Most people know Mustek for its low-cost Mecer computers, but these are the proverbial tip of the iceberg for South Africa’s largest independent computer maker.
When David Kan opened the doors of Mustek in 1987, the first computer he assembled was an Intel XT desktop computer. In quick succession, it was followed by the AT or 286, the 386, the 486 and the Pentium. He quickly learned that, in this business, you only survived and grew by embracing change as it happened.
In the past month, Mustek had to up its act once again, building its first Ultrabook computer. And in the first quarter of 2013, it will enter the tablet market.
The heart of the business, however, remains the desktop computer. You know, that big machine our forefathers used in the 20th century?
“A lot of people feel the desktop is dying, but I don’t believe it,” says Kan. “It still has a value and a reason to exist. In terms of cost of ownership and manageability, the desktop still has a lot of advantages over the tablet and even the notebook.”
As the biggest local vendor of assembled PCs in South Africa – its nearest rival, Pinnacle, trails it by a large margin – Mustek has found it difficult to extend its famed assembly-line economics to notebooks.
It uses the Mecer brand on all its notebooks but, says Kan, volume is small. So the focus is still on the desktop.
“I do agree that the desktop market is under pressure, but it has not collapsed, as many people think. Globally, according to IDC forecasts for next year, the total desktops sold will be about 2% down – which is far from the idea many people have that it will halve. IDC don’t think so, and I don’t think so either.”
Kan is willing to bet an expensive, high-tech assembly line on this prediction. In the past year, about 130 000 computers have come off the conveyor belt, with desktop machines making up 110 000 to 115 000 of these. Laptops accounted for only 15 000-20 000 machines.
The relatively new format mandated by Intel, the ultra-slim Ultrabook, made its first appearance under the Mecer name in the past two months. But Mustek is not yet going large on the category, bringing in components for little more than a 1 000 units so far.
Another growing category, the All-in-One desktop, is similar in size. But, says Kan, that is only the beginning, and penetration of both categories will increase in 2013.
While the Mustek Ultrabook does not shoot out too many lights in the specs arena, it has one advantage over its sleeker counterparts: the price tag. The entry-level machine with an Intel Core i3 chip retails at R5 999, compared to most international name brand equivalents starting at around R8 000.
“The price is cut to the bone,” says Kan.
While it is shaping up to be the biggest growth category of the holiday season, the effort barely pays off.
“A normal laptop with an equivalent Core i3 retails at R4 495, so even a cheap Ultrabook still carries a R1 500 price premium.”
Kan has higher hopes for the All-in-One desktop, particularly as screen sizes become standardised. Right now Mustek is producing the machines with 21.5” screens, and early next year will move into the 19.5” format.
As closely as Kan watches his own production line, he watches those of the component manufacturers that supply the ingredients of his machines.
“In the All-in-One category, we believe 18.5” and 20” will consolidate into 19.5” by the end of the first quarter of 2013, because of the size of glass that the manufacturers can cut cost-effectively. That’s what we’re seeing on production lines now.
“We use Intel’s ATX motherboards, straight off the shelf. That is why the desktop PC cost of ownership is low: regardless of the brand, as long as you stick to the ATX form factor, components inside are 100% interchangeable.”
This simple strategy means low cost of holding spare parts. However, it also means little differentiation.
“We will always be a follower,” Kan acknowledges. “We don’t manufacture, but nor does HP – we all buy components from similar factories.”
Kan reveals that Mustek is poised to release an Android tablet range under its own brand, but is not rushing it. Right now it has 20 Android tablets in the lab for testing, and the boss is unimpressed.
“I have to label each one, because they all look the same,” he quips.
A Mecer tablet could well be an iceberg that sinks many low-cost tablet importers in South Africa. Mustek’s computers start at R1 500, rising to whatever a customer’s specs demand. A Mecer 7” tablet will start at a similar price.
It sure won’t be pretty, but then David Kan hasn’t survived the computer business for 25 years by winning beauty contests.