Hank [BS/MSEE,
MSM $$$, Ph.D. Mgmt] teaches As many of you know, I am the happy owner of one of the first Asus Eees and have passed it around my Purdue classrooms for students to "touch and feel." The following story, thanks to Forbes and Suzanne Nam, provides the interesting story behind the neat little palm-top. For those of you who haven’t seen the Eee in action (or have forgotten my show and tell) see the YouTube at end. BTW, I used the 1 gig SODIMM I took out of our new iMac when upgrading it to 4 gigs and put it in our Eee so it now has 1 gig of memory instead of the 512 megs as delivered. Just so happens both use the same DDR2-667 memory 
. For the record, our Eee still has an open PCI Express Mini Card slot where several cards, such as a solid-state 32 gig card, or 3G card could be installed. Hank
On The Cover/Top Stories
The Jonney Machine
Suzanne Nam 11.12.07
Intel pushed and prodded. Microsoft came in right at the end. How Taiwan’s Asustek built its cheap laptop for grown-ups.
A year ago Jonney Shih was searching for a breakthrough. The Taiwan company he has run since 1994, Asustek, had become the world’s largest maker of computer motherboards and one of the ten biggest laptop manufacturers. Once known for churning out cheap clones of name-brand laptops, Asustek began designing its own ten years ago and produced more than 4 million last year. "But we were still a second-class company," he says. "We were fighting fires, not thinking ahead."
The problem was that the personal computer market was maturing. The company had just established its laptop brand, and Shih was worried that Asus laptops would now be left with only a small slice of a slowly growing pie.
But around that time, two low-cost notebook models were making waves. Last November tech guru Nicholas Negroponte’s One Laptop Per Child, or OLPC, program released its first batch of prototype laptops designed for children in the developing world. And Intel was getting ready to launch a competing laptop, the Classmate PC, for a similar market. So, Shih thought, why not make a small, inexpensive laptop for grown-ups?
Last month Asus’ Eee PCs hit store shelves in Taiwan, and Shih may have his breakthrough. The two-pound laptops starting at $340 sold out in 30 minutes, and buyers around the globe clamored to get their hands on them. This month they arrive in the U.S.–starting at $300–and Europe. The rollout will probably reach China early next year, with the schedule for the rest of Asia not yet set. The day they went on sale, Asustek’s stock rose 4.9%. Kirk Yang, who heads Asia technology hardware research for Citigroup in Hong Kong, predicts that the company will sell at least 3 million Eee PCs next year but could easily tally 6 million. By comparison, Apple has sold 4.3 million laptops in the last four quarters. Analysts say the Eee PC will probably have the low-end market to itself for 18 months before the other big PC makers can jump in.
Even before the Eee PC went on sale, Asustek was having a great year. It’s taken over the number one spot in laptop sales in Taiwan, and the big electronics retailer Best Buy now carries its products in the U.S. The company–founded in 1989 by four former Acer employees–expects to reach $23 billion in revenue this year, up from $17.2 billion last year. Profits for the high-volume, low-margin business that’s still dependent on making components should hit $878 million, up from $591 million.
Before OLPC and Classmate, smaller meant more expensive. You could pick up a laptop weighing in at two pounds, but it would cost upward of $2,000. The cheapest ones sell for as little as $500 but can weigh more than 5 pounds. The OLPC device, though, will be priced at under $200; bulk sales to governments are expected to start by the end of the year. Classmate, which has been on the market for eight months, goes for $200 to $300. With bright colors, rounded corners and built-in carrying handles, the two models look like toys to computer buyers, but they showed that it was possible to produce a small, inexpensive laptop able to perform most of the functions that users need.
So Shih, the 56-year-old chairman and chief executive, quickly mobilized Asustek to build his low-cost laptop for grown-ups. He pulled staffers from his laptop, design and motherboard businesses and put Jerry Shen (who will move up from president to chief executive when Shih stops handling day-to-day operations in January) in charge of the project last November. "There were so many crazy ideas," recalls Shen. "I’d be traveling somewhere in the middle of India on a business trip and Jonney would call me and want to talk about an idea for an hour."
Shih knew the computer would need a solid-state memory–no spinning hard disk taking up space and creating heat. Instead it would have a flash drive, which uses less power and is more durable. He also knew it must include Wi-Fi capability, a video camera, an easy Skype interface, speakers, a microphone and a high-resolution (if small) screen. And it had to be light, so it would serve as more of a personal accessory than only a computer–a tall order considering they wanted to sell it for less than $300.
The first challenge for Shih and Shen was to line up a chipset maker. When connected to the motherboard, the chipset becomes the brains and nervous system of a computer, and it’s the most expensive part of the Eee PC. The two approached amd and Intel about making a chipset that was inexpensive and didn’t use a lot of energy, to keep the battery weight low. But AMD was already producing the OLPC chipset, and Intel had designed a chip for its Classmate.
Intel, though, was eager to jump into a project with a bigger market potential than just education. Sean Maloney, who is Intel’s chief sales and marketing officer and had done a lot of work with Asustek, was so keen on the idea that he campaigned inside Intel to get the company onboard. When it came time to unveil the project in June, Maloney stood side by side with Shih at the Computex show in Taipei.
Intel signed on in February. Then, having committed money and manpower to the project, Intel told Shih and Shen that it wanted to see a prototype in one month. "When I heard that," laughs Shen, "I told Jonney, ‘We’ve got nothing yet!’" Designers and engineers endured sleepless nights and long weekends and managed to put together the basics of the machine in time. Folks at Intel started calling it the Jonney machine.
Asustek had proved it could make a low-cost laptop on a small scale, but could they find all of the components at a low enough cost to mass-produce it? Other than the chipset, most of the computer is built from common components such as a 7-inch LCD screen and flash memory cards. "We had to really leverage our existing business relationships to get the components so cheaply," says Shen. And that’s where being a contract manufacturer and clonemaking outfit came in handy. Having built computers, mobile phones, PDAs and iPods for Sony, Apple and other big outfits for years, Asustek had relationships with the big component manufacturers and big enough orders to persuade them to offer the best prices they could.
But low prices, says Shen, don’t mean cheap products. "We want to create a revolution. We can’t afford to put out a bad product." The Eee PC’s designer, Jimmy Chu–whose other designs include the Asus U1F, a $2,000 laptop with leather trim and hand-polished steel parts–says image is everything when it comes to selling laptops. "It has to look like you’re getting more than you paid for." With the Eee PC, he says, the company did little things such as adding an extra-large hinge to give it more heft and durability.
A bigger hurdle was designing the user interface, the first thing people see when they turn on the machine, and the screens that lead to the programs. Asustek decided that the Windows operating system was out of the question. The licensing costs would have been the most expensive part of the computer. So it decided to use Linux and build its own user interface, and that became the most time-consuming part of the project.
The company first said the computer would be on shelves by August, then September, before it finally arrived Oct. 17. The holdup, says Shen, was making sure the interface worked well. To test it, Asustek took 1,000 prototypes and distributed them to employees and vendors, with strict orders to share them with family members of all ages. Bloggers on Eee PC Web sites that sprung up after the Computex show groaned that the product was taking too long to come out, but that didn’t bother Shen. "The user experience must be very high," he says. "So we delayed, because with all the momentum built up around this product, I want to make sure it’s exactly right."
Meanwhile, the prospect of millions of new PC users buying the Eee PC without Windows seemed to worry Microsoft. Just before the launch, it agreed to give Eee PC buyers the option of getting Windows for under $40, more than a third off the standard price.
Shih says Asustek will tap into a new market–consumers unable to buy computers because they’re too expensive or just too intimidating. Indeed, the Eee name comes from easy to learn, easy to play and easy to work. That new market has been nicknamed the second billion. An estimated 1 billion people now have access to computers and the Internet, but even in developed countries, computers are just out of reach for millions. In the developing world that number is in the hundreds of millions.
But Asustek clearly wants to connect with the first billion, too. For instance, the 2- to 8-gigabyte memory cards can be upgraded to 32 gigabytes and the RAM from 256 megabyte to 1 gigabyte by simply taking out two screws on the back of the machine, something that Shen demonstrates but isn’t including in the marketing materials. Asustek is also linking with mobile telecom companies to provide a 3g attachment, so users can be connected when Wi-Fi isn’t available.
The initial interest in the machine has come from PC hobbyists; and chat room denizens talking RAM specs and placing orders via the Internet are certainly not first-time buyers. Star Tech, an online retailer in the U.S. that started taking orders for the Eee PC before the specs were done, says its Eee PC page has been averaging 1,000 hits a day and it’s been taking roughly 100 orders a week, mostly from businesspeople and travelers. Citigroup’s Yang wants one, too, but it sold out too quickly for him to get one after it hit the stores in Taiwan. "I’m on the waiting list," he says.
20 Responses to “The Story Behind The Asus Eee PC”
- 1 Pingback on Nov 26th, 2007 at 10:41 am
- 2 Pingback on Nov 27th, 2007 at 12:31 pm
Obviously this was a great idea. I can see how the market would be so big for this laptop since there are so many older people who just need the basics when it comes to technology. I usually think you get what you pay for, but in this case there are many name brand parts going into this product and qualified people building it. For a price range below three hundred, not too bad.
These blog topics have been covering extreme ends of the market. It’s important for students to know that there are opportunities both with millionaires and more price sensative consumers. The mini laptob satisfys two unmet needs for consumers. One, it is relatively inexpensive and it is also user friendly for the technologically challenged. This product is a great example of spotting an opportunity and pursuing it. I am anxious to see how Dell, Apple, and Microsoft respond.
Interesting story. I didn’t know that Eee was such a hit. Maybe clothing with a built in Eee or iphone pocket is a viable idea now
I`m impressed by anyone who can take a market as saturated as the laptop market and find a way to fit in. This gives hope to all entrepreneurs. If Asus Eee PC can find a nich in the laptop industry, then there are still great idea that are yet to be discovered. It’s all about appealing to the right target market at the right time.
What can I say, I’m impressed. Like the man in the video said, it is a rather small laptop for older individuals, but for small children… it is perfect. It is able to accomplish the neccessities and then a little extra on the side. The only thing that I didn’t really like, was the fact that there is no real desktop, persay… that instead the home screen is divided in to tabs. I am more of an aesthetic person than a tech person, so I would definitely say, that it is always more appealing to be able to customize something, even if is as simple as having a picture of your favorite band smiling at you every time you boot your computer. May seem silly to most, but it is something that would be nice on the aesthetic side to me.
I think this is a great idea! The older generation is always looking for simply and easy, and this has accomplished it! I would have to say though that I wasnt a big fan of it since it didnt have anything extra on it but if you want the basics then its for you. I guess another target could be little kids, it a great first laptop/computer and all. Maybe it doesnt appear as though its really customizable so it might be that I would like it in the future but right now I’m not being sold on it. This isnt a computer that college students would get much use out of but one that a grandparent or small kid would. The market is deff needed this and now it has come.
I believe college students would get great use out of it. Instead of carrying around a huge labtop I would love to carry around a two pound labtop. It would have only what I need and it doesnt have Windows Vista because I have been having problems with Vista.
It was amazing that they came up with a prototype within a month, but that shows that if you did not have a passion for the work than you would not get anything done.
Yep, the Asus EEE has a lot of potential, it has done something amazing, it has gone back to the roots. The thing is that computers have gone a long way and computer manufacturers developed more and more features and they were able to keep it at the same price ($1000-2000) for a long time, ignoring the fact that perhaps some people just want those basics. Asus saw a opportunity, a problem (lack of very basic laptops) and solved that problem.
There are two things that stood out to me after reading this article tracing Asustek’s success. Firstly, it is crucial to maintain good business relations with other companies as you never know when you will need their help:
- “We had to really leverage our existing business relationships to get the components so cheaply,” says Shen. And that’s where being a contract manufacturer and clonemaking outfit came in handy. Having built computers, mobile phones, PDAs and iPods for Sony, Apple and other big outfits for years, Asustek had relationships with the big component manufacturers and big enough orders to persuade them to offer the best prices they could.
Secondly, if you develop a really good product, competitors will go out of their way to help you so as to avoid being totally undercut by your product.
- “Meanwhile, the prospect of millions of new PC users buying the Eee PC without Windows seemed to worry Microsoft. Just before the launch, it agreed to give Eee PC buyers the option of getting Windows for under $40, more than a third off the standard price.”
Hank I played around with the Eee PC when you brought to class and I noticed the screen maybe small but still boasts great resolution. I also loved how easy it was to use!
Anything that can seem less intimidating and more user friendly to “the second billion” while at the same time appeal to computer enthusiasts and still be cheap is a winner. Jonny Shih got his breakthrough–and he needed one. The PC market has matured and he needed something new. These guys have a little more time by themselves on the market before other manufacturers in on it as well. A good stock? Also, it’s cool to see Microsoft feeling a little pressure as well.
This was a great idea and it seems like it is defiantly worth the price. I would much rather use this to take notes during class than hauling my huge heavy laptop across campus. The guy on the video was right this would be perfect for children. It gives them the basic features while still giving them the freedom they want. How are you liking your Eee Hank?
I really like Janam’s comment about how computer prices have stayed so lofty when people could easily do with a relatively cheap computer that just handles a little bit more than the basics that were talked about in the video. It would be cool to have one of these things to take notes with in class. It is small enough that it would fit on the absurdly small desks in most of the lecture halls. I wonder what it would cost to do the memory updates that they talked about.
I think this little computer seems really cool. I was already impressed when I saw Hank’s computer in class. I think this computer is perfect for children, but lets not forget those adults that have no clue how to simply copy and paste text. I think that there are many older people that get frustrated with their computers because there is just to much stuff they need to know to operate it. Some adults just want the basics, and that is exactly what this computer has to offer. And it’s cheap !!!
I think that the Asus Eee would be prefect for someone who’s main computer is a desktop and just needs a temporary computer while on the go. It is great for this becuase is it very portable and cheap. There is no sence buying a 1200 dollar laptop if you will only use it when you travel. Asus has definatly found a niche.
This laptop worth the price, especially if you just want the basics. Although I would prefer of a laptop, this would be perfect if I just wanted to surf the net or type a paper.
The Eee PC got me thinking about a market that it might not target specifically; however, it might turn out to be an interesting niche to pursue. Coming up on the holiday season, I was thinking this could be a great gift for my technologically inclined grandparents. They are a little older, but they have always wanted to try and find a computer that they could “understand”. The Asus Eee seems very easy to use and doesn’t have a vast array of unwanted programs that might confuse the first-time computer user. This computer is also small enough that it could easily fit within my grandparents small apartment and not take up too much room. As people get older, it seems as though they want to communicate with their loved ones and keep in touch. This computer helps solve not only that problem, but it could also potentially help the older generation simplify their lives. With the price as an added plus, I can’t see why the Asus Eee is not a legitimate possibility for anyone looking to get up to speed with technology.
i really like the product, i haven’t heard much about in the news, this was my first time hearing about it, its definitely something i would be interested in buy with its easy to use format and sensible size and price. Very interesting and i am excited to hear more and see this product develop further.
I also am incredibly interested in this product. The size and functionality are very appealing..especially for a student who is constantly on the go. Right now..I own two laptops. One personal..one work- and I would love to have something I could take with me..and not worry about bulk or destruction.