The smaller-is-better trend comes to the home computer.
What takes up the most space inside a personal computer? The memory? The disk drives? The CPU? Actually, it's none of these. The thing traditional PCs are most full of is empty space. Continuing innovation means PC components have become a lot smaller during the past decade, but the big metal cases that contain them have hardly evolved at all.
But recently, several innovative companies in Taiwan have begun to change this. They have done away with the empty space, and shrunk the PC down to a tiny, stylish cube one quarter the size. The result: a PC that actually looks attractive, and is at home in any living room. Alongside the average PC--a staid metal box-- it looks like a Porsche next to a dump truck.
It all started with Shuttle Inc. Founded in 1983, this medium-sized manufacturer enjoyed a comfortable living making PC components that foreign companies would use to build computers. By 1995, Shuttle had become the world's fifth largest manufacturer of motherboards, the anonymous electronic circuit boards that form the guts of all modern computers.
Shuttle did not sell computers to ordinary consumers. Instead its components were used in PCs sold by well-known brand names like Dell, Compaq and IBM. The profitable business enabled Shuttle to expand into other areas, such as graphics cards and CD-ROM drives. Indeed, the PC components business was so good that everybody wanted a slice of the pie.
As more manufacturers entered the market during the 1990s, increasing competition squeezed profit margins wafer-thin. In common with many of its competitors, Shuttle's formerly cozy existence had become an increasingly desperate struggle for survival. Taiwan's giant high-tech companies, like Acer, Asustek, and First International Computer, with sales measured in the millions, had turned many PC components into commodities--products that were only profitable for the largest mass producers.
By 2000, the company found itself facing a stark choice. The writing was on the wall, Shuttle had to change, or die. Ken Huang, now a marketing vice president, proposed a radical plan: shrink the computer. Fashion- and style-conscious consumers had shown they cared about appearances, for example, by buying stylish (but expensive) Apple computers, alternate mobile phone covers, and other consumer products designed to please the eye.
"Everybody seems to be more and more style-conscious these days," says Daniel Lin, an engineer at Asustek Computer Inc., who oversees product design on the company's range of small computers. "Everybody wants to be different, they want their possessions like mobile phones to be personalized."
Shuttle's Huang realized that consumers were ready for PCs as furniture--products that could grace a living room. Sometimes, the computer might even occupy the same space as a stereo component. Shuttle's new product, later dubbed the XPC, would encourage, and then tap, this nascent demand. The company paid particular attention to the appearance of the product, giving it a shiny brushed aluminum finish.
But in the beginning, the future did not look so bright for Shuttle's new baby. The first model had problems. With all the computer's components crammed into such a small box, there was no way for all the heat they generated to escape. Components inside were in danger of being damaged by the high temperatures. Shuttle was forced to add several noisy fans to pump the hot air out of the machine.
"It's really difficult to control the thermal environment inside such a tiny space, the heat just has nowhere to go, you have to take control of it and move it out," says Matt Chang, a marketing specialist at Iwill Corp., which also makes small PCs. "Often, new CPUs and graphics cards are actually hotter than older generation chips, so the challenge gets worse."
Sales were slow when Shuttle's new product was tentatively released onto the market in 2001. There were complaints about the noise the fans created--compared to a small hair dryer by some--and about the lack of space inside for upgrading the computer. Gradually, however, positive opinions began to filter back to Shuttle. "When we first started selling the first XPC," recalls Huang, "we knew we had a great product, but we were not entirely sure who the customer would be."
PC enthusiasts, people who built their own custom computers from components made by several different companies, were excited by the potential of the small, but powerful PCs. Word of mouth spread online; technically-adept users began customizing and modifying the machines--the noisy fans, for example, were often replaced with quieter ones. The Internet allowed widely scattered individuals to form a community around the new product. Other companies had experimented with small PCs before, but they often used special, nonstandard parts, and so were impossible, or costly, for users to modify or upgrade. They also tended to be underpowered, compared to state-of-the-art computers. "The Shuttle XPC is different from other small computers in that it uses standard components--processors, graphics, memory, storage devices, etc.," says Huang. "Moreover, the XPC offers performance that equals or bests full-size computers."
The enthusiasts who had first adopted Shuttle's small PC, and tinkered with it to correct its deficiencies, were also opinion leaders, who influenced the purchasing decision of many ordinary consumers. Over the next couple of years, Shuttle's miniature computer gradually grew from a niche product to something larger.
However, to be truly suitable for the mass market, the noise issue had to be dealt with. The PCs were so loud because they needed high-speed fans to move hot air quickly away from intensely hot areas, such as the CPU and power supply. If not properly cooled, temperatures around these delicate and expensive components will reach dangerous levels--well above 100 degrees Centigrade--in a matter of minutes.
Shuttle discovered that noise was an especially serious concern for the XPCs because people were not using them like normal PCs. Because the XPCs were small and attractive, they were putting them on top of desks or tables, closer to the user's ears. Users were also putting them in environments like living rooms (where they could use them to play music or movies) in which noise was unacceptable.
The company brought in outsiders with expertise in acoustics and thermal control, as well as developing in-house knowledge. They borrowed a trick from notebook computers: heat pipes, which silently whisk heat away from hotspots, like the CPU, and carry it to arrays of cooling fins at the back of the computer. There, a quiet low-speed fan blows air through the fins, carrying the heat out through the back of the computer's case.
Engineers also experimented with techniques to damp vibration from disk drives, which would otherwise be amplified when the tiny computers were placed on a table or desktop. And they physically rearranged components, where possible, to streamline airflow through the system and achieve the optimum cooling environment.
Once Shuttle had learned how to deal with the noise and heat control problems, while still offering the latest CPU technology, sales really took off, and profit margins began to look extremely good for the company's unique product.
Although the XPCs took considerable effort to develop, Shuttle was surprised to find that each new model remained profitable much longer than expected. Some models continue to sell more than two years after they were first introduced, says Ron Carlson, a senior marketing executive at Shuttle. That is remarkable in an industry where many products have a life span of nine months or less--before they are superseded by the latest and greatest technology.
Buoyed by the unexpected hit product, the once-endangered company attracted substantial new investment and enjoyed a steadily rising share price. Other companies were becoming aware of Shuttle's unexpected success with what was now seen as a new class of products, known as small form factor PCs. Since 2003, at least five other companies have introduced products that compete directly with Shuttle's brainchild. Among them are many of Taiwan's largest high-tech manufacturers, including First International Computer, Asustek Computer, Elitegroup Computer Systems, Microstar International, and Aopen (a member of the Acer Group).
Daniel Lin, engineer in charge of a team that has spent the past year developing a small form factor PC at local giant Asustek, acknowledges that Shuttle was the first into the market, but believes the resources a bigger company can bring to bear are critical. At Iwill (which also offers a line of small form factor PCs), Matt Chang suggests that Shuttle, controlling over 50 percent of the market, may be resting on its laurels, and failing to adopt new technologies rapidly enough to satisfy market demand.
Asustek's new S-presso sports a molded plastic exterior with a finish that resembles a sports car. Asustek and other companies have added elaborate front panel displays to their small form factor PCs. These can display a variety of information, such as which CD track is currently playing, increasing the product's resemblance to a stereo component.
In response, Shuttle's Carlson cites his company's greater experience--a three or four year headstart on its competitors --and ability to focus all its resources on a narrower range of products. "We're way out in front on the cooling," he notes, "the others are only just introducing heat pipe cooling."
Carlson also suggests that other manufacturers are sometimes bolting on external decorations that do nothing to enhance the functionality of their products. Although Shuttle spends a lot of effort on making the XPC range look good, and ensuring products are easy to use, he says, it does not believe in adding unnecessary frills.
However, the illuminated front panel display is one innovation that Shuttle will accept for certain models. It is an important adjunct to an ongoing push by software behemoth, Microsoft, to expand the reach of the personal computer into the living room, where it can form the center of a home entertainment system. Microsoft hopes that its share of this market will derive from a new version of its Windows operating system, XP Media Center Edition (MCE) 2005. "We were a Microsoft launch partner in October and we're building on that relationship," says Shuttle's Ken Huang. "Moreover, our US branch sells fully configured XPC's direct and through the [distribution and retail] channel, and we've found that roughly one-third of our direct sales have been MCE-equipped XPC's. That's really phenomenal when you consider that less than 1 percent of the broader PC-market shipments are media center products."
As the PC moves into the living room and finds a place alongside the stereo and TV, once-anonymous companies like Shuttle and Iwill are attracting increasing attention. Indeed, promotion of brand names has become critical. Shuttle sponsors gaming competitions where the competitors play using XPCs. Iwill recently released an ultra-high performance dual-CPU small form factor PC that it believes will help establish a reputation for quality and reliability--even if it does not sell in high enough numbers to repay its development costs.
Shuttle's innovative concept has seeded a highly-profitable and rapidly growing market. According to Taiwan's Market Intelligence Center (MIC), around 1.6 million small PCs were sold last year, of which around 1 million were small form factor PCs similar to Shuttle's cube design. The MIC expects the market to grow 20 to 25 percent this year--one of the fastest growing sectors of the PC market. And the makers of these products have not just changed the PC. They have also transformed themselves, from anonymous mass-producers into modern, design-driven manufacturers.
Copyright (C) 2005 by Simon Burns.