Seven out of ten mobile PCs are outsourced to Shanghai, says iSuppli

El Segundo (CA) - In a report released today, iSuppli delivered the stunning news that 82.6% of all mobile PCs produced worldwide - more than four out of five units produced anywhere - are outsourced by their vendors to original design manufacturers (ODMs). Some have names you’ve heard of, like Samsung, the #9 ODM with 1.5% of business. But the top six ODMs on iSuppli’s list, led by Quanta, are based in Taiwan, and they account for 71% of the world’s outsourced production.

What’s more, according to iSuppli estimates, a stunning 85% of all mobile PC manufacturing capacity is located not on the island of Taiwan, but in mainland China - specifically, in the greater Shanghai area. It’s standardization in notebook design which has made it possible for companies to outsource production - or, to be accurate, to let their outsourced production be outsourced - and which has contributed to the seemingly impossibly rapid rise of Shanghai from a farm town to a production powerhouse.

Basically, if you know exactly how to build a computer, then you can calculate exactly how low you need to pay someone to build a specific part of that computer ; and nowhere is that calculation more accurate than the low-wage capital of the world, Shanghai. The cost savings on the ODM’s part is then passed onto the OEMs.

What happens to the savings then ? They get reinvested, today’s iSuppli report implies, in what vendors do best : advertising and marketing. This way, says iSuppli, OEMs "can focus on their sales strategies, marketing activities and after-sales service to acquire and retain customers." That reinvestment, the report ever-so-carefully implies, may contribute to the fact that gross margins in the mobile PC field remain in the 5 - 6% range, despite reduced costs.

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