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Developing World Creates Electronics Niche
December 31, 1969 |Estimated reading time: 3 minutes
By Meredith Courtemanche, assistant editor
Conventionally, high-volume consumer electronics are manufactured in the developing world and marketed to developed regions throughout Western Europe, North America, and Asia. In recent years, however, the developing world has edged into the consumer market, and shown potential to grow into a larger segment. The increasing popularity of cell phones in India and parts of Africa attests to this trend, and low-cost laptops between about $100 and $200 could carry the electronics market's momentum, establishing a technologically savvy generation of school children and opening a broad market for consumer electronics. This dynamic shift raises several logistic questions an increase in consumption of electronic devices parallels an increase in e-waste, and many underdeveloped countries are far from equipped to properly recycle or dispose of heavy metals, copper, and other components; volatility in this immature market poses new challenges for companies heavily invested in manufacturing low-cost devices; outsourcing models to manufacturing hubs must change to accommodate domestic and foreign demand; and infrastructure (cell towers, etc.) must be available for the laptops to work properly. Finally, competition for the emerging market could have ramifications on the already-slim profit margins for consumer devices, a possibility that has the United Nations' (UN) project "one laptop per child" (OLPC) facing competition from OEMs interested in the same target market.
Africa is the fastest growing mobile telecom market in the world; seven out of ten phones there are mobile, according to World Bank and UN statistics compiled by the International Development Research Centre (IDRC) in Canada. Cell phone subscription rose by more than 100% in many developing nations between 2000 and 2005; subscriptions in Chad rose 107.2%, and those in Liberia increased by 154.5%, according to the UN agency International Telecommunications Union (ITU). China's subscriptions rose 35.8% in the five-year period, while Vietnam's increased by 64.8%, and India saw a 90.6% rise. These statistics contrast with cellular growth in developed nations, which ranges between single digits and mid-20%. Wireless communication is growing alongside urbanization, and electronics manufacturers are continuing this connectivity from cell phones to laptops. IDRC claims that every capital city in Africa offers internet connectivity, though subscription is low. The OLPC project will begin shipping laptops manufactured in Shanghai, China, to 25 countries participating in the $100 laptop project in September, and estimates shipments will reach 10 million units per month by 2009.
The XO, OLPC's ruggedized, child-friendly laptop, was developed by ODM Quanta Computer, Inc. (Taipei, Taiwan), and several independent designers to answer the needs of a developing country. Screen design suits use in sunlight rather than under lamplight, the casing is dirt- and moisture-resistant, and the graphical user interface serves two purposes it connects children to technology intuitively and easily adapts to many different language structures. OLPC also ensured that the assembly is RoHS-compliant, as a means of promoting e-waste recycling. Increasing connectivity in developing countries is promoting interest from groups outside the non-profit realm. Intel introduced the Classmate, a laptop costing about $200, to the same target market through its "World Ahead" program, and reports that it has received thousands of orders. In March 2007, Intel shipped Classmates to Brazil and Mexico. The company plans to deliver orders to about 25 developing countries, including China, India, Indonesia, Nigeria, Pakistan, Thailand, and Vietnam, through a pilot program. While neither the OLPC PC nor Intel's Classmate are priced at $100 as yet, both groups assert that they are seeking methods to lower the price.
Should the developing world become a successful market, strategies for computer design, cost margins, and outsourcing structure will need to change. Like the OLPC computer, Intel's design is ruggedized and low-cost, with moisture-resistant electronics and wireless connectivity. Intel reports that it is partnering with local PC manufacturers in target markets to build the assemblies, and develop language and education software. Local software, hardware, and communications companies manufacture, distribute, service, and support the end product. OLPC partners with Taiwan-based Quanta, which sources manufacturing in Shanghai, and incorporates components from AMD, Analog Devices, and other suppliers 92% of the components come from Taiwan-based suppliers, according to the China Economic News Service (CENS). OEMs and EMS providers investing heavily in the developing world market hope to follow the trend of cellular connectivity with mobile computing. Should manufacturing hubs in India, sub-Saharan Africa, and Asia evolve into viable consumer markets, high-volume, low-cost electronics manufacturers will respond equally, possibly recreating the growth curve achieved in the early years of cellular and PC adoption.