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[Hilbert Hagedoorn] - The videocard
market is a _very_ dynamic one, you have moved your production process
from building the videocards yourself to a sub-contractor, can you
explain why you have done this ? Also can you tell us who this
sub-contractor is ?
[Eoin Leyden] -
This decision was prompted by a number of factors.
Firstly as you say the market is very dynamic and you need to be able to
move very quickly to meet demand and yet at the same time keep your
inventory holding low in case the memory market bombs. I’ll go into in
a bit more detail so you can see the issues …
To keep our retail channel in supply we typically have
about four weeks inventory in the channel at any point in time. To
support them we carry buffer stock in our operations centre in Ireland
which would be another couple of weeks worth and then we have our
leadtime for materials being purchased to build boards in Singapore. So
at any point in time we probably have about ten weeks of inventory
scattered across the various locations. So you can quickly see how a
couple of dollars swing in memory pricing multiplied across that
quantity of product quickly adds up.
Our new model involves the use of an NVIDIA approved
sub-contractor to manufacture our boards for us. Basically we provide
the specification to them and they build the product to order. This
makes us much more flexible because we do not have to source long lead
components ourselves and our sub-con assumes some of that risk. In
addition the partner we are currently using has a hubbing facility right
here in
Europe
so again our flexibility is greatly increased.
Since Creative prides itself on the quality of our
product we have very stringent quality control in place to ensure the
best possible end user experience. To start with we have the sub-con who
are ISO accredited as we are ourselves. Then NVIDIA are intimately
involved in verifying the hardware designs. We also have our European
Product Development team here in
Europe
who not only do hardware compatibility testing but also test on every
permutation of localised OS here in Europe.
Finally we have both incoming goods inspection and random samples from
finished goods that are also fully tested. As you can see we take
quality seriously and it is one of our biggest strengths.
[Hilbert Hagedoorn] - You will not launch
videocards based upon the very attractive Kyro-II chipset, why was
this decision made ?
[Eoin Leyden] - I had a feeling you’d ask me
this. While we were defining our roadmap we went out and talked with
all of our retail partners about what they wanted to see from us. The
overwhelming response was a solid roadmap with a range of products
from entry-level to high-end. Whilst the Kyro II offers an interesting
mid-range offering STMicroelctronics do not provide the sort of top to
bottom range that our retail partners are interested in stocking.
The other concern I would have with Kyro II is that it falls into a
sort of mid-range limbo with regard to pricing. There are three very
well defined areas in the graphics market.
Firstly there is the value segment of the market which is sub $100. At
these prices performance takes a bit of a back seat and the key factor
is the customers budget. In our experience people shop with a budget
in mind and they are unlikely to stretch the additional 50% to get to
the $149 asking price for Kyro II.
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