiary of VIA Technologies, which acquired US x86 manufacturers Cyrix and Centaur several years ago. VIA makes the C3 processor, but is better known for its x86 chipsets.

But this is not where the connections end. VIA is a sister company of Nanya, which manufactures DRam, and also of FIC, one of the big Taiwanese concerns mentioned earlier. All of these firms are owned by Formosa Plastics, a large Asian conglomerate with interests in oil, steel, plastics and the manufacture of plasma and LCD screens.

VIA's processors are now made by the Taiwan Semiconductor Manufacturing Co, which will make chip designs to order at its fabrication plants (fabs). As well as making chips for VIA, it manufactures for US notebook chip designer Transmeta, telecoms giant Qualcomm, graphics chip maker nVidia, and many other less well-known names. Its rival, United Microelectronics Corporation, has two 12in, seven 8in and one 6in wafer fabrication plants.

This year, a number of Taiwanese firms started to increase production of LCD panels, causing a glut of screens and precipitating a minor crisis in the industry as prices and demand fell.

The Taiwanese computer industry has suffered along with its US and other customers in 2001, and watching the companies which power the IT industry is a good way of gauging the strength or weakness of the overall industry.

As the major PC firms have all caught colds in 2001, their suppliers have suffered too, spurring a move to faster production methods and places where labour costs are lower, such as China or Hungary. So when you're thinking of buying a new PC or a new notebook, your options might all be made in the same factory, somewhere south of Shanghai.