Should you care whether your laptop manufacturing is outsourced

Does HP make better laptops than Dell? Are American brands like Apple, HP and Dell more reliable than Taiwanese brands such as Acer, Asus and MSI? It’s probably something you’ve thought about, or read surveys about, but perhaps it no longer makes much sense. Today, very few laptops are made by the company that puts its name on the front. They’re made by contract manufacturers who are probably based in Taiwan but, increasingly, run factories in China.

The result is that the world’s biggest laptop manufacturers are companies that few buyers have heard of: Compal, Quanta and Wistron. They all make machines for the three biggest brands -- HP, Acer and Dell -- though not in equal numbers. Bearing in mind that this sort of information can be unreliable and soon goes out of date, it seems that Quanta is HP’s biggest contractor while Compal and Wistron are Acer’s.

The other major contract manufacturers include Inventec, Flextronics, Pegatron, and one that you will have heard of: Foxconn.

Apple wouldn't be so profitable if it actually made its own laptops

It’s a big business: both HP and Acer need close to a million portable computers every week. It’s hardly surprising that each of them uses about half a dozen manufacturers.

Contract manufacturers and ODMs (original design manufacturers) can do all sorts of things. They can supply “barebones” machines that brand name companies can complete by adding a processor, disk drive and so on. They can provide “white box” systems that dozens of companies can sell, so the same machine appears with many different badges. They can manufacture, box and ship branded machines to another company’s design.

But if we’re serious buyers, shouldn’t we be evaluating which contract manufacturers produce the best laptops? Is an HP laptop made by Quanta better than an HP laptop made by Foxconn? Are the laptops that Wistron makes for HP, Acer and Dell better or worse than the ones Quanta manufactures for the same companies. What if the different contractors are manufacturing identical designs?

This is not something the big brands want to talk about. They certainly won’t tell me which contractors make which machines, let alone which ones are more reliable. But it can make a difference. For example, my IBM ThinkPads manufactured in Greenock in Scotland were better made than later ones with labels that say: “Manufactured for IBM Corporation. Made in China”. (Yes, they were also a lot more expensive.)

10% Design, 80% Manufacturing, 10% Marketing

One of the problems is that there’s not much money in manufacturing. Acer was one of the first big companies to act on this. When the Italian-born Gianfranco Lanci started transforming Acer, one of his executives sketched out the strategy for me on a restaurant napkin. He drew a bell curve and explained that most PC companies focused on the middle bit -- manufacturing -- rather than the extremes: the initial design and the final marketing.

Acer was going to turn the curve upside down to concentrate on design and marketing, hollowing out the manufacturing. It led to Acer’s astonishing growth over the past few years, which could soon make it the world’s biggest PC supplier. (It’s not clear whether Apple was an inspiration but it obviously uses the same playbook.)

So what happened to Acer’s 8,500 production workers, who had been looked after by Acer’s paternalistic founder, Stan Shih? Most of them are in the contract manufacturing business, because Acer created the spin-off we know as Wistron. It now has about 40,000 employees. More recently, Asus (which was founded by former Acer employees) spun off a separate company, Pegatron, to do contract manufacturing.