Sept. 30, 2002

Trying to escape the price war and small margins in the low-end market, several Taiwan network equipment makers try to develope products targeted at the high-end market, albeit with mixed results, according to industry sources.

Most Taiwan network equipment makers achieved their market share by introducing low-end gear for private end users or small offices. With all past experience of Taiwan to adapt to price-oriented buyers, makers have been successful in this new field also by winning orders from small players as Linksys, Buffalo, and Netgear.
However, the quality level thus achieved reportedly did not impress prospective customers like Cisco, 3Com, and Nortel, whose market target is the high-end corporate level.

There are reports from insiders that several Taiwan makers had bitter experiences of initial orders taken away from them after they failed to meet higher requirements.
In addition, many international brands were not eager to release ODM/OEM orders to Taiwan for high-end products already for fears of intellectual property infringements.
Therefore, some insiders say that Taiwan will only be successful in this category if makers move to electronics manufacturing orders (EMS), that means to serve only as a rational manufacturing basis for readily developed product specifications, handed down to them by bigwig customers.

Among the manufacturers trying to enter the high-end margket, Gemtek Technology has begun small shipments after three years of cultivating this sector. An executive of the company pointed hat that the gross marging of a high-end outdoor access point is as high as 50%, while a regular WLAN (wireless local area network) PC card or low-end access point reaps only below 20%.

Industry observers point out that the technical barrier to enter the high-end field is also high-end, meaning the difficulty in developing WLAN components that have to work under severe environmental stresses due to exposure to weather conditions and vibrations, such als directional antennas, outdoor access point s and back-up management systems including network security, bandwidth and firewall management.

Demand for high-end wireless local area networks is expected to increase from areas like Europe, the US, Korea and China. Manufacturers in Taiwan who cannot meet the requirements of these users will have to withdraw from competition andd move to low-cost China to maintain their competitiveness in the lower end of demand.