Computer makers look to China's Legend

Taiwan's computer makers are tapping China's growing personal computer market, seeking orders from Legend Holdings Ltd (聯想集團) to sidestep falling demand and saturated markets in the US and Europe.

First International Computer Inc (大眾電腦) and Mitac International Corp (神達電腦), which make desktop and notebook computers for overseas clients such as NEC Corp and Sun Microsystems Inc, met with President Yang Yuanqing (楊元慶) of Legend this week to ask for more orders from China's biggest PC maker and Asia's biggest distributor of computers.

The bid for expanded cooperation comes as demand for PCs in the biggest consumer market booms and China becomes attractive as a destination and not just a source for manufactured products.

Meanwhile, slowing sales in the US and Europe have forced companies such as Dell Computer Corp and Compaq Corp, which place orders with Taiwan computer makers, to slash profit forecasts or fire workers to cut costs.

"Computer makers are looking at China as more than just a manufacturing base," said Kevin Lee, who manages NT$750 million (US$22 million) in Taiwan stocks at Polaris Investment Trust (寶來投信). "They want to start relationships with Chinese companies now because of that market's growth potential."

First International and Mitac want to expand ties with Legend as the biggest consumer market grows in prosperity, feeding demand for computers and other electronic gadgets. China expects its economy to grow between 7 percent and 8 percent this year, compared with 1.5 percent growth expected in the US and 4 percent in Taiwan.

Many US customers are cutting back orders. Palo Alto, California-based Sun Microsystems Inc, which Mitac supplies with computers that manage corporate networks and Web sites, reduced fiscal fourth-quarter sales and profit forecasts Tuesday as its clients reduced purchases.

Legend, which said sales in the three months to March rose 45 percent on year, expects to sell 4 million PCs in the current year ending March 2002, from 2.6 million in the last fiscal year, analysts said.

"Either you grow or you're out," said Horace Tsiang, chief executive officer at First International. The company is Legend's biggest notebook PC supplier and has focused on the company as part of its growth strategy, Tsiang said. "By supporting and making sure Legend is successful, we share in that success." Tsiang denied local media reports that First International would supply Legend with 70 percent of its notebook PCs this year.

Mitac, which has made desktop computers for Legend, expects to start shipping personal digital assistants to the Chinese company this year.

Unlike other Taiwan companies such as Acer Inc (宏電) and Twinhead International Corp (倫飛電腦) that sell computers in China under their own brand names, Mitac and First International sell their products through Legend's sales network and its locally well-known brand.

"We like to invest in companies that invest in brand names," said Mitac Chairman Miao Feng-chiang (苗豐強). "Legend's in a very prestigious position to capture the China market."