David WolfBy David Wolf
John C. Dvorak wrote a brilliant column in PC Magazine this week skewering the recent Tech Future cover story in Business Week. You should read it yourself so I won't spoil it, but one point he makes sticks out in the otherwise very good article for a bit of correction.

"[Business Week's editors] seem absolutely stunned that, for example, companies like Dell don't have much market share in China itself. This is somehow a shock, part of a global change that needs a special report. The fact is, buying a Dell, or any American-branded computer for that matter, in China would be like a Virginia pig farmer buying bacon from Argentina."

While this reads nicely and provokes a chuckle, the analogy is not apt. It's more like Argentine pig farmers buying Virginia bacon. Computers made by local PC companies, whether mom-and-pop do-it-yourself shops or even Lenovo, continue to lag their international competitors in features and quality. That difference alone may not have been enough in the past – locals wanted a cheap computer, period.

But as Chinese begin to bring more knowledge to the purchase of a computer, many are opting to spend more for quality and features as a fight against early obsolescence. When you make a few hundred dollars a month, and you can spend a few hundred dollars more to make your computer usable for another year or 18 months, you are getting a good deal, and a growing number of Chinese understand that. In addition, the WTO and local production are helping companies like HP become more competitive in the local market by leveraging their global size to deliver economies of scale.

The evidence? Look at Lenovo's financial results, and while they don't break out numbers, look at the reporting of HP and IBM. Lenovo is losing ground in its own market, and HP and IBM are building steam. Dell's recent abandonment of the consumer desktop in China has more to do with the company's own execution than a general trend.

The locals' home court advantage is slipping. Both Dvorak and BusinessWeek missed that.

About the author:
Silicon Hutong is an ongoing series of thoughts and commentaries by David Wolf, President and CEO of Wolf Group Asia'a management advisory firm providing strategic communications counsel to technology, media, entertainment, and telecommunications companies in Greater China and the Asia-Pacific region. David's opinions are his own and do not reflect those of either WGA or it's clients. Past articles can be found at www.chinatechnews.com, the Silicon Hutong Blog can be found here and David himself can be contacted at [email protected].


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