Back in the mid-’90s, CyberPowerPC CEO Eric Cheung was your typical young man obsessed with playing video games.
“That’s all I did in college. It hurt my grades, but I loved PC gaming,” he says.
At that time, most people were buying computers at the store or from a physical catalog. But Cheung and his friends were interested in what the future held for the personal computer industry. They all agreed that the internet was the next big thing, and brainstormed about what products they could sell that would work well on the web. The answer they came up with: offering customized computers to hardcore gamers.
“We found out that do-it-yourself business was doing pretty good,” Cheung says. “They can configure their own computer and order through the website. We can build it for them—cheaper, better.”
In 1998, the three founders—Eric Cheung, Stanley Ho and Steven Chu—pooled together $100,000 from their families and started selling customized gaming computers through their website. Nineteen years later, their company CyberPowerPC is one of the most established gaming PC manufacturers in the United States, with annual sales reaching $184 million.
In case you haven’t been following the video game business, it is exploding. Strategy and technology consulting firm Activate predicts that eSports—competitive video gaming—will be the next tech phenomenon. Already, the eSports fan base is starting to gain on other major sports. There are more than 250 million enthusiasts worldwide following pro gaming teams, and Activate says that number is expected to double to 500 million fans by 2020, when global eSports revenue will reach nearly $5 billion.
CyberPowerPC sells customized gaming computers direct to consumers through their website, and they also sell wholesale through retailers like Best Buy, Walmart, and Amazon. The key to CyberPowerPC’s success in this ultra-competitive field is their quick response to the changing market, and their smaller size relative to other PC manufacturing giants actually gives them a competitive edge by allowing them to be more proactive and nimble.
At CyberPowerPC’s main manufacturing facility in east Los Angeles County, the employees stand as they work on the factory floor. They are not just plugging in one small part in a long assembly line; each worker is custom-building a whole computer from top to bottom according to a customer’s specifications, from the video card, to memory, to the central processing unit, and extras like decorative lights. And they are able to deliver the finished product to the customer within a week or less.
“So it’s like craftsmanship,” Cheung says. “Each computer is quite unique and has its own character.“
One of CyberPowerPC’s advantages is that they assemble all of their computers locally in the United States, so they are able to bring new products to the North American market faster than many competitors who manufacture in Asia. When new technology becomes available domestically, they are often one of the first to incorporate it into their systems and offer it to the consumer, Cheung says.
“The big manufacturers like Dell and Lenovo—their manufacturing facilities are in Asia, so it takes months between ocean freight and logistics to get it to the U.S.,” he adds.
Their consistency and user reviews have also helped them to develop strong relationships with manufacturers and vendors such as Intel, AMD, and Microsoft, who work to promote their components by supplying CyberPowerPC with new products first, in advance of their unveiling.
“We can get the components ahead of other system builders, and we can have our systems built before the new components launch,” says Stanley Ho, president of CyberPowerPC.
For example, on the first day that Oculus virtual reality headsets were released, CyberPowerPC was ready to offer their full line of products, certified by Oculus and HTC, as VR ready.
"We can get the components ahead of other system builders, and we can have our systems built before the new components launch."
CyberPowerPC’s small size also means they can get access to capital quickly through small business loans. SBA loans carry competitive interest rates, lower down payment requirements, and longer loan terms than conventional commercial loans, according to Wai Chun Li, East West Bank’s head of SBA lending.
“A lot of smaller businesses don’t know they can benefit from loans that larger businesses can’t get—those loans can help them stay nimble, and do improvements, renovations, and other changes to keep their products fresh and innovative,” Li says.
CyberPowerPC was able to purchase both its warehouses with SBA loans from East West Bank. The newest warehouse provided extra space for inventory and installation of modern processing lines, conveyer belts, and robotic arms to pick up equipment. Having a local warehouse means they can control the quality and speed of delivery, and they can house their customer support in the United States, as well. In addition, they were able to increase their credit line to support their working capital and were able to expand into wholesale at major retail outlets.
Ho talks more about it here:
The investments paid off, and Ho says the company saw 50 percent growth in sales last year. They are now in talks with Costco to build customized computers using Costco’s website.
Cheung doesn’t play video games that much anymore, now that he has a child to raise and a business to run. But he stays on top of what’s current in the industry through his employees, many of whom are young, hardcore gamers who help drive the direction of the company, which has been growing steadily, about 20 percent every year.
“I think the story of our success leads only to our employees: they love gaming. We always have the brightest and best in our research and development, marketing, and production departments—they love PC gaming,” Cheung says.
CyberPowerPC finds new hires mostly through word-of-mouth, and employees refer their friends who are active in the gaming scene. They analyze future technology trends, and configure the best computer systems to sell through their website and retail outlets.
“All of us believe in what we are doing. That is how we built to become the No. 1 gaming PC manufacturer in the U.S.,” Cheung says.