Asus is now the No.3 tablet maker in the world, more than half of its tablet shipments are backed by the power of Google Nexus, and Google is likely to move the Nexus lineup to LG next year. While Asus is trying to keep the business, whether it can do so or not is of limited importance, in our view. If Google can move this business freely among different OEMs, then it is actually an ODM business rather than an own-brand business for Asus. The more Asus intends to keep the business, the more they need to suffer on margins (again, that’s exactly what ODM biz is all about).
Asus’ own-brand tablet run rate, based on our estimate, is only around 1M per quarter, meaning that Asus’ own-brand tablet is only around the size of that of Acer. Asus was one of the earliest and most aggressive Android tablet makers in the market. However, after two-and-a-half years, its quarterly run rate still hovers around 1M unit per quarter. With rising 6” plus phablet offerings from Samsung and Sony, we believe that the 7-8” tablet growth might start to slow down in a big way next year. As such, we are rather bearish toward Asus’ own-brand tablet business.
According to IDC, Asus’ global NetBook market share has declined from 11.3% in 3Q12 to 9.6% in 2Q13, with 3Q13 market share likely to decline further. We believe Asus’ share loss is due to its overly aggressive touch-panel NB strategy and concentration in consumer market. In our view, Asus’ most targeted market is basically consumer touch NB – probably the product facing the worst consumer
demand, which is why Asus lost so much market share despite its strong product design capability.