MITSUBISHI - Meet your maker

With 15 years experience building boards for its own PCs - most notably the Apricot - Mitsubishi's entry into the motherboard market is not before time.

The move by Mitsubishi Electric PC Division (MEPCD) to enter the ATXbly the Apricot - Mitsubishi's entry into the motherboard market is not before time. motherboard market triggers the thought: 'Why didn't it think of it earlier?'

MEPCD has been involved in motherboard design and manufacture for more than 15 years, building the boards for its own Apricot PCs in the very early days of the PC market.

Fast and often quirky, Apricot PCs have always had a reputation for engineering excellence. It was one of the first computers offering voice control, built-in security and integrated Lan ports. It was also an early MicroChannel Architecture adopter - to its disadvantage.

MEPCD's experience leaves it as one of only 20 or so PC makers in the world that are capable of designing their own kit from scratch. Now, that expertise is going to be available outside the company to a range of Vars and vertical market integrators.

But entering the merchant motherboard market isn't a guaranteed strategy to extra profit. The roadside is littered with PC board designers that once led on quality and support but came undone under pressure from two sides - the low-price manufacturers of the Far East and Intel itself.

It's a jungle out there, according to James Wickes, managing director of Ideal Hardware, a high-profile component distributor that handles motherboards.

'It isn't a terribly profitable business in its own right - margins are extremely tight and the technology has a high rate of turnover,' he argues.

'Like everything else in the technology business, you have to really focus on something if you want to do well for yourself and your customers.'

Focus, it seems, is the key. Six months ago, MEPCD took the decision to go public with its motherboard designs. Before that, it's in-house designers focused solely on their internal market, creating five or so new boards a year for Apricot PCs in Europe and Japan, with a small operation providing bespoke boards to a handful of embedded PC integrators.

In an effort to harness its intellectual capital more effectively, as well as keep its PC products up to the minute, the company decided to switch into high gear and crank out 18 new products a year.

However, that number doesn't include slight variations, such as video or sound on/off the mainboard, points out Peter Horton, former chief designer and now vice president of MEPCD's Mitsubishi motherboard division (MMD).

'We are now working to external market timeframes, which will make a big difference in the competitiveness of our designs, both internally and externally,' he says. 'Our goal is to be zero days behind Intel in the release of new motherboard technology and I think that we will be there by the spring.'

MMD is still part of MEPCD, but is subject to US-style financial controls.

The division is in charge of its own decision-making and heads will roll if it doesn't find its place in the motherboard business.

However, Horton remains confident. The Mitsubishi name has a lot of clout on a business card, even in new markets. 'It's not as tough as the PC system market,' he says. 'While part of the motherboard market is driven by the latest technology and low prices, we also have the ability to give vertical market integrators long product runs.

'Those companies don't want to deal with the 'product of the month' mentality of some motherboard shops - our LPX line will last a long time but with comparatively fewer new designs. We are also planning on licensing more of our designs out,' Horton reveals.

Suresh Panikar, director of product marketing at Mylex, the Raid and SCSI market leader, knows the sharp-end of the motherboard market.

Mylex is now just selling designwork. 'We were driven out of the market by very stiff competition,' he says. 'Quality wasn't enough; performance wasn't enough; good support wasn't enough. We had to deliver all of those things at a price that could compete with our Taiwanese rivals.

'We tried for a while at the very high end with motherboards that were biased towards servers, with onboard SCSI and all the bells and whistles.

We had some success, but in the end we gave up.'

The company now offers bespoke motherboard designs for its clients and has a number of Raid and SCSI chip-level systems for other motherboard manufacturers' designs. Mylex's clients include PC giant Acer and premier board maker Soyo.

Panikar adds: 'We still have the board-making skills, but we offer them in a way that isn't quite so exposed to the competition created by the board market. The rate of revision is quite high and it is hard enough to keep up with the design elements, let alone put them into production and through distribution.'

MEPCD has also had some OEM experience in the past, selling to NCR and AT&T, but has only recently won its first design licensing deal. But the identity of that customer is under wraps, Horton insists.

The company will be expanding its NLX, Micro NLX, ATX and Micro ATX products over the next few months. MMD plans to populate its lines with all levels of Intel technology - 440 BX, ZX and eventually the Whitneys and Caminos as they are available.

'We are pretty much an Intel house, but that is not an absolute forever,' Horton says. There is still room in the market for a company that follows the Intel line closely. While Intel is pretty quick to market with new technology these days, it can be counted on to practise the Intel Architecture (IA) policy line only.

When IA changes, Intel motherboards follow suit. 'Not everyone wants Lan onboard or no ISA sockets. There's a need for alternative designs - especially in vertical markets,' he points out.

MMD intends to focus on Tier 2 and some Tier 3 system builders, as well as vertical markets such as kiosk, coin-op and game machine opportunities.

In due course, it will move the boards into distribution. The market position that MMD is aiming for is quality as good or better than Intel, teamed with a price comparable to Gigabyte and Asus.

'Over the past 15 years, we have built up a wealth of design and development knowledge that would be hard to match anywhere in Europe,' Horton claims.

'That, coupled with our manufacturing expertise, which mirrors the quality standards expected by Japanese production techniques, means we can develop quality, world-leading products quickly and efficiently.

'The fact that we constantly achieve product failure rates of less than one per cent bears testament to the soundness of our products,' he adds.

Graham Palmer, product marketing manager for Europe at Intel, is in wholehearted agreement about the motherboard market needing more quality vendors.

'Each level of assembler - from Tier 1 PC vendors down to the Intel product integrator smaller assemblers - has its own unique characteristics,' he argues. 'But the one thing that ties them together is the need for quality and reliability. This is especially crucial for the smaller assemblers for which any defects have a disproportional impact.'

But Horton hopes that the level of service and support will set MMD apart.

The division claims years of experience designing front panel interfaces, getting type approvals and supporting the full gamut of operating systems.

But so has Intel. The chip manufacturer is a key MMD supplier and a competitor for board-level sales. For all the quality connotations that are attached to a Mitsubishi Electric product, Intel has a large marketing shadow and is well known for the ferocity of its competitive instincts.

Palmer is eager to play down the conflict between the two companies.

'Getting along in a sector of this size is not difficult. Our markets don't overlap that much due to segmentation and geographic scope issues.

'The future of the motherboard market is increasingly towards specialisation and segmentation,' he adds. 'Board-level products are following customer needs, just as microprocessors have.'

Flexibility is the key, Palmer believes, to making PC assemblers happy.

If that is true, one has to suspect that a newcomer like MMD, which also has a much smaller organisation, will be able to outflex the giant Intel.

MMD has set up sales offices in France, with responsibility for Spain as well, while the UK office in Birmingham has responsibility for the rest of Europe until the German office comes on stream. The company's sales people are getting ready to put a lot of miles behind them.

A great deal of emphasis is also being placed on exporting MMD products to the US, according to Richard Christiansen, general manager of US operations at the division.

'Our customers will receive Mitsubishi quality, pricing that will challenge many of the world's leading players, excellent support, long product supply chains and a very competitive time-to-market service from the American base, which is under negotiation at the moment,' he claims.

As the market for custom-shop PCs expands, MMD will be there to provide the high-quality alternative for Vars, integrators and assemblers. MEPCD has manufactured quality main board products all along - now it is going to try to sell its expertise without the Apricot box.

Mitsubishi Hornet (HN-440)

The Mitsubishi Motherboard Division's Hornet (HN-440) is its first ATX form factor board. The boards are made in its own assembly facility in Glenrothes, Scotland, where Apricot PCs are assembled.

Hornet tows the Intel party line. It is a Slot One board, giving the assembler a choice of Pentium II processors through 400MHz. The front side bus operates at 100MHz; while 66MHz can be selected by jumper so that systems can be built to hit defined price/performance points. Builders wanting Socket 7 flexibility and price flexibility will have to look elsewhere.

Hornet's Intel 440BX chipset assures total compatibility with the latest Intel spec. Versions of the board include optional sound capability from an ESS Solo 1 chip with Sound Blaster compatibility.

The three DIMM slots take only PC-100 spec SDrams, up to 384Mb. The board features an AGP 2x slot, four bus master PCI slots and two AT slots. Phoenix provides the Bios.

Inside Mitsubishi

An interview with Peter Horton, vice president of Mitsubishi motherboard division.

How are you managing your relationship with Intel, which is both a supplier and a competitor? Intel has been a close partner of Mitsubishi Electric PC Division (MEPCD) for more than 15 years, and the relationship is even closer than it appears. When Mitsubishi bought Apricot, Intel had an offer on the table at the same time. So it knows us very well.

Intel is a valuable technical partner and in any partnership there has to be some give and take. We really aren't after any of its valuable Tier 1 customers, so our relationship will undoubtedly continue to be warm and co-operative. In fact, Intel has bought motherboards from us for its customers when we had products that it did not. We have even got some good sales leads from Intel's sales team.

Do you think that you can compete with Taiwan from a factory in Scotland? Being in Europe has other advantages aside from transportation proximity and customs differences. We sell and support these products in the same time zone and with English as our native language.

But we aren't looking to meet the high-volume/low-price producers of Taiwan head-to-head. Our differentiators will be in terms of additional engineering and customisation to make our products more suitable to vertical markets. We may have an announcement that adds capacity to our fabrication facility in Glenrothes and our assembly plant in Japan in the near future - we are a global company.

Isn't the US the real focus of this exercise? How important is Europe to MMD? Europe is our home market, which makes it our initial priority, but the volume opportunities are in the US. When we are fully up and running this time next year, with our full line of new products, we envision half our sales coming from Europe and Asia, and the US providing the other half.