The A-View from Aware adopts Aday's AW-300 platform with Aday5F-300 CPU.

Northern Taiwan makers leverage product development and vertical integration capabilities.

Northern Taiwan's leadership in laptop manufacturing has given the region a natural edge in the nascent Ultra-Mobile PC (UMPC) market. Although the downstream UMPC market is currently dominated by brand owners from Japan, South Korea and the US, Taiwan's ODM and OEM companies are beginning to build momentum in the upstream. Some have also entered the UMPC fray with their own brands. Shipment volumes are still small and the UMPC is still considered by suppliers as a niche product line, but makers expect the UMPC market to expand this year, with growth coming from the introduction of low-priced models. Subsequently, Taiwan's UMPC supplier base will also expand.

There are at most 15 companies in Taiwan manufacturing UMPCs. All of these makers are based in Northern Taiwan, mainly in the production centers of Taoyuan and Taipei. The advantage of makers in this area lies in four key areas: strong integration of hardware and software, capability for low-cost and flexible component procurement, strong vertical integration, and established channels for international maintenance and customer services.

More than 90 percent of Taiwan's UMPC output is exported, mostly to developed countries. The major makers include Quanta Computer Inc., Compal Electronics Inc., Arima Computer Corp., Inventec Corp., AsusTek Computer Inc. and First International Computer Inc. (FIC). Companies that are promoting UMPCs under their own brands include AsusTek, Gigabyte Technology Co. Ltd, and FIC.

There are also some medium-scale manufacturers, such as Amtek System Co. Ltd and Aware Electronics Inc. Ltd, which have strong capability in hardware and software design, but outsource production to maintain flexible production and put more emphasis on product development.

Many of the Northern Taiwan manufacturers maintain factories in both Taiwan and mainland China, mostly in Jiangsu in the latter. New products are usually developed and first produced in the Northern Taiwan facilities, then rolled out to mainland China when production volume requirements pick up. There is much flexibility in terms of selecting production sites for UMPCs, since both Taiwan and mainland China have mature supply chains for related products. Nonetheless, makers continuously monitor availability and price movements of materials and components.

Many of Northern Taiwan's UMPC makers are vertically integrated and source from either affiliated companies or Taiwan suppliers with which makers have established strong ties. This approach enables makers to respond immediately to fast-changing product trends and to keep costs as low as possible.

UMPC components that are readily available to Northern Taiwan manufacturers include LCDs, driver ICs, PCBs, 1.8in hard disk drives (HDDs), optical disc drives (ODDs), DRAM modules, WLAN modules and touchscreen modules. The major Taiwan LCD suppliers are AU Optronics Corp. (AUO), Chi Mei Optoelectronics (CMO), HannStar Display Corp., Chunghwa Picture Tubes Ltd (CPT) and Innolux Display Corp. AUO is among the suppliers that offer panels with total touchscreen solutions.

UMPC makers also source from Samsung and LG. For CPUs, Taiwan UMPC makers sourcs from Via Technologies Inc., Intel Corp, Advanced Micro Devices Inc. (AMD) and Aday Technology Inc.

The only potential sourcing problem is in new components, such as solid state disks (SSDs) and LED backlights, whose supply is not yet as established compared to other components. For instance, there was a severe shortage of 8GB SSDs last January due to a surge in demand for AsusTek's Eee PC and to a relatively higher product failure rate back then.

Northern Taiwan UMPC makers' business is mainly driven by customers in developed countries in Europe, North America and East Asia. To sustain leadership in serving these areas, many of the Northern Taiwan makers have established strong international channels to provide maintenance and customer services. There are companies that have their own assembly factories in their key customer bases such as the US and Europe.

For their emerging low-priced UMPC models, interviewed Northern Taiwan makers are eyeing Eastern Europe, Central and South America, and mainland China.

UMPC product development in the Northern Taiwan supply hub is focused on the early adopter and mobile worker markets. Pipeline projects are placing emphasis on adopting the latest technology and creating full-function, ultra-portable designs with high performance capabilities and longer battery life.

At present, cost and pricing strategies are not yet a major issue. Most UMPCs from Northern Taiwan fall into either the high-end or the low-end group. In addition, ODM and OEM customer specifications generally determine production cost and pricing.

As of Q2 2008, the majority of UMPC models produced in Northern Taiwan are still in the high-end group, which has prices exceeding $600 per unit. Low-end units are priced below $500. UMPC suppliers are closely watching the progress of the low-end market, which is predicted to drive growth for the category. According to James Tung, AsusTek deputy director for OBM product marketing, decreases in UMPC prices this year will be more significant than decreases in laptop PC prices.

There are now varying strategies in positioning low-priced UMPCs. Intel has declared the distinction between the two segments, identifying as ‘true' UMPCs devices supporting ‘heavy' OSs such as Windows XP and Vista and their accompanying business applications. Intel has pegged devices with ‘lighter' OSs, that are more suitable for Web surfing than productivity application, as mobile internet devices (MIDs). This distinction, however, has not totally influenced Northern Taiwan's makers. For instance, Aware is targeting its low-cost UMPCs at the education, business and mobile worker markets. Aware's products are available for more than $150 each. Its sister company, Aday, makes UMPC processors thus lowering production cost.

Among Aware's entry-level models is the A-Bag, which has a 300MHz processor, 128MB memory and 1GB SSD. The A-View is a midrange offering that features a 300MHz CPU, 256MB memory and 2GB SSD. The A-View has a Web-based interface. When docked with a keyboard, it functions as a notebook PC.