Hardware Wars

It’s easy to concentrate on the software wars with all the dirty tactics M$ uses but the actual manufacturers of hardware on which that software runs are in a pickle. According to Digitimes,“ODMs mostly still see their gross margins stay between 3-5%. In the first quarter, Quanta had a gross margin of about 4.05% and Compal 3.93%. Wistron had 5.09% and Inventec 4.91%, higher than the top-2 notebook makers due to contribution from their non-notebook businesses.”
see Notebook ODMs bracing for price war

So, while the hardware makers toil away for peanuts, M$ rakes in huge profits thanks to hiding its price from consumers and retailers. As hardware prices continue to fall, the manufacturers are going to see the light. Rather than shipping bloatware at a high price, they can compete and raise margins at the same time by shipping */Linux and FLOSS, software that works for them and the consumers. Doubt that? Hardware makers of small cheap computers running */Linux have margins of 19% (Samsung). Even struggling HTC and LG have small margins in small cheap computers but survive on huge volumes. How are those legacy PCs selling? Gathering dust on retail shelves…

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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5 Responses to Hardware Wars

  1. oiaohm says:

    “I don’t think that they do, but in any event they do not specify it.”
    ODM install the images in a lot of machines. Dell does a lot of custom stuff. So Dell it self is part ODM.
    –Dell does that and seems to be the level where Microsoft makes deals and gets paid. —
    This is correct and this causes problems.

    –They are telling the Asian companies what to make and they pay them for the services of design and manufacture. —
    This is partly correct and incorrect.

    –The Asian company does not sell a design to Dell with or without software, they take orders and deliver the hardware product.–

    This is bogus. Some of Dell products are in fact ODM made, designed and sold first then case altered to have Dell brand then sold as dell item. The ODM will do that case alteration for who ever orders enough volume. Yes it is possible to order something that looks a lot like a Dell screen but the logo is wrong. Lot of Dell screens, Tablets and Phones fall into this camp.

    Screen making companies are particular known to compete heavily to get the Dell and other large contracts. As well as selling directly.

    agora and kogan brands from kogan.com.au are in fact just ring up ODM and say hey I want my badge on it and order enough volume. Kogan does not have a design team. So if you see something that is Dell that looks like a Kogan its most likely not Dell Designed. It would have been in fact ODM design with dell brand stuck on it.

    Yes if ODM has designed the case it can sell that case to many suppliers with minor alterations like logo.

    bw its in the ODM best interest to send product out as many large volume doors as possible.

    We don’t see many like Walmart own brand PC’s because Microsoft does not sell Windows to ODM’s. Yet there are a few Walmart own brand Android tablets because ODM’s can ship that.

    bw yes there is a warping of the market place caused by how Microsoft sells Windows.

    The effect of what Microsoft does with Windows is reduced own brands.

    Individual retail groups don’t want to have to deal with Microsoft for Licensing. ODM does not want to have to deal with Individual customers.

    ODM needs at min a Retail side to deal with customers. This retail side could be Dell, Kogan, Wallmart….

    Notice with the Android patent licensing that Microsoft has placed demard for. Microsoft has accepted here the fact the ODM does need the right to pay it since the Retailer wants nothing todo with licensing stuff from Microsoft.

    bw do you know what the big snag with ODM’s and Windows OEM licensing is.

    ODM’s flat out don’t want to deal with individual customers. And MS OEM license demand they provided customer service without any right to transfer it to third party.

    Individual customer service is part retail.

  2. bw says:

    “Nope. ODMs install the stuff.”

    I don’t think that they do, but in any event they do not specify it. Dell does that and seems to be the level where Microsoft makes deals and gets paid. They are telling the Asian companies what to make and they pay them for the services of design and manufacture. The Asian company does not sell a design to Dell with or without software, they take orders and deliver the hardware product.

  3. oiaohm says:

    –The ODMs sell pure hardware to brands like Dell or Apple or HP who brand the hardware,–
    bw this is kinda bogus.

    bw ODM’s do directly supply Android devices to retailers. There have been issues with ODM’s not being able to buy Microsoft OEM volume licensing directly at cost effective form.

    — The ODMs cannot benefit from substituting Linux for Windows–
    O yes they can benefit. No longer have to pay some of the cost of the device to dell and other middle man and directly sell to retailer.

    bw some of those strange Android tablet brands are ODM direct. So ODM sell to brands and retailers. This is why Microsoft has started licensing Android ODM’s. Why because a retailer might contact an Android ODM and ask for a custom batch with their brand on it. That is what ODM’s do. Issue is ODM’s do like larger volumes.

    Packaging in Apple case is done by the ODM same with installing the software under license from Apple.

    Windows machines have seen at times double and triple handling. All due to MS OEM licensing.

    Dell ODM for example the machines ship OS less until they hit imaging location. So bw is right about Dell. Problem is bw this is not true of all big brands. Apple is different. HP is different on particular models.

  4. bw wrote, “The ODMs cannot benefit from substituting Linux for Windows, they are not supplying Windows in the first place.”

    Nope. ODMs install the stuff. The OEMs even get the ODMs to label it. It’s just too costly to open the package, take apart a notebook and do the installation later. The ODMs are contractors. Just like house-builders subcontract everything except the design and selling, the PC-industry often out-sources most of the work.

  5. bw says:

    You seem to be missing the point of your own cite. The ODMs sell pure hardware to brands like Dell or Apple or HP who brand the hardware, add the software and packaging and sell the result via retail distribution chains. The ODMs cannot benefit from substituting Linux for Windows, they are not supplying Windows in the first place.

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