Sampo hopes for TCL-Thomson orders

Sampo Corp (聲寶), the nation's second-largest home-appliance maker, is expected to deepen its partnership with China's TCL International Holdings Ltd after TCL decided to form a venture with Thomson SA of France, company officials and industry watchers said yesterday.

The Chinese television manufacturer TCL announced Monday a joint venture with rival Thomson to create the world's largest producer of TV sets. The venture company will be called TCL-Thomson Electronics.

"We don't have details about TCL-Thomson Electronics' product line so far ... but we believe we have a good chance to win more [LCD and PDP-TV] orders from TCL as a result of the deal," Sampo deputy spokesman Kanty Wu (吳錦芳), said yesterday.

Sampo has collaborated with TCL for almost a decade, Wu said. The Taiwanese company produces refrigerators for TCL on a contract basis and it has also set up a joint venture with TCL, Rechi Precision Co (瑞智精密), to produce compressors, he added.

Sampo also manufactures PDP-TVs for Thomson on a contract basis, industry analysts said. Wu declined to confirm the company's partnership with the French consumer electronics company that now owns the RCA brand.

Sampo, which expects to ship 400,000 TVs next year, said it will stick to the strategy of selling brand-name products in Taiwan, while providing outsourcing services for European or US brand-name home-appliance vendors, Wu said.

The new TCL-Thomson venture is likely to bring more orders to Sampo, an analyst said.

The contribution from the original equipment manufacturing (OEM) and original design manufacturing (ODM) side is expected to increase to about 50 percent within the next few years due to the deal, said Chen Yen-liang (陳彥良), an analyst with Yuanta Core Pacific Securities Co (元大京華證券).

During the first nine months, OEM and ODM businesses accounted for 30 to 40 percent of Sampo's consolidated revenues of NT$17.13 billion.

Another analyst, however, said the creation of the new venture is likely to negatively affect local home-appliance makers while selling their products abroad.

"It's a challenge for local home-appliance makers to sell their products overseas with or without the TCL-Thomson joint venture," said Helen Chen (陳佩君), an analyst at Polaris Securities Group (寶來證券).

"Taiwanese companies can only make a profit by selling brand-name products to local consumers on effective cost control. Without that advantage, they are unable to compete with their international rivals in Europe and North America," she added.

Rival Teco Group (東元) said the TCL-Thomson deal could create an additional hurdle for local companies wanting to sell their branded TV sets to European consumers as the deal will enhance Thomson's edge due to lower production costs in China. But smaller rival Sanyo Electric Co (Taiwan) (台灣三洋電機), said it doesn't see the deal having a serious impact on local companies.

Sampo shares rose by N$0.3, or 1.91 percent, to close at NT$16.0, while Teco were unchanged at NT$12.05 on the TAIEX yesterday. The Hong Kong-listed TCL closed 1.7 percent lower to finish at HK$2.875 (US$0.369).