Famous international brands such as Palm and Handspring presently have a hard time to derive profits from there personal digital assistants, as many Taiwan manufacturers have jumped on the same bandwagon, and much cheaper at that, as last week's COMPUTEX ITC trade fair in Taipei demonstrated.

Even companies which one would normally not associate with electronic gear, such as CMC Magnetics, a maker of DVD and CD discs, are now making them.

Other companies, like Compal Electronics and Mitac, traditional makers of notebook PCs, cellphones and PDAs, have added more functions to their handhelds, including　Connections transforming them into telephones, Wireless-LAN and 56k modems for Internet access, and they are doing at low costs, because both companies manufacture their products in cheap China, while doing the design in Taiwan.
This division of labor makes sense, since Taiwan engineers' salaries are much lower than those of the US or Japan counterparts, while labor costs in turn are much lower in China than in Taiwan.

Compaq Computer Corp., now taken over by Hewlett-Packard, foresaw this situation already years ago and has it's popular iPaq machines made by High Tech Computer Corp, a Taiwan PDA maker, who in turn has these PDAs made in China. The company's sales during the last three years of this operation have increase by 250%　each year.

Palm is rumored to try the same kind of partnership with Acer's subsidiary Wistron Inc., a former manufacturing arm of Acer, which is now making PDAs for its mother company.

Some industry insiders question whether the PDA business will ever reach the comfortable profit levels of 2000, because hardware is becoming dominated by low-cost manufacturers entering the market.

The Market Intelligence Center of the government-backed Institute for Information Industry in Taipei forecasts the production value of Internet appliances, including PDAs, Web Pads and other handheld computers will soar to US$50 billion by 2006, up from 23.2 billion in 2000.