Asian computer and electronics companies have set their sights on the US PC market, threatening to break domestic leaders’ traditional hold over key segments. The new entrants have already taken about 28 percent of the consumer PC segment, up from 5 percent a year ago, and about 40 percent of the portable computer segment, up from 30 percent a year ago (Exhibit 1). They also control much of the consumer retailing shelf space. At a typical consumer electronics retailer such as Best Buy, as much as 70 percent of PC shelf space is controlled by Asian manufacturers.

Market share does not necessarily translate into profitability, however. Although the US consumer PC market has grown explosively over the past three years, domestic manufacturers generally have difficulty turning a profit. The recent appearance of Asian manufacturers threatens to make matters worse. All market participants therefore need to understand how this assault on the US PC market will affect industry structure and economics, and what actions will be needed to ensure success can be measured not just in sales, but in profits.

The new contenders

Among the Asian electronics companies, the Taiwanese and Japanese are showing the most interest in the US....