Sat, Dec 20, 2003 - Page 10 News List

Quanta chairman expects opportunities for Taiwan

By Lisa Wang  /  STAFF REPORTER

Taiwanese handset and flat-screen television makers have a good chance to score massive orders from international vendors following the moves of local contract computer makers, Quanta Group chairman Barry Lam (林百里) said yesterday.

"South Korean companies were seen as a threat to their international rivals, but now Taiwanese companies are taking over that role," Lam said during a speech focusing on the company's development strategies.

Lam also serves the chairman of Quanta Computer Inc (廣達電腦), the world's largest contract laptop computer maker.

"With strong cost-cutting abilities, Taiwanese original equipment or design, manufacturers [OEM or ODM] will be the big winners eventually," he said. The cost-cutting measures are effective use of China's cheap labor and Taiwan's advanced researchers and technicians, according to Lam.

Speaking about the flat-screen TV market, Lam said growth potential is unpredictable, but global demand for flat-screens will be at least 200 million to 300 million units a year, which will double or even triple the demand for laptop computers.

As for the handset market, local companies' presence remains quite low, indicating an ample room for further growth, he added.

Handset shipments by Taiw-anese manufacturers currently only account for about 9 percent of the world market, said Steven Tseng (曾續良), an industry analyst at Yuanta Core Pacific Securities (元大京華證券).

"Taiwanese companies have a good chance to repeat the success enjoyed by local computer makers by winning massive orders from international mobile phone and LCD-TV vendors," Tseng said.

There are actually a lot of business opportunities for handset OEMs or ODMs to vie for larger orders from international brands, according to a report released by ABN-AMRO Asia Ltd in October.

Global handset brands only outsourced around 30 percent of the total production to OEM companies as of the second quarter this year, compared to 70 percent of notebook computers and 80 percent of personal digital assistants, the report said.

To achieve that goal, local cellphone and LCD-TV makers have to develop capabilities of making embedded camera phones and face the reality that the demand for the pricy flat-panel TVs remains lukewarm, Tseng said.

Quanta has been expanding its capabilities with those two consumer-electronics products. Lam said he expects to see the group's total revenue surge to NT$500 billion annually. He did not say when the company will reach that target.

"Quanta is likely to achieve that goal [NT$500 billion revenue] within the next two to three years, if the company is able to hit Lam's target of grabbing one-third of the global laptop market share," Tseng said.

Quanta Computer has said it plans to ship more than 9 million notebook computers and 5 million mobile phones this year.

"But what concerns investors is profitability due to the thin gross margins for notebook computer makers," Tseng said. The company's gross margins currently hover around 5 to 6 percent, he added.

Quanta Computer's major rival, Compal Electronics Inc (仁寶電腦), chose a different approach and announced that it would shift its focus on the improvement of profitability, rather than increasing revenue, the analyst said.

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