
The end of the road for OEMs - maxko87
http://www.extremetech.com/computing/134203-the-end-of-the-road-for-oems?utm_source=rss&utm_medium=rss&utm_campaign=the-end-of-the-road-for-oems
======
tjic
> You can empathize with the OEMs, though. For decades, these companies have
> had an incredibly easy ride, producing mediocre, commodity computers, and
> getting very rich in the process.

I love how someone who's never worked in the sector asserts that it's all
trivially easy to do and the money just rolls in.

In reality, there is almost no market sector that's trivially easy. Problems
are fractal. EVERYTHING is hard. I'm sure that if you dig deep enough into it,
slicing bread is a tricky business to be in. Should the bearings be teflon or
delrin? How do you compete with the new machines from China? What about that
new OSHA mandate coming down the pike?

~~~
notatoad
It doesn't matter what the sector is. Doing the same thing as everybody else,
and doing the same thing year after year after year, is trivially easy.

Slicing bread is a dead easy business to be in. You buy a bread slicer, and
you let it run. innovation, no matter the sector, is what is hard. And the
point the article is making is that we haven't seen any innovation out of the
tech OEMs in a long time.

~~~
anamax
> Doing the same thing as everybody else, and doing the same thing year after
> year after year, is trivially easy.

No, it's almost impossible. Doing the same thing for year after year is
impossible because someone comes along and does some part better from the
customer's point of view, and then you don't have a business.

> Slicing bread is a dead easy business to be in. You buy a bread slicer, and
> you let it run. innovation, no matter the sector, is what is hard.

There are no "easy businesses".

For starters, there's no "bread slicing" biz. Slicing bread is a small part of
whatever it is your customer is actually paying for.

Never confuse "units of billing" (suc as "loaves of sliced bread") with the
business. For example, the biz is often making sure that they can serve their
customers profitably. Fresh, on-time, small-inventory, etc is what makes a
difference, not the bread slicer.

There's innovation in every biz that lasts. Technology is usually the easy
part.

~~~
notatoad
>No, it's almost impossible. Doing the same thing for year after year is
impossible because someone comes along and does some part better from the
customer's point of view, and then you don't have a business.

That's what I'm saying. Nobody in the pc OEM game has done that lately, that's
why it has been so easy to be a OEM.

~~~
anamax
> That's what I'm saying. Nobody in the pc OEM game has done that lately,
> that's why it has been so easy to be a OEM.

You're wrong. You seem to think that PC OEMs just order some parts and slap
them together. That's no more true than "buy a bread slicer and you've got a
biz".

Being a PC OEM has always been hard and the ones that have survived have
innovated. (Consider Starbucks. Pouring coffee isn't their biz.)

Never confuse "I don't know what they do" with "they don't do anything".

------
brudgers
I think the tech-press is misreading the situation. What Microsoft is trying
to avoid is a slew of mediocre former Android slates hitting the market with
the release of Windows 8.

Instead, they are trying to insure that there will be decent slate hardware
available at the Windows 8 launch.

It's not as if OEM's have been knocking slates out of the park since the iPad
was released. And I suspect that the OEM's haven't exactly been clamoring for
a Windows slate OS, either, considering the lackluster profits for everybody
but Apple (and perhaps the Amazon ecosystem).

Come 2013 Microsoft will have options - either to continue as a hardware
vendor ala Xbox (and slates are a great product line extension); or having
gathered meaningful data to scale back to OS provider as was the case with
Kin.

Sure the OEM's will not get to set the tone for Windows 8 slates right away.
Given their love of crapware, that's a feature, not a bug.

~~~
ChuckMcM
"It's not as if OEM's have been knocking slates out of the park since the iPad
was released."

I've worked with a number of OEMs and original device manufacturers (ODMs)
over the years and they have been a hugely important resource for getting
technology into consumers hands. But one of the things which I have learned is
that they don't make products, they manufacture them. The difference between
those two statements is subtle and important. An OEM will manufacture exactly
what you ask them to manufacturer, they will write into the contract what it
is and they will build it. If the device they build is not competitive to some
other product it really isn't there fault, its "you" the person writing the
contract's fault.

iPads are made by FoxxConn, which is, an OEM. They make lots of stuff for lots
of people. They aren't threatened by the 'newer than the new iPad iPad'
because they know that Apple will likely ask them to build that one too. That
the iPad is an iPad is because Apple drove a vision of what an iPad should be
so hard they drove into FoxxConn's heads and they build them.

But not all OEMs are product companies. They are just good manufacturing
companies. And sometimes they say "Why should we let these guys push our price
down and take all the profits?! They buy those from us for $X and sell then
for 3X$! We want that money too!" And so these manufacturers try to make a
'product.' And they do make it by looking at it and making something as
similar as possible, but they often don't "get" what it is that makes the
product the product because they haven't had the vision drilled into their
heads. So you get 'knock off' products.

In all my dealings with OEMs the OEM assumes they are doing the hard job and
the product design is the easy part, and the product guys figure they have the
hard job and just making it is the easy part. They are both wrong, there is no
'easy' part.

~~~
brudgers
I agree. I was using the term "OEM" in the same sense it was used in the
article, as a stand-in for "PC company which purchases Windows OEM licenses in
high volume," e.g. Acer. These companies generally are branded in a way that
an automotive OEM such as GKN is not.

------
mtgx
"For almost as long as Microsoft has existed, OEMs have ridden its coattails
and made hundreds of billions of dollars in the process."

So did Microsoft, thanks to those OEM's. I for one hope that Microsoft's goal
is to kill the OEM's. I mean, imagine if all of the sudden no other company
but Microsoft could create a Windows machine. No Windows XP, no Windows 7, no
Windows 8. Do you think hundreds of millions of users all would just buy from
Microsoft their PC's?

I think it would create a huge vacuum in the market, and the OEM's would
simply flood the market with Linux machines. Normal people would just buy
those Linux machines, while the more savvy users would keep pirating Windows
for a few more years until Linux becomes a more viable market.

Sure, Microsoft might get say 20% of the "PC" market on their own, just like
Apple has in the mobile market globally. But the vast majority of the market
would be filled with OEM Linux machines, just like 70% of the market is now
filled with Android phones from other OEM's.

~~~
mhurron
> Do you think hundreds of millions of users all would just buy from Microsoft
> their PC's

Yes, if that was the only way to get Windows. Linux doesn't run their
software. Windows does. They'll buy Windows.

~~~
greenyoda
Lots of Windows software will run under Linux with help from Wine.
(<http://en.wikipedia.org/wiki/Wine_%28software%29>)

~~~
thenomad
Lots of it won't, too.

I'd love to switch to Linux - but until Premiere, After Effects, and Photoshop
all run as well on Linux as they do on Windows, I can't. (Not to mention
various other bits and pieces of 3D software).

------
forgottenpaswrd
" incredibly easy ride, producing mediocre, commodity computers, and getting
very rich in the process"

My god! Another way to say that they did all the hard work(the hardware
itself) and earned 1-3% margin in the process.

...while MS will earn margins bigger than 95% on Office and Windows. >30%
margins as the entire company(Once MS spent billions trying to extend his
monopoly to other sectors).

OEMs are not going away. It is MS who is in danger. OEMs are the Vietcom, used
to live on a cage or in the jungle, eating scraps. People that want cheap PCs
will continue buying them with Windows 7, Linux or Android.

~~~
jwoah12
I can't tell if "Vietcom" is a typo or a clever adaptation of Viet Cong to
high-tech companies.

~~~
Metrop0218
Viet Cong that implement IUnknown. Crazy.

------
Roboprog
It's a shame nobody is going to make components for all of the data centers
running Linux anymore.

Also, I feel really bad for Apple and Google that Microsoft is going to
deliver such an ass-kicking tablet that it puts them out of business, or at
least into a distant second and third place.

Yeah, that was sarcasm.

My experience, over 25+ years, has been that MS products are almost always
inferior to the competition (with the possible exception of XBox), and only
exceed where they can exploit bundling. I don't see the leverage over tablet
users. Also, how many places hung on to WinXP until support ran out, since
Vista/7 sucks so bad? (7 might be less glitchy, but I still HATE the new UI,
and I am relieved not to have to use it at home)

I suppose if MS starts to bundle their own PC hardware with Win8 at WalMart
and BestBuy, it will make traditional PC components more expensive, alas.

~~~
debacle
Microsoft sells the best $20 keyboards and mice that money can buy, and has
for the last 15 years.

~~~
Splines
Logitech does really well too (so maybe there is still room for OEMs?). I work
at MS but I use a Logitech as my daily-driver mouse (it's hard to find a MS
mouse that has a wheel with detents, is wireless, and has back/forward
buttons).

~~~
rogerbinns
I'm a Linux guy for two decades and all the hardware accessories I buy are
from Microsoft - keyboards, mice, webcams, joysticks etc.

I did do Logitech for a while, but they were incredibly user hostile - for
example they didn't have drivers available for download, at one point wanted
to charge for them, and then the final straw was a driver for a USB keyboard
that refused to install on the grounds that I was pirating the driver!

I detest the constant assumption in Windows that you are a vile thief stealing
it, but the hardware accessories have been the other way around. Drivers
always available, always worked, and even available for Mac. And on Linux the
hardware has just worked out of the box.

------
cek
Microsoft will make & sell, maybe 5M Surface units in the first 12 months.
Maybe.

Who's going to make & sell the other 345M PCs that are sold every year.

This talk of Microsoft becoming a hardware company is crazy talk with no
understanding of the underlying dynamics of the industry.

I recently wrote a post on this:

[http://ceklog.kindel.com/2012/07/25/a-mouse-and-keyboard-
don...](http://ceklog.kindel.com/2012/07/25/a-mouse-and-keyboard-dont-make-a-
hardware-company/)

------
tmurray
Buh, I think this article has totally missed the point.

First of all, I think the reason why the iPad and iPhone have been so good
hardware-wise while most Android devices have been lackluster in comparison is
that the vertical integration that Apple can achieve allows them to make
decisions at this point that would be completely stupid if they were just
another OEM or IHV.

Basically, because iOS is a very large ecosystem with a guaranteed large
install base per product, Apple can afford to tape out chips that would have
absolutely no chance of being profitable for a IHV (e.g., NVIDIA or Qualcomm).
Since every iOS tablet sold for the next N years will use A5X, it makes sense
for Apple to design and tape out their own SoCs specifically for that, but the
device fragmentation inherent in the Android market makes it extremely
difficult for IHVs to do the same. Look at A5X versus Tegra 3 in terms of die
size. Tegra 3 is 80mm^2. A5X is 165mm^2. SoCs from IHVs (at least for the
foreseeable future) need to be dual-purpose tablet/phone chips in order to
deal the many devices the IHVs will need to target (differentiated using
clockspeeds or binning), which means no huge die sizes allowed. Even if
Android tablet sales increase to iPad levels overall, part of the reason for
that is choice; OEMs probably won't be willing to use the same enormous
processor in their $600 flagship as their $150 budget tablet due to their
margins (or the chip wouldn't exist because IHVs wouldn't be able to make a
profit at the cheaper levels because of the fab costs).

Vertical integration also means Apple can eat the cost of large die size SoCs
because they don't have to worry about margin on the SoCs alone.

In other words, if bigger chips result in better experiences for tablets,
right now the only way to guarantee that is to play kingmaker and only support
one SoC. The way Apple has done that is to build their own SoCs and cut the
IHVs out entirely. Yet, they haven't done this in PCs at all. PC hardware is
all Good Enough at this point; there's no hypothetical 40%-perf-advantage-if-
only-someone-would-build-it chip.

As the mobile market matures, platforms become more established, OEMs combine,
etc, the need for vertical integration will disappear because mobile hardware
will become a commodity, largely indistinguishable in meaningful ways besides
minor perf/W or perf/$ advantages. IHVs will see enough sales to do what Intel
or the GPU companies do in the PC space and build one scalable architecture
for all platforms, there will be relatively established price points, etc.

~~~
shurane
I just want to mention that it's a lot easier to replace and swap parts in a
PC than on a phone or tablet. Mobile devices are unmodular solutions that one
can't swap out for 'newer parts', the way desktops, and to some extent laptops
are.

I would also like to mention that Android integration is a bit poorly
designed, IMO. If a hardware manufacturer writes drivers for Windows, those
drivers are still likely to work as Windows itself matures with newer
releases. However, with Android, each new release of its OS leaves dozens of
models behind on a previous release. Couldn't Android have designed their OS
to be a bit more... upgrade-friendly?

------
zmmmmm
This article seems really weak on a number of points. It holds up the Nexus Q
as an example that Google is moving into its own hardware manufacture?! And it
claims that OEMs are unable to "innovate" - but when you look at actual
hardware innovation they have been the _only_ ones innovating in the phone
space; Apple has produced about 4 devices with identical form factors in 5
years. Contrast with Samsung and Asus who have produced all kinds of crazy
stuff. It's not so much about innovation but quality, focus and finishing that
the OEMs are not set up to do.

Personally I think these things are just cyclical: it takes a vertically
integrated company to really break through into a new domain, that much is
true. But then that new area will always be commoditized and the most open,
flexible and widely available platform will "win" in the end - until the next
major innovation cycle begins. We need both the yin and yang of this cycle to
move things forward.

I do think MS may have unintentionally saved Android on tablets - the mere
hint that Microsoft could possibly go its own way and leave the OEMs with
nothing to sell will be giving them such nightmares that they will be doubling
down on their investments in Android _if only_ to give themselves a lifeline
to future viability if the unthinkable happens. Without that I suspect half of
them were probably ready to completely jump ship and leave Android behind as a
bad experiment.

------
johnohara
Some of the thin mini-itx offerings look interesting.

[http://www.engadget.com/2012/08/08/intels-thin-mini-itx-
plat...](http://www.engadget.com/2012/08/08/intels-thin-mini-itx-platform-
gets-stuffed-inside-a-monitor/)

[https://www-ssl.intel.com/content/www/us/en/hardware-develop...](https://www-
ssl.intel.com/content/www/us/en/hardware-developers/thin-mini-itx.html)

[http://www.missingremote.com/review/lian-li-pc-q05-thin-
mini...](http://www.missingremote.com/review/lian-li-pc-q05-thin-mini-itx-
chassis)

True, you don't need an OEM to build them (and maybe that's the point here).
But I don't quite get the Acer argument. Thin mini-itx devices easily bolt on
to the back of their monitors.

Last time I looked, the inside of my Vizio 47" had nothing but room too.

Dell, Gateway, Acer and many others got their start with the DIY system
builder -- and a Computer Shopper.

------
debacle
Open computing as we know it requires choice when creating a system.

I don't want to have to pick my poison when it comes to walled gardens the
next time I want a new system.

------
old-gregg
These two quotes make me feel very uneasy:

    
    
        Other companies do not physically possess the equipment 
     or resources to produce anything that even approaches an 
     iPhone or MacBook Pro
    

and

    
    
        Perhaps Lenovo can subsist at the bottom end of the
     market, or maybe it too will shut up shop.
    

While the rest of the article makes sense, I call the 1st quote a complete BS:
Lenovo already makes vastly superior computers to Macbooks. They just lack the
marketing (and confidence) to explain to the masses that cold and
uncomfortable aluminum is actually a pretty shitty material for a laptop. The
confidence situation is so bad that they even started replacing their supeiror
keyboards with calculator keyboards. Because Apple does. Ughh...

And my very first Android phone (Nexus One) had a vastly superior (and
practical) construction than the iPhone of the time. The thumb ball was great
for precise scrolling and you can tell up/bottom or front/back apart when
holding the phone in your pocket. But once again, there was no marketing to
rub that into the brains of the shoppers.

Although it will indeed be irrelevant if Microsoft/Google push OEMs aside. For
one, I am not looking forward to the depressing "glossy aluminum future". If
nobody has ever managed a laptop even half as good as a Thinkpad, I am having
doubts if Microsoft will.

~~~
mikeash
Can you elaborate on your aluminum complaints? I like Apple's metal-centric
industrial design there, and have ever since they introduced the first
Titanium PowerBook, but I'd certainly be interested in another perspective
there. I haven't seen a plastic machine that seemed anywhere near as solidly
built, but I may simply have never been exposed to the right hardware.

------
jamesaguilar
> If the Surface tablet is a success — and with its design, specs, price
> point, and Microsoft’s marketing dollars, you have to assume it will be . .
> .

Do you now?

------
rogerbinns
In Microsoft's case they have to get into the whole solution business in order
to retain margins. Asymco has an excellent article with the numbers:
[http://www.asymco.com/2012/06/20/who-will-be-microsofts-
tim-...](http://www.asymco.com/2012/06/20/who-will-be-microsofts-tim-cook/)

Quote: "So Microsoft faces a dilemma. Their business model of expensive
software on cheap hardware is not sustainable. The future is nearly free
software integrated into moderately priced hardware. For Microsoft to maintain
their profitability, they have to find a way of obtaining $80 of profit per
device. "

------
Splines
I doubt all the OEMs would leave. Surface may be great, but there's still room
at the high-end for powerful desktop-replacement laptops.

------
rbanffy
It's by now abundantly clear someone high up at Microsoft thinks the OEMs need
them more than they need their OEMs.

It will be interesting to watch.

------
grecy
That article mentions the "design, specs, price point" of the Surface like the
price point is known.

Is it ?

------
emeltzer
"seats upholstered with the tanned skin of Scandinavian virgins"

Ew?

~~~
Roboprog
Icky, but expensive.

