China Insider: PCs Are Dying, No Smartwatch Market, The Cloud Is The Future

iPad Pro review: Apple’s laptop killer? [Warning: Stupid autoplay video!]

I won’t link to the Comments themselves because the site is all ass. The autoplay video takes priority and there are so many damn Comments that people have to keep clicking to Load More.

Andy in the FarEast:

I have years of industry knowledge. I would make my own gripe at the reporter. This is a new product launch and so all sample pieces will be shipped from China by air. This is incredibly expensive since the carriage cost is based not only on size by weight also. When we produce keyboards for our customers, the samples are always international English – ie US layout. It is a simple procedure for producing UK keyboards and you can be sure that stock on the water now bound for Apple stores in the UK will be UK layout.

The tablet market is extremely competitive. Microsoft, Samsung and especially Apple spend a huge amount of money on marketing so when you are buying products from these vendors (note I do not say manufacturers), you are paying the cost of the marketing also. These companies are also innovators, so you are paying for the R&D.

These vendors will produce a tablet and it is good for at least a year. They will save costs by ocean freight.

Going down towards the other end you will have businesses that copy the products and have limited marketing expenses. So naturally they will come at a lower price. These companies will compete on specification. The time between launch and eol can be as small as 2 months. The products are constantly changing. So yes you do get more hardware for your buck, but you also get more instability in the product. Faulty rates for the top tier brands are minor in comparison. I have seen 15-20%. This is the sort of faulty rate you can possibly expect on say a re-certified/refurbished product. The top brands are aiming for 12-24 months so naturally the stability is better.

Cloud is killing the PC market. Microsoft have launched their final Windows, Apple have announced that PC is dying. I am telling you as a manufacturer of PC peripherals that PC is dying. In the USA and in Europe sales of standard peripherals has collapsed – keyboards mouses speakers etc. I am seeing rival factories in Shenzhen going bust. so you now have information from two software companies and one manufacturer telling you that PC is dead or dying and yet I see comments here to the opposite obviously from people who have no knowledge of the numbers.

South America, Africa, India, parts of Eastern Europe – these markets are still ok for PC. You will notice we would look at these as pretty much 3rd world almost. For the first world we are producing niche products of very high quality such as mechanical keyboards and gaming mouses. Because these are in much lower quantities our raw materials costs are higher as well as our production lines.

I do take the point about notebook v tablet. Think back 15 years. A PC might cost you £500-1000 and a laptop £1500-2000. We have similar here except everything is half the price with laptop v tablet. With cloud it is very easy for me to use CRM/quote/invoice etc on the tablet. The tablet is great for media. When I am doing more complicated tasks then the notebook is the solution. It is about selecting the right tool for the job.

Will the new Apple way replace the notebook? You can be sure Apple have done their research and they are on the right track. For you PC death deniers out there: from 2000 to 2005 the PC market in Europe had stagnated. From then it’s been steady decline. Remember Tiny and Time? They came and went along with hundreds of other PC manufacturers in the UK. Now, worldwide, there is Lenovo, HP, Dell. Gradually, the third world manufacturers’ market share will be swallowed up. I think I read a report not so long ago that Dell was anticipating only 2. Apple, on the other hand turned its hand to consumer electronics which, since 2000 has grown every single year

So this is what the manufacturers see. We can see this in the numbers. We also know precisely which markets are good for each product. Sitting behind your desk in the uk looking at your LCD panel is hardly a qualification for telling us manufacturers that PC market is not really dying.

Boldfaced emphasis added by me.

Well, there’s the China tablet makers explained.

As for the Apple Watch clones:

I looked at the watch…should we produce. One of my partners was “wow” let’s go into production with this. I said no. The iwatch is a product i would aim naturally at younger people. But when you travel on the metro etc look at young people and do they wear watches? No. They have the time already on their phones.

So we went cautiously. We checked a couple of friendly factories and said we might help them sell. If they went well, then we would copy and produce ourselves.

We found a) that the product was not very stable (I have no figures on iwatch) and b) there is no market for this product. I do not have Apple’s marketing budget, but if they can’t create a market for it, then there is no point me trying.

Boldfaced emphasis added by me.

And how things work and don’t work in the merry wild west of China manufacturing; a real eye-opener:

Sadly consumer research is not accurate data. I will get HP out of the way first. I am high up in the trade … Maybe that gets me better service. I have had 1 faulty out of three and that’s because I did not have the part to fix it myself. It was the cable to LCD. They collected it, it went to Poland and as was back 5 days later.

Why is consumer data not reliable….well basically end users are idiots. Some damage is self inflicted, other faults can be software related. Even batteries in wireless mouses die and the consumer can think the product is faulty…normally this can happen when the vendor chooses the cheapest battery. A cheap AAA Battery costs $0.10 and yes it won’t last long.

We have to look firstly at where the data is coming from. When goods arrive at a shop, if the master carton is damaged, shops tend to reject the box. There is nothing wrong with the goods….the packaging is damaged. In the US, the law classifies these goods as faulty and if the vendor wants to resell them they must label the goods “re-certified” sounds an awful lot like refurbished doesn’t it?

Then we have distance selling. If an end user buys online in the uk or from a catalogue you have 28 days to return the goods…it may even be more now. This is true for the whole EU. So if you buy from Amazon, PCWorld online, Ebuyer, Scan you have this right. When the goods come back the box might not be in mint condition. The online retailer will always try to insert a clause in the supply contract to return goods.

No we come to faulty items. I have mentioned already some reasons why the goods are not really faulty. Sometimes it is the case that the end user really is stupid. Now retail stores do not want to stand around arguing with the customer half the time. It used to be the case with dixons that they did not even bother to test the goods. I know one big motherboard supplier to them used to repackage motherboards into clean boxes and send them straight back. That this is not the fault of the vendor…it was the fault of the distributor. That said these new boxes were marked and if a marked box came back then the distributor knew it was faulty because it had been to two end users. But you can see by this one action the faulty rate appears to double.

When we supply these retailers directly from the Far East, we know the failure rate is less than 0.1% to maybe 0.2%. This is very low yes. But we give them 1% extra knowing this is plenty and they can handle the RMA themselves. So we are giving them 5-10 times the faulty rate in spares. We do add 1% into the cost of each item but they do not need to know that. Our products are reasonably simple…keyboards mouses speakers cables etc. These do not have many parts in them to go wrong. Where we look at wireless the chipset needs to be stable. Where wired the cables need to be good quality and in all the pcbs need to be stable quality. This means we expect it to last the life time of the product – 2 years under eu law. This means we extensively test all new components and test thoroughly new suppliers.

We do reject business. Customers come to us and ask us to make with a certain chipset and we will refuse if we think it’s not stable enough. We want to move goods out not have them move back in. Also we can reject if we do not like their payment performance. LG is delisted.

This also aids our reputation. Last year Logitech came to us with a project for 1 million wireless mouses. It was ODM so we were making to their design. Their target was $2.20. We beat that and gave them at $2.05. The reason we were cheaper was we had a better price for the chipset … Taiwan sourced and our pcb was cheaper…but quality very good. Logitech, whilst they have factories in China is still a foreign company. Where we are in Shenzhen…it’s hard to describe to you. 25 years ago Shenzhen was a village with a lot of mud and security. Now its population must exceed that of greater London. It has to be now maybe 14 or 15 million. All the surrounding areas, all industrial. My partners are actually related to each other included is an engineering solutions company and it is this that does all our r@d for the different producing factories. We try to source our parts from factories owned by people from the same home town in China. The engineering solutions company does all this and works out all the costings. Logitech is a foreign business and does not have the same relationship with their component suppliers.

Where all the correct procedures are not followed then you can have a bad batch…but that does not happen with us because it’s in house and our engineering solution business is a family member.

I don’t know if you remember ECS motherboards or PC chips. This is a Taiwanese business and was the biggest motherboard manufacturer in the world. In 2003 Asus poached their ENTIRE R@D department. Suddenly the motherboards were no longer stable. This would have affected dell, HP compaq etc because they were all buying from ECS for their entry level machines.

Hon Hai manufacture for Apple. They are a massive massive company. In Shenzhen we have Fox Conn city as a suburb. Here they produce cabling etc. The iPads are manufactured by them in the north of China. Apple, I know policies Hon Hai’s supply chain. Some time ago it was reported that at least one of their suppliers would fail BSCI rules and this is far more embarrassing for Apple. Apple’s job is to police Hon Hai’s suppliers and this takes a long time to set up. It takes a long time to build trust in these relationships.

My point was when I was talking about stability when comparing Apple to Microsoft is simply that Microsoft has zero experience in this. Apple has had 15 years or so. This is perhaps best reflected in the Lumia ( I think that is their phone) and also the fact that until about 12 months ago they did not have a proper tablet solution for Windows. Before that they were all shipped with android. Windows was not stable on the hardware. With the introduction of Windows 10… Yes the software appears stable. The issue is going to be when we look 2 years down the line to their faulty products and the percentage rate. Unless they are really on top of it it can go to 15%. That would be huge. But you have to look at the number of different components in a tablet and any one of these components can go faulty. Pick the wrong supplier and you can have 1000s of returns. Apple and Samsung are the leaders and they have the experience and know-how. Microsoft is green. With their earlier models that had big problems with wifi. This is the 3 model for example. My suspicion is a corner has been cut in bandwidth it only costs 1 usd to add an extra band…alternatively they have a power issue. Windows does take up more power normally than OS and intermittent loss of signal could be down to software using more power.

In addition Apple’s supply line is well established and now trustable. When shortage of components happens, Apple will be ok, I am not so sure about Microsoft.

Cherry did this to us last year. They decided in October not to supply anyone with mechanical switches for keyboards. We already had another supplier tested and ready to go… We trust nobody outside the family. (I am the only westerner they do trust). This year they wanted to resume supply and we told them that we did not have any need at that time. We never burn bridges. But had we not already had an alternative solution ready we would have been under huge pressure. If this happens to Microsoft do they stop all supply or do they take a risk on a half tested alternative.

I’ve probably rambled on far too much…but suffice to say things are not always as they may seem when we look at faulty rates, consumer figures etc. When we do our jobs properly we have a reasonable idea of the expected faulty rate when we supply.

I have nothing against Microsoft…I use word excel outlook etc. Apple has always been good for its simple ease of use.even on their notebooks once you get over the fact that it’s no longer Windows a lot of tasks are actually a little easier. The new pro from Apple is not a competitor to Microsoft. It is going to bought up by people who by Apple notebooks and also by people who buy the iPad Air. A smaller percentage will come from other brands. What will be interesting is how it develops next September. Then, I think we will start seeing Apple properly attacking the market. The are going to sell huge amounts in China. This people seem to forget. Apple at the back of last year signed a deal with China’s biggest mobile phone supplier. This product will easily find a home there. Microsoft does not have this sort of contract. In China they will deal with Lenovo (big boss there is a friend), but really they have no worries. They will dominate the numbers. Next year they should dominate the west again with a more powerful solution.

What I did not appreciate was the blatant trolling by certain people in the discussion. I was making points based on proper experience and knowledge of the market at the point of manufacture. I quoted IDC research. I let people know what Apple thinks and also what Microsoft thinks. Microsoft and Apple both think the PC will die a slow death. Dell also thinks this as does the boss of Lenovo. I have no clue about HP and what they think except I have bought 3 HP laptops and one has gone faulty. That does not mean a 1/3 faulty rate in the whole market – just I got unlucky and I could not replace the part as quickly as they could fix it.

Boldfaced emphasis added by me.

And on The Cloud:

Steve jobs passed away before cloud had really taken off. I think had he lived he would say that netbooks can do it. Storage is mainly offered now in cloud. Unfortunately no tablet vendor can offer 2TB storage. Space is the issue inside. If you have to travel to the Far East and back often, cloud is a pain because your music and film collection can’t be downloaded so easily. This is a drawback that Apple has. But when I am on the move in Europe I can normally access my media. When I am on an aeroplane for 11 or 12 hours I prefer my own music and films…..perhaps Apple will produce a 2 TB solution for us

I have to agree with the response from Fowler:

Only a complete mug would store their data in the cloud.

And from iamfatman:

I agree totally with storing data in the cloud. The Cloud is an ideal target for hackers / governments. I would not store anything that I would not be prepared for others to see. The other problem is that unless your on fibre the upload time for the average computer user is pants. I would hate to have to upload photos to a cloud server as it would probably take all year if not longer.

It’s a shame Andy in the FarEast posted all of this (and more, which I’m not quoting) in Comments at a badly-designed MSM news site. He should have a blog with this stuff.

2 Comments

Filed under Quoted, Reference

2 responses to “China Insider: PCs Are Dying, No Smartwatch Market, The Cloud Is The Future

  1. Robert Jasiek

    A “slow death” is different from “dying”. For the forseeable future, there will be specialised uses requiring PCs or servers. The notebooks do not replace quality monitors (such as those offering portrait position) and quality keyboards. Many professional contents creators need such. It is possible though that an increasing fraction of mobile devices will run the peripherals. Currently, suitable devices are still much more expensive than PCs, so this will be a process for the next 5 to 20 years. For example, a PC costs ca. EUR 300 while a Core i mobile device costs EUR 500 – 3000, typically twice or thrice as expensive.

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