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Survivor Umax boosts Mac role

Umax has survived the Apple purge and now will boost its presence in the overseas Mac clone market and help Apple develop and sell products.

Umax Computer, which will soon stand alone as the only major company to make Mac OS clone computers, is hoping to play an increased role in helping Apple (AAPL) regain its footing in the PC industry.

Taiwan-based Umax Data Systems (UDS) has recently expressed interest in helping Apple develop and produce peripherals and even computers, according to reports from the online edition of Nikkei Business Publications. UDS is the parent company of Umax Computer and Umax Technologies, which produces PCs and scanners.

That offer of help couldn't come at a better time, judging by what industry analysts are saying about Apple's chances as a major computer vendor.

Apple says it expects to ship 3.5 million computers this year, down from 4.5 million systems shipped in 1995. While the immediate impact of lower sales is a loss of revenue, the long-term implications are a matter of the economics of today's PC industry.

"Without market growth, that platform could simply cost more to deliver," says Scott Miller, an analyst with market research firm Dataquest.

The basic problem, Miller says, is that the cost to Apple of research and design on both the hardware and operating system are spread across fewer units, effectively making them more expensive to produce. In the PC industry, Microsoft funds development of the Windows OS while the manufacturers bear the cost of developing a system.

In addition, Apple is losing out on economies of scale. Basically this means that when Apple manufactures a computer, it often pays more for components because it isn't buying them in large quantities, especially in cases where it needs specialized parts for computers. This again translates into a more expensive Mac.

Where Umax hopes it can help is in the manufacturing stage of the PC game. Among the companies in UDS is the Elite Group, one of Taiwan's largest motherboard makers. The company has manufacturing facilities in eight locations worldwide and just opened a new facility in the U.S., which employs just-in-time manufacturing techniques to reduce system cost.

Motherboards, including the processors and associated chips, are the guts of a PC. In this market, finding a way to reduce the cost of producing one motherboard quickly adds up to millions of dollars. This is why U.S. vendors such as Compaq and IBM are looking to companies such as Dell for tips on making computers for less.

Apple has not yet followed this trend. In fact, the company has a history of misforecasting demand for its products and paying a steep penalty in the quarterly financial reports. For example, in the first quarter of 1997, the company posted a $120 million loss, largely due to an unanticipated slowdown in sales of consumer systems.