How did a relatively unknown Taiwanese motherboard maker become the most despised company among PC giants like Microsoft, Dell, and Apple? Through a relentless drive to innovate faster than complacent giants bogged down by bureaucracy and status quo thinking.
ASUS saw the future of mobile computing before anyone else. It delivered innovative products at disruptive price points, carving out new consumer-friendly market segments. In just over a decade, ASUS has grown from a niche player into a global PC powerhouse:
- From ~$3 billion in revenue in 2000 to over $14 billion in 2022
- Global PC market share rose from ~3% in 2000 to ~8% in 2022
- Now the world‘s 5th largest PC vendor by shipments
For ASUS, being hated comes with the territory when you‘re an industry disrupter.
Contents
- Eee PC – The Tiny Laptop That Shook Up the PC Industry
- Microsoft – Exposed the True Cost of Windows
- Dell & HP – Squeezed by "Race to the Bottom" Pricing
- Apple – Blindsided by "Cheap and Cheerful"
- Intel – An Innovative Partner
- Aftershocks – Racing to Relevance
- Powering the PC Industry from Underdog to Contender
Eee PC – The Tiny Laptop That Shook Up the PC Industry
The ASUS innovation that earned it so much hatred was the Eee PC netbook launched in 2007. Weighing just 2 pounds, the Eee PC crammed desktop-class computing into a tiny, ultraportable form factor.
Despite its size, the specs were impressive:
- 7" 800×480 display
- Intel Celeron 900MHz CPU
- 512MB RAM
- 4-8GB solid state storage
- Linux OS with OpenOffice productivity suite
And it retailed for an astounding $299 – half or less than the cost of mainstream laptops.
The Eee PC exceeded sales expectations right off the bat:
- Over 300,000 units sold in 2007
- Hit 5 million+ units sold by 2010
- Created the "netbook" product category, major growth driver for laptops
This tiny machine threatened giants all across the PC ecosystem.
Microsoft – Exposed the True Cost of Windows
The Eee PC was regularly sold with Linux rather than Microsoft Windows pre-installed. This enabled ASUS to achieve performance and productivity without paying Microsoft‘s software licensing fees.
The full cost of a new Windows license actually exceeded the retail price of the Eee PC itself! This put serious pressure on Microsoft to lower OS pricing.
In the wake of the Eee PC‘s success, Acer and other vendors negotiated Windows XP licensing down from $125 per unit to just $45. This marked a major shrinkage of Microsoft‘s bread-and-butter Windows revenues.
"We are not happy with the impact netbooks have had on the software industry. From that perspective, we would really like that category to go away." – Steve Ballmer, CEO Microsoft (2009)
Dell & HP – Squeezed by "Race to the Bottom" Pricing
Major PC vendors like Dell and HP found themselves under massive pricing pressure due to the Eee PC‘s wild popularity.
Their mini laptop products like the Dell Inspiron Mini 12 cost 3-5X more than the Eee PC but offered only incremental spec improvements. Dell and HP simply couldn‘t match ASUS‘s cost structure.
This forced a "race to the bottom" as vendors chopped prices and margins attempting to compete. HP called the segment a "nascent and troublesome category" as its low-cost laptop revenue plunged $1 billion in a year.
Meanwhile ASUS enjoyed healthy 28% operating margins even on its budget netbook line, thanks to its efficient supply chain. ASUS was likely selling each Eee PC above cost while competitors struggled to break even.
Apple – Blindsided by "Cheap and Cheerful"
Apple has never shown much interest in the low-cost PC market, preferring premium products with high margins. But the runaway success of the Eee PC caught Apple off guard.
Rumors indicate Apple leadership scrapped plans for a modestly priced netbook after realizing ASUS has already seized the market.
"We don‘t know how to make a $500 computer that‘s not a piece of junk." – Steve Jobs, Apple CEO (2008)
While Apple avoided embarrassment by not competing in netbooks, they ceded the rapidly growing segment entirely to ASUS and other Windows vendors.
Intel – An Innovative Partner
However, not every PC powerhouse viewed ASUS as the enemy. Intel provided the Celeron processors used in early Eee PCs and enjoyed a productive partnership with ASUS.
The companies collaborated successfully in the 1990s, with ASUS engineering helping Intel resolve design flaws. This history meant Intel saw ASUS as an ally in driving PC innovation, not a threat.
Intel also appreciated the Eee PC‘s thermal efficiency requiring no cooling fan. Intel aims to make processors powerful yet cool and quiet, aligning with the Eee PC ethos.
"Our strategy is to provide computing capabilities and solutions across the entire compute continuum. Asus‘ exciting new product is an example of the type of innovation possible in the low-cost segment." – Bill Siu, Intel (2007)
Aftershocks – Racing to Relevance
The incumbents ASUS left in the dust didn‘t take the disruption lying down. But their efforts to respond seemed too little, too late.
Microsoft aggressively cut Windows XP netbook pricing from $125 to under $30, but still struggled to hit ASUS‘s price points. Windows netbook share peaked at 96% in 2009 before smartphones and tablets took over ultraportable computing.
Dell eventually managed to produce profitable Inspiron netbooks, but market share dwindled as consumers favored hipper vendors like ASUS. Dell exited the consumer PC business entirely in 2021.
HP resorted to acquisitions to bolster its netbook efforts, buying up Palm and iPaq. But the segment collapsed before deals could pay off, and HP botched both integrations.
Apple released the premium iPad tablet in 2010, creating a new category ASUS couldn‘t compete in. But the iPad couldn‘t match the Eee PC‘s ultra-affordability that made computing accessible to millions.
Powering the PC Industry from Underdog to Contender
The Eee PC showed the power of moving faster than lumbering giants. ASUS saw the consumer desire for lightweight affordable computing and delivered well before established players.
By ignoring the traditional rules of PC industry cost structures, ASUS created a new segment on its own terms. This let the company grow from bit player to top 5 global PC manufacturer:
- Multi-billion dollar revenues
- Global top 5 vendor by shipments
- Best-selling motherboards worldwide
- High brand recognition and loyalty
In the process ASUS earned the ire of giants clinging to old business models. But the company was laughing all the way to the bank.
ASUS proved small players can compete through speed, innovation, and customer focus – even in a market dominated by behemoths. No wonder the giants hated them so much!
