Fujitsu-Siemens to keep making PCs in Germany

By Georgina Prodhan

PARIS (Reuters) - Fujitsu-Siemens Computers sees no reason to move its manufacturing of personal computers away from high-wage Germany as a means to offset rapidly falling prices, its chief marketing officer told Reuters on Wednesday.

Barbara Schaedler said FSC, Europe's biggest maker of personal computers, did not believe in business models solely based on cost-cutting and that in any case only minimal gains were to be made from moving production to lower-cost regions.

"The Asian labor cost advantage would be almost eaten up by transport costs," Schaedler told the Reuters Global Technology, Media and Telecoms Summit in Paris.

"Our labor costs are currently under 10 euros ($13.60) per box. Transport costs would be $10-$12 per box," she said, adding that in addition FSC would have to shoulder the fall in prices during the four weeks it would take to ship the goods from Asia.

Prices for PCs are being driven down about 10 percent per year and FSC has lost market share in Germany, being overtaken by Taiwan's Acer (2352.TW: Quote, Profile, Research, Stock Buzz) in notebook sales last year.

"This is a very challenging market. You'd better be prepared for the fact this is not going to change," she said, adding that FSC had not been approached by Acer, which has said it wants to buy a PC maker outside Taiwan and the United States.

Schaedler said it was important for FSC's production, almost all of which takes place in Germany, to be close to the company's customers, the vast majority of whom are in Europe.

"Our whole supply chain is built around customer requirements," she said.

FSC, a joint venture between Japanese conglomerate Fujitsu (6702.T: Quote, Profile, Research, Stock Buzz) and German industrial group Siemens (SIEGn.DE: Quote, Profile, Research, Stock Buzz), was squeezing 10 to 20-percent productivity gains out of its plants and had implemented a hard-won labor agreement, Schaedler said.

But she said FSC was working to build awareness of its brand, which she said was "improvable", as well as pushing sales of its non-PC products, which include servers and digital home entertainment systems.

"Some of our competitors have business models just based on cost-cutting. When you can't cut costs any more, this is no good," she said.

DISAPPEARING ACT

In a bid to individualize its consumer computers and free FSC to a degree from the relentless pressure to cut prices, Schaedler said the company planned to focus more on design.

She said consumers would drive changes that would filter through to the corporate level, as in the case of Microsoft's (MSFT.O: Quote, Profile, Research, Stock Buzz) Vista operating system, which has been launched as a consumer product but is expected to be adopted by companies.

"The consumerisation of the IT industry needs to be taken seriously," Schaedler said. "There's absolutely no reason to believe that a notebook needs to look like it does today."  Continued...