Talking Heads: Motherboard Manager Edition, Q4'10, Part 2

The Future Of Motherboards And Their Makers

Question: A few motherboard manufacturers have exited the industry. We are continually seeing profit margins on components drop. As consumers, how will we see motherboard manufacturers continue to drive their brand?

  • Since the motherboard industry is mature, the cost/performance ratio of the product and speed of technology adoption are going to be the final keys to success.
  • As the desktop total available market growth rate is shrinking, only those motherboard manufacturers who occupy leading brand positions will survive. Innovation and product quality are both key to brand image. However, both need long-term resource investment.
  • The continuing drop of profit margins isn’t necessarily bad. We see this as a positive move, because manufacturers now have the know-how to keep the same functionality by removing unnecessary components. This will start with motherboard manufacturers and end with the consumers. Lower production cost means lower MSRP. Everyone is a winner.
  • Specification: Higher price for more delicate features and more added-value, Support: Focus on good product maintenance and after-service, Marketing: Cooperate with vendors from well-known brands.
  • For us, we are dedicated to delivering high-quality components, innovative technologies, and implementing the latest industrial technologies on our products. In addition, we see the overclocking and gaming community as an important market, and therefore will keep focus on providing the best overclocking and gaming solutions.
  • We think there are only two ways to drive the motherboard business: cheaper price or special features.
  • We're more focused on advanced engineering [research] and developing leading edge time-to-market products that customers will see greater value in.
  • Focus on the technical trends and new features.
  • After some makers exited, it is good there are fewer competitors in the arena. Driving brand name takes differentiation in product offerings and strong channel coverage.

Over the past decade, the motherboard industry has gone through a few rough patches. The economic recessions over the past few years really show in the number of players left in the game. As far as consumer brands go, we at looking at the scene without Abit, AOpen, Albatron, Chaintech, DFI, Epox, Shuttle, Soltek, and Soyo. And if the current economic climate has anything to say about it, it is possible that this is not the end of the list. It is important to point out that some of these brands are not the result of dead companies. Some have just simply exited from the channel motherboard business. Others, like Shuttle, have simply just carved out their little patch of the earth elsewhere.

The players that remain are still facing the simple challenge of relevancy. Part of the reason for the previously-large number of motherboard makers was decent profit margins. As margins dropped, fewer players could financially afford to stay in the industry. Now that the industry is basically mature, how do these makers continue to separate themselves from the pack?

Over the next few years, we will see continuing pressures on price as manufacturers weather the changing economic climate. However, this has not abated the consumer thirst for well-designed products. It seems to us that manufacturers will need to focus on delivering better feature sets with an eye on time-to-market. For example, one or two brands are in a vulnerable state because their products were released more than a month behind the rest of the pack. A high-price feature-laden motherboard can justify an early entry as much as a low-price barebones design can justify a late entry. However, motherboard manufactures will find this is going to be a careful balancing act. In fact, winning is about doing both.

Most of the profit in the motherboard industry isn’t at the budget or high-end product-levels. If you consider the volume, it is really in the mainstream product. However, everything we usually associate with the high-end spectrum of the motherboard business: overclockability, big feature sets, bundle packages, next-generation technology is also trickling down into the mainstream product. The lines are becoming more and more blurred. As consumers, this is great news. This means having a small budget can’t stop you from building a reasonably heavy-duty computer. If you don’t believe us, look at our latest $400 System Builder Marathon configuration.

Going forward, it'll be interesting to watch is how companies keep their mainstream and premium products separate. At the higher end of the spectrum, we are looking at a situation where $300 translates into the difference between 4-way SLI with USB 3.0 over 3-way SLI and USB 2.0. 

On the business side, this means there has to be a careful evaluation of the margin/product cost ratio and the price/performance ratio along with sales volume. Careful planning of an entire product line will be essential to healthy sales, and in return a healthy quarterly report. There is less room for product line overlap as the margins tighten, so decisions on which features to include need to be very conscious and deliberate.

If you look at the balance sheet, every company seems to be healthier in 2010. Since only Q1 data is in, we are left wondering about some of the more recent events: increasing wages in China and the appreciation of the yuan. Quarter to quarter, the operating margin and net revenue reports are up, and we are eager to see more of the 2010 data. However in a two-year window, one tier-one company’s estimates for global motherboard shipments have fallen by almost 25%, which really puts into perspective the global economic climate and the current price war between Asus and Gigabyte.

The market share numbers for everyone are in flux, but keep in mind that this is not really due to a major decline in unit sales. Over the past few years, everyone was hit fairly proportionately by the economic downturns. If you look at the numbers, the total available motherboard market is experiencing slow growth, but is not shrinking. This is an important distinction to make. The shifting numbers are not a result of giving up market share; it is more a result of a company taking a share of the growing market disproportionate to its current market share. So this makes for a major shift in the market share landscape, even though the total market and individual companies both may see some degree of growth.

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  • mi1ez
    new AMD Operton offerings

    Operton? Really?
  • david__t
    They could save some cost by getting rid of onboard sound on the high end boards - seriously, who on earth builds a PC with a £300 motherboard and then uses onboard sound?
  • slated
    Well the target for these mobos is servers, surely. What servers need audio, onboard or otherwise?

    My biggest problem is simply buying one of these mythical beasts. AFAICT nobody actually sells them in the UK. The only board I can even find (ostensibly) for sale is the Asus KGPE-D16, and it needs some proprietary junk called "Pike" to use SAS apparently. No thanks. Not that it matters anyway, as every link I've followed to the Asus boards results in an "Out of stock. No lead time available" message. Been like that since day one.

    Try buying a half-decent Tyan or Supermicro G34 board in the UK. I came close to buying a quad board once, until I realised it was damned near impossible to find a case to fit Tyan's out-of-spec size (and naturally their cases were unavailable).

    I'm starting to think the G34 platform is nothing but a myth.

    Maybe Tom's Hardware could do some legwork, pull a few strings, and reveal the magic secret of where to buy these boards, because I'll be damned if I can find one.
  • tinnerdxp
    to slated... Sorry mate, but THG doesn't give a damn about its readers... let alone the market in the UK... They actually think we have $ in here...
  • tinnerdxp
    On the other hand - I feel the same about Zotac mobos for AMDs... it's close to impossible to buy the latest offerings or anything AMD based at all in the UK... I gave up few months ago for exactly that reason. You can get one or two models for Intel and... that's it...
  • chechak
    motherboard hasn’t gotten any simpler it's more complected and more functionality faster and more reliable but simpler to use,iam just waiting for NEW Nvidia chipset (yes iam NVIDIA FAN BOY)