Compaq launches new Internet link to suppliers

More than thirty CEOs of Taiwan's major high-tech manufacturers and top government officials yesterday toasted the official launch of a plan to construct TaiWeb, an Internet based link between Compaq Computer Corp, Taiwan's biggest high-tech customer, and its local downstream suppliers.

The US firm also announced Taiwan purchases next year will be US$8.5 billion, a 25 percent increase.

"Compaq will supply the business infrastructure needed for our suppliers to link up with the supply chain via TaiWeb ... and the government will facilitate the project," said Phillip Yu (俞新昌), president of Compaq's Greater China Division.

The new system, according to Compaq, will cut production time, reduce inventories and operating costs, and therefore increase competitiveness.

The government will put up 50 percent of the initial cash that Compaq's mainly small and medium sized suppliers need to adapt their businesses to TaiWeb, Ministry of Economic Affairs Director General Hwang Jung-chiou (黃重球) said.

"From the government side, we will be subsidizing the planning stage of the project and will also provide [Compaq's] suppliers with tax breaks and other incentives and assistance," Hwang said.

Although users of TaiWeb will not yet be able to conduct transactions across the Internet, the government aims to assist with the development of e-commerce between suppliers and buyers, he added.

"We will be smoothing the legislative pathway to open up the Internet banking sector," Hwang said.

Aside from deepening relationships with existing and future downstream suppliers through TaiWeb, Compaq plans to increase purchases in Taiwan next year in line with a 25 percent global increase in purchasing.

"Next year, Compaq's purchases in Taiwan will be up 25 percent, from US$7.1 billion this year to NT$8.5 billion," said Stephen Martson, chief procurement officer of Compaq's global headquarters.

"That means Taiwan will still account for 25 percent of our total global purchases, compared to 20 percent from US manufacturers and up to 15 percent from Japanese suppliers," Martson said.

Compaq's purchases span the whole breadth of high-tech products, including motherboards, PCs, chipsets, keyboards and servers, Martson said.

The US-based firm was also the biggest player in Taiwan's consumer market after recently besting previous incumbent Acer (宏其石　電腦) , Yu said.

"We beat Acer in the third quarter this year in terms of both revenue and unit sales," Martson said, adding: "We also sold about US$9 million worth of PCs and US$30 million worth of servers last year."

TaiWeb has been ten months in the making. Compaq has until June 30 next year to choose ten suppliers to enter TaiWeb, after which the government will take charge of entry into and administration of the supplier network.

TaiWeb will form Plan A, the first installment in an ambitious government plan to informatize and network-enable Taiwan's high-tech manufacturing sector, and to eventually link up over 2,000 firms in an island-wide network.

Although company officials ruled out any change in Compaq's purchasing pattern in Taiwan, not all of the 27 CEOs present at the launch ceremony are current suppliers to Compaq and are eyeing future contracts, analyst Sharon Su (蘇艷雪) of ABN Amro said.

"Compaq already outsources a lot. However, I think there is still room for growth," Su said, adding: "Most of Compaq's outsourcing now is low-priced. In the future, they will increase the proportion of more expensive products."