Sampo counting on contracts to grow

Sampo Corp (聲寶), Taiwan's largest home appliance vendor, said yesterday that its contract business will continue to grow, making up 70 percent of its total sales this year as international television brands increase sourcing on cost-savings.

"We're receiving new liquid crystal display [LCD] and plasma display panel [PDP] TV orders from American and European brands," said Sampo president Ho Heng-chun (何恆春). He declined to give the names of the new customers.

Sampo, which supplies consumer-electronics makers Gateway Inc, Thomson SA and Haier Group (海爾) with PDP-TVs, will start to deliver the sets to new clients in the second half of this year, Ho added.

Sampo will also start to produce freezers and air conditioners this year for international home appliance vendors.

With new orders flooding in, Ho said that the contract business will rise to make up at least 70 percent of its total sales this year, from 60 percent last year. Sampo posted sales of NT$19.74 billion last year.

In the first quarter of this year, Sampo said consolidated sales rose by about 10 percent to NT$5.01 billion from NT$4.56 billion a year ago.

"This seemingly bullish news, however, will not divert industry watchers' concerns about falling gross margins and the firm's ability to outflank information industry manufacturers by winning more contract orders," said Helen Chen (陳佩君), an analyst with Polaris Securities Co (寶來證券).

Weak cost control is a major flaw shared by local TV makers when competing with computer makers, which are aggressively expanding into the fast-growing flat-screen TV business, including Asustek Computer Inc (華碩), Taiwan's biggest motherboard maker, she added.

"In the first quarter, we have already seen local IT companies gain the upper hand over their local TV-making rivals in winning more orders," said Simon Yang (楊勝帆), an analyst with market researcher Topology Research Institute (拓墣產業研究所) in Taipei.

As partnerships with Chinese consumer electronics giants Haier and TCL Corp become more established, Ho said his company did not plan to sell Sampo-brand products to China, Europe or North America.

"Providing original equipment manufacturing service is our gambit," Ho told reporters.

But Sampo will not rule out the possibility of tapping into those markets using a separate brand: Claire.

With brand-name business limited to the home market, core-business sales will shrink to account for 30 percent of its total sales this year, according to Sampo.

Sampo hopes to sell 20,000 own-brand PDP-TVs locally this year, up from 5,400 sets last year, Ho said. He, however, ignored questions about sales targets for LCD-TVs, in which Sampo lags behind Teco.