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Of industry, pricing, loss, and media interference
Written by wild_andy_c   
Wednesday, 12 July 2006 01:00

Wild_andy_c comes out of the closet and gives us an overview of the realities of the motherboard manufacturing business specifically, the hardware business in general, and how cut-throat competition and the 'RMA Culture' have affected all of us.

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Some five and a half years ago I moved from a scientific role in a polymer company to take on the challenges associated with working for a hardware manufacturer. I was a PC enthusiast with a great deal of excitement and drive for the technical edge of hardware with an ambition to make my hobby my job. Times were good in the whole of the hardware industry and everyone was making money – companies existed even just for the sake of existence. My eyes were wide open and the whole thing was so different to what people actually think drives this industry, you don’t realise just what goes on from say a chipset being released from a vendor to a manufacturer to the product development to the product sampling in BETA to the first production run and hasty air shipments of product from the factory to your local branch offices warehouse to it being sold to the distributor and then to the retailer and eventually ending up in the hands of the excited end user. A lot of effort goes in, in years gone by this effort was effort-less given that margins could be as high as 75% or even 100% and companies were able to put copious amounts of people in teams of development for any given product.

The company I began working for was EPoX, at the time this company was the greatest mainboard manufacturer in the world if not by a long stretch the largest. Monthly shipments of mainboards were truthfully only around two hundred thousand pieces which was small fry in relation to the then quantities shipped by tier one manufacturers ASUS and ECS which exceeded one and a half million units a month. EPoX at this time had a huge advantage over any other manufacturer; it had an enthusiast product which became the largest selling mainstream product in the world. The EPoX 8KTA3+ was first to market in terms of VIA KT133A mainboards for the then dominant Socket A processor. The AMD Duron could be purchased for less than $80 USD and unlocked with a pencil to facilitate easy overclocking to in excess of 1 GHz with relative ease with a noisy cooler such as the Globalwin FOP32. The 8KTA3+ was unique in the fact that during these times of wealth and stealth, it was engineered specifically with overclocking in mind. It required a PSU of quality ilk and sold for in excess of $200, but sold to all and sundry – you would find this mainboard and its corrugated plastic carton everywhere. Its integrated RAID controller also heralded the birth of many system integrators first sold systems with striped drives as standard – very often you would find a system with this mainboard adorned by 2 x 20GB Maxtor drives. So there we have it – I am in a company that simply can’t sell quickly enough a product that was far better than ASUS’s A7V or Abit’s KT7A-RAID and the media were friendly to the product and the company given this fact. Or should I say – friendly-ish.

In the UK where I was originally based there wasn’t anything of an issue. We regularly advertised on and with the regular 468 x 60 banners using funding that came from the huge margin that mainboard manufacturers were able to command at the time. At this time was certainly the largest review site in the UK, and other sites would simply award products basically because they couldn’t afford to buy them themselves. Great consolation to a manufacturer is that if you can give an excited geek with FTP access a product for free to keep you can add a sticker to the carton of the product to say that its verified as wonderful by XYZ review site. This behaviour however doesn’t last forever as the whole web review community evolved from being hobbyists with free Golden Orbs from Thermaltake to becoming cash focused opportunists.

After the success of socket A for AMD, Intel was floundering with its 850 Tehama chipset and the then awful rambus memory for the first socket 423 Pentium 4. I remember sitting in EPoX’s European headquarters and benchmarking a 1.7GHz Pentium 4 on the EPoX 4T2A against the worlds first ever DDR mainboard – the socket A 8K7A+ based on AMD760 chipset. With a 1.2GHz Athlon the AMD platform out-performed the Intel platform easily in all tasks. EPoX are on a roll – they are ahead of the market and have a product that can make ones working life a dream. Or can it.

At this time and through strange circumstance, a large hardware site with a large presence throughout the world was running a banner advertisement of EPoX. If you fund an entity in this manner, you would be rather upset should you receive a bad review. If you cease to fund such an entity would you expect to receive bad press, or would you even expect to receive threats ?

For reasons of office administration or lack thereof, perhaps the support of some entities financially ran late for a very short period of time. Telephone conversations ensued and then you start to hear within the matter of only a few days that “if we don’t get our sponsorship we will hold your review”. Hang on – is this a ransom situation – will a mainboard be pooped or hidden based upon monies ?

At this time selling mainboards was no problem, and at this time a new phenomenon really took off in a big way. Many forum members here and elsewhere will think that the world revolves around full sized ATX mainboards, fast memory and performance. They will think that this is what drives mainboard manufacturers. Well – since 2001 the world has changed, system builders don’t want a quality mainboard, they don’t want a system that performs. The want to sell a system based upon the numbers they can advertise it with. Why should someone sell you a system with a high end vga card, high end cpu and a full sized ATX mainboard when they can on paper sell you the same system using integrated graphics, a micro atx mainboard and a cpu that runs at the same speed ? I’ll call it Celeronism – the beginning of the end of the mainboard industry and the IT industry completely. Using Celeronism, a company could sell a system with a 64MB graphics card, a 2Ghz processor etc. That 64MB graphics card wasn’t a Geforce 3 Ti 500 however, and that CPU wasn’t a northwood P4. It was an ATi Radeon 9000 OEM and a Celeron. But on paper it reads the same. Mainboard manufacturers and graphics chipset vendors alike start to see a different ethos for the mainstay of their business model. Pricing and numbers.

The warehouse is now full of micro ATX boards, integrated graphics and no chance of upgrading to an AGP card. Full sized ATX mainboards are sold in small quantites to satisfy the needs of enthusiasts or those needing a cheap RAID solution for the office server. No one cares about the birth of AGP 8x and the Radeon 9700 in the industry, they just want to know if you can supply 5000 mainboards that accept a certain processor for less than $50 at this time. Things generally start to tighten up. Advertising has to be re-negotiated for cost-down, some of it pulled entirely – sending out samples for evaluation starts to get tight but that doesn’t matter too much because there're less fish in the e-media sea to worry about now that greed has driven the hobbyists away. Working in the industry becomes harder as distributors tell you of the vast amounts of cash they make just selling hard disks as the rest of the industry suffers selling much more complex development items with small margins – such as mainboards. Where’s the excitement gone – why should you be in this arena where the gladiator now sees himself back in his slaves attire ? Why has the hobby that became a vocation become the same as any other nine to five ?

We have gone from a situation where the mainboard manufacturers were cherished, along with all other manufacturers of IT related products. Now we have a situation where the distribution channel (which has been diminished through its own power struggles) dictates the world by an advanced definition of Celeronism. Is it for them Greed or Survival. Survival.

The monster created by Celeronism is vicious. Companies that were once respected have now been eaten and spat out. No longer do we see a TMC mainboard, a Hercules VGA card, or a certain sound card once cherished. The big get bigger, the small shrink or lose their blossom and wither to die. You would think that this point is enough and that the survivors are in a position to carry on forth with their belts buckled tightly to their corporate waist. Celeronism should be enough- there need not be a new force which pushes Celeronist attitudes to become extremist. The world is about to change – the world becomes fanatical about fundamentalists in a religious manner at the same time that it becomes fundamentalist in the pricing manner.

Branding of product is now only important to very few people. Pricing of product is paramount – where before to have a Plasma TV you needed $8000 US you now only need to have $1500, and your friends will be just as impressed by your huge amount of techie equipment that adorns your home. Why does the Plasma become so cheap ? Because the same power struggle you saw visibly with mainboard manufacturers, VGA card manufacturers and those other sound card manufacturers has also happened invisibly. Taiwan lost the war to China.

Taiwan is upright in culture, technology and many other aspects. It is also upright in cost and salary. Taiwan used to be the manufacturing base for all that you see in front of you as you read this piece. China isn’t upright, its upward. At this time all of the manufacturing that was in Taiwan is now now in the most part in China, everything is OEM product, nothing has its air of originality. Who makes your TV ? Not the company whose brand is on it. Who makes fans ? There are only 3 major fan manufacturers on this planet, Delta being one of them. Who makes your NVidia VGA card, regardless of brand ?

At this time only Flextronics and now Hon-Hai (Foxconn) account for the majority of NVidia cards manufactured. Does it matter whether your card is XFX or ASUS – no because they were likely made at the same factory, just using a different materials list supplied by the customer – XFX or ASUS. So what are Flextronics and Hon-Hai in all of this? They are the advanced form of the moulding of extreme-Celeronism.

Although you will now know Foxconn as a mainboard manufacturer, the evil that they bring to all smaller manufacturers along with Felxtronics (ASUS included) is one that is hardfelt particularly to the enthusiast. Why can you not always overclock your Opteron past 3Ghz on your DFI board ? Because of Foxconn or the other extremists. Why can that be – that sounds senseless ? Because Foxconn drive the mainboard market price down, any mainboard out there is compromised in R&D in an attempt to minimize the loss that the mainboard manufacturer makes when selling you the board. Loss? Yes Loss. Many banks in Taiwan have many electronics related companies living on borrowed time as they continue to sell product at a loss just existing for the sake of it. Look at what happened to Abit. Who owns them now – USI – the equivalent of Foxconn or Flextronics!

The enthusiast deserves to have the insight of what has happened to their industry. Fifty percent or greater overclocks on Celeron 300A were down to not only good Intel CPU yields, but also great mainboards – particularly those from Abit at the time. Now mainboards could certainly be better – why do they all ship in the main part with Electrolyte filled capacitors rather than aluminium low profile ones. Survival. The problem isn’t just this simple however – it convolutes to other problems. RMA culture.

So things are tight for everyone from the top to the bottom of the pile. But what’s the largest problem now for every manufacturer ? RMA. Why is RMA a problem – two reasons end user apathy and dishonesty or over-expectancy. Manufacturers now in this age of advanced Celeronism are the salve of their customers. The end user doesn’t know how to use their product correctly – it is returned to the retailer, returned to the distributor, returned to the manufacturer. Instant and huge loss of revenue. So little of what is returned to companies is actually at fault. The end user, the customer, the paying customer is the death of the manufacturer. Through the bullying and threat of dis-loyalty of the manufacturers own distributors they have to accept and replace thousands of items each month with either no fault found or damage by the consumer. I get angry when I see the idiot who returns their mainboard as it doesn’t run 1T command rate with their processor and memory, or they return a mainboard due to a fluctuation in voltage – little do they realise – this action can no longer increase the price of the product due to the pricing pressure from the large companies like Flextronics, all it serves to do is kill the smaller company. You even get the situation where a distributor is sitting on stock and gets a cheaper deal elsewhere. Then they return all of your stock as faulty for credit after systematically damaging it all. Rough world. Yes – think of the warzones in the Terminator movies – think of the IT industry. Only the largest force with the most draconian method will survive.

So next time you are buying your sound card, your mainboard or your monitor – remember that the big boys make them all, they’re not as good in quality as they should be. Think of Celeronism.

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