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HONG KONG -- Acer founder Stan Shih has made an apocalyptic prediction.
In 20 years time, he told a Taiwanese newspaper, major personal computer (PC) brands like Dell and Hewlett-Packard won't exist. They'll be eclipsed by manufacturers who prioritize low costs, high volumes and cheap sticker prices--companies with strategies similar to Acer itself, based in Taiwan, or China's Lenovo.
"The trend for low-priced computers will last for the coming years," Shih told Chinese-language newspaper Commercial Times. (His comments were widely translated.) "But U.S. computer makers just don't know how to put such products on the market."
But not everyone backs such a bleak forecast for American mainstays. Some technology consultants and market researchers, in fact, think up-and-comers from Asia are the impetus these companies need to try a new tack. Dell and HP have to rethink their focus, they say, even if that means moving away from PCs.
"The Acers and Lenovos may dominate the traditional PC and laptop sectors, but will we need to store all our files on a local hard drive, and will we need to carry a laptop around?" says David Carini, managing director of Maverick China Research in Beijing. "Some of those leading U.S. companies may evolve into something else."
Dell especially should focus less on reducing costs through labor and supply chains, according to Jessica Lo, managing director at Shanghai-based China Market Research Group. She says it should work on developing a piece of technology that a consumer or a business actually wants to buy.
"If Dell and HP were to invest more into making cooler, funkier PCs, then I think it is an overstatement that they will disappear," Lo says. "But if they keep competing on price, then the Taiwanese and Chinese manufacturers will continue to gain."
In recent years Acer has snatched up once-popular brands like Gateway and Packard Bell; Lenovo took over IBM's computer business. In the fourth quarter of 2009 Acer overtook Dell to become the world's second-largest PC vendor, according to global shipment data compiled by market research firm IDC. It now trails only HP.
Just selling affordable computers, though, isn't enough to hold on to market share for two decades. Especially if traditional PC makers want to compete with a company like Apple, which develops products--from computers to phones to the imminent tablet--which sell like hotcakes even though they aren't cheap.
"The success in the sales of premium Apple computers show that consumers are willing to pay when they see value," Lo says. "Fundamentally, we think the PC sector needs to change and stop selling on price sensitivity, especially in China where consumers are spending a significant portion of their savings on a PC. For them, they want the best."
To be sure, some Asian electronics manufacturers are savvy in that regard, with valuable insight into the mainland Chinese market to boot, says Duncan Clark, chairman of Beijing-based investment consultancy BDA China Limited. He adds that U.S. companies must stay tied up with China--either through trade or investment--to stay afloat.
"If HP and Dell are just in the box business then they’ll likely be extinct, but HP is already in many other areas," says. "The key is innovation, staying ahead of the curve."
As for Acer and Lenovo, Carini says, selling cheap laptops by banking on cheap labor is not a viable long-term plan for the same reason U.S. manufacturing has floundered: Low costs don't stay that way forever.
"The U.S. can still operate factories efficiently, but you still have to pay workers $20 an hour. In China you could pay the same workers $1 an hour or less. As the economy grows, you will not be able to pay an endless number of people that same low cost," he says. "[Shih's] company will be in the exact same situation as HP."
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