There is an impending battle between Consumer-Electronics manufacturer's and PC makers.  Traditionally, a division exists between these two industries both in terms of product and market focus.  Consumer-electronics makers have focused on consumer markets with "gee-whiz" gadgets that deliver entertainment.  PC makers have focused on business markets offering efficiency and speed.  Now, with business sectors cutting "costs" and consumers not upgrading to faster models each year as in the past, PC makers are looking to the electronics markets for growth. Added to this, there is now the actualization of the "convergence" hype that everyone was embroiled in a few years ago but which never really materialized. With digital content, these 1's and 0's can be converted into entertainment on mediums which are moving closer and closer to PC's. Thus the scene is set for the battle of the supply chains.

The battleground is being waged on two different fronts of the supply chain:  one operational and the other strategic.  On the operational front are the efficiencies of the PC supply chain.  

Whereas the Sony's of the electronic world have enjoyed margins in the region of 30%, PC companies like Dell have had to survive in an industry where 10-15% margins were really good.  And yet, Dell was more profitable.  This is largely due to Dell's leaner operations and efficient supply chain.  

PC makers like Dell are about to leverage their lean supply chains onto the "fat" margins of the electronics makers.

On the other front is the fundamental question of where you sit in the supply chain.  This is more on strategic supply chain management.  PC manufacturers have long moved to a "virtual" factory where their suppliers in some instances manufacture and design (ODM's:  Original Design Manufacturers) entire product lines onto which Dell slaps its logo.  In the electronics world, the design and manufacturing process is very much vertically integrated.  Therein also lies the higher cost base as well as slower development cycles.  The PC makers, because of thinner margins and short life-cycles, have used this virtual manufacturing to not only make their operations leaner, but also to develop new models more quickly.

An extreme example of this question of "who will make what?" is Apex Digital.  In 1998, this former scrap-metal exporter, entered the DVD market.  Through usage of ODM's in China, they are credited with single-handedly driving down prices from US$700 in late 1997 to US$74 in August, 2003!  Today, they command a leading 15% of the DVD market share.  Coming together here is the convergence we spoke of.  Unlike VCR players, which have more than 100 moving parts, DVD players utilize mostly standard digital components.  Where it took "brandless" VCR manufacturers over 10 years to impact the VCR market, "brandless" DVD players, like Apex Digital, have made an impact much more quickly.  

But Apex better pay attention as well. At the beginning of 2004, Amphion MediaWorks, another Chinese ODM manufacturer, will sell their DVD's at an "eye-popping" price of US$34.99!

Thus, the scene is set for the battle of the supply chains between consumer-electronics makers and PC makers.  Those companies who will be able to strategically manage their supply chains will survive, while those whose supply chains will not be able to compete will not.  Do not be surprised if some big names are included in the "obituary" list to be replaced by new names like Apex Digital.