ON THE SIDELINES at the Taiwan IDF gathering, we managed to get hold of Asustek president, Jerry Shen.

Asustek, whose huge $23 billion expected 2007 revenue will include nearly 63 million mainboards and 16 million graphics cards, is the behemoth of the Taiwan IT industry.

An outspoken leader in Taiwan's IT industry, Jerry shared some of his opinions and outlined his firm's current status.

1 – Jerry, what's your assessment of Asustek's history and achievement up to now?

I'm happy with the progress for now, feel we exceeded the founder's expectations. Our first phase, the 1989-1993 component supplier, did fine, but we accelerated dramatically once Johnny Shih came on board, resulting in a 33 times annual profit jump from 1993 to 1998 – US$ 10 million to over US$ 300 million. With him, we moved to the second wave, focusing on product quality and performance, rather than quantity. In 2001, the third phase was entered, with us firmly on track to become a system-level brand name. Even then, the combined unit production of MSI, Gigabyte and ECS still can't match Asus.

2 - How did Asus fare against its local competitors?

At the system brand level, compared to Acer, we control the ‘core’ value chain: technology, innovation and design, with no outsourcing. “We believe that controlling these factors helps more rapid and advanced innovation.

On the Component production side, we only have one high end competitor, Gigabyte, while I feel MSI and ECS focus on the midrange. . Asus has more resources and more talented people than either of these, as well as time-to-market speed advantage.

3 - Asus brand strength potential vs big worldwide Tier 1 and Tier 2 is a challenge for near future.

Tier 1 vendors like HP, Dell have good scale but they outsource almost everything these days. We compete in the Tier 2 vendor space, where Acer, Leno vo, Sony and Apple reside. Whether it is globally or in the Greater China market, our plus is, again, control of the core design and engineering values within the company. In China, we also share the same culture as the customers. As for Sony, Toshiba or even Apple, their innovation level is impressive, however the scale is not sufficient.

We want our brand Image and perception to reflect easy of use, user experience, seamless integration, affordable, stylish and leading technology, rather than focus on low price.

4 - So what is the future company and product strategy?

We will be separating the company in two different directions to address the market needs better. The Asus brand side will focus on lean, innovative highest product value approach, relying on the best talents. The contract manufacturing side will, of course, have to rely on the scale instead. Our long term strategy is to keep the lead in technology, quality and design.

5 - What does need to be improved about the image of Taiwan vendors overall to make them more palatable globally?

While, according to Interbrand, we are No.1 IT brand in Taiwan for 2007, Asus is still only 1/15 of Samsung or Sony in size or recognition. We may be well accepted by IT suppliers and power users, but commodity product users don’t know Asus brand very well yet. Our Chairman, Johnny Shih is also now a CBO (Chief Brand Officer), a high profile traveling Asus promoter to bring up our visibility. Even the eeePC with its ease of use and overall user experience. Is actually our brand spreading tool. When people think about eeePC, they would hopefully think of Asus.

In general, we, Taiwan vendors, have to focus on seeing our brands across the globe as equaling quality, performance and reliability, not just low price or mass manufacturing. Of course, careful brand name choice process is also important, and we feel Asus brand needs no changes there. Right now we are No 3 in China, and doing better by the day in Russia.

6 - What do you make of the current Intel vs AMD vs Nvidia vendor standing? How does it affect Asus? And how important is for the industry to have the competition alive

Talking about Intel, we are good friends with most of their top management, and in the middle of top 10 Intel partners for processors and chipsets. Overall, Asus is comfortable with Intel’s support over the years. Intel has consistent and stable corporate culture, which we like.

AMD likes to rank partners more by volume alone. Acer uses a lot of AMD processors and we feel AMD favors them. We hope to have a level playing field from AMD. Also, on the chipset and GPU, ex-ATI, side: AMD marketing, product delivery and strategic alliance relationship development needs improvement. Their CPU 2002-2006 product performance was better. Since mid 2006 we feel Intel regained the lead. Departure of top executives is a big challenge for AMD, in my opinion. Our concern is also the combination of no product leadership with reduced volumes. There seems to be no clear near-term strategy how to win back the lead.

Last October they had processor shortage for the whole quarter. Vendors, including Asus, were forced to switch to Intel even further. The same shortage repeated this last quarter with ATI GPUs. Finally, they suddenly changed their focus to top tier vendors from us, the OEMs. I feel the relationship has not yet reached the required stability for consistent business.

Also, we are concerned about their continuous one generation process technology lag behind Intel, while the on board memory controller and interconnects will be anyway matched by Intel during next year. However, I feel that the 2009 Fusion is a great chance for AMD to succeed with integrated processor and GPU approach.

As for Nvidia, we have an OK relationship, except for their product schedule uncertainties. Being squeezed between Intel with CPUs and upcoming GPUs, and AMD with both CPUs and GPUs as well, I feel Nvidia needs to define a new position in this changed environment, in my opinion.

8 - Asus core board-level business. Your feelings on the future prospects of it and any Asus competititive advantages, especially at the high end?

I think mainboard market has become flat. Asus focus is increasingly at the high-end where we can focus on performance advantage, new features like Express Gate 5 seconds boot to Net access, as well as energy saving,additions like Asus Energy Processing Unit. So, our main markets will be high end PC, gaming enthusiasts, workstations and servers. At the workstation and server front, we will mainly compete against Supermicro using our unique advantage of combining enthusiast PC overclocking board expertise with our workstation and server team designs to create greater performance. In summary, we’ll keep the focus and add more resources for our high end product lines.

9 - Can you give us more details on Asustek's forays into new market areas like EEEpc, ultramobile, cellphones, monitors, casings, PSU, and why in these areas?

We focus on open vertical markets such as Digital office - networking, enterprise,

Digital home: PC, laptop, and Digital person: phone PC (PDA). shopping, connected life. The newest addition is Digital control, i.e embedded and industrial PC. Asus designs and creates all these components to satisfy the open vertical market and to be a strong system brand across all of them.

10 - Final closing question: Your thoughts on the future of PC and IT industry in general, and the place of Taiwan and Far East in it?

Taiwan will continue to be focused on manufacturing, but Asus and Acer will grow brand business beyond our shores. For instance, in Greater China, besides Lenovo there are opportunities for more brands. Asus, Acer and Lenovo will become the top three brands there in the long run.

In the Far East including Japan and Korea, the overall market will grow, but the dominant strength will still be design and manufacturing - the US market will remain the largest for sometime, followed in the importance by Europe. And there, it’s very difficult for any of Asian companies to be in the top five. As a consolation, within five years, Chinese notebook market alone will match the US market, and we know mobiles are overtaking the desktops anyway. That is a big opportunity for Asus. µ