Asustek sees sales growth of 50 percent

Asustek Computer Inc (華碩), the world's largest motherboard maker, said yesterday it expected sales to grow by half this year thanks to increased profitability in its own-brand business.

"We are moving on the right track in line with our business strategy and are now at a high level of vertical and horizontal integration," Asustek chairman Johnny Shih (施崇棠) said at an annual shareholders' meeting yesterday.

"We expect annual sales to hit NT$300 billion this year" from NT$200.3 billion last year, Shih said.

Asustek reported after-tax profit of NT$11.5 billion, or NT$5.07 per share, last year. The company said it would issue a NT$1.5 cash dividend and NT$1.0 in stock dividends to shareholders.

Shares of Asustek closed unchanged at NT$82.0 on the TAIEX yesterday.

The shareholders meeting dragged on for nearly four hours as investors questioned the effectiveness of Shih's so-called "Grand Lion (巨獅)" business strategy to improve the company's bottom line.

The strategy -- which aims to gain overwhelming market share and leading brand positioning -- and the drive to integrate vertically and horizontally seemed to be paying off for the motherboard business, the company said.

The company forecast it would ship 40 million montherboards this year -- with own-brand products comprising around 60 percent -- up from 30 million last year and 17 million in 2002.

The company is aiming to raise shipments of its own-brand laptop computers to around half of the total 3 million it expects to sell this year, from around 40 percent of 1.7 million units last year, said David Chang (張偉明), Asustek's chief special assistant to the chairman.

Asustek wants to double sales of its own-brand products this year so that they make up 50 percent of revenues, up from less than 40 percent last year, Chang said.

The company has benefited from the dual business model of being a contract and own-brand manufacturer through economies of scale and extra experience, but it has also faced queries from its customers about conflicts of interest.

"We have been endeavoring to keep a fine balance [between the two models] but there is also the likelihood that we will separate them, as Acer did" in 2000, Shih said, without giving a timeframe.

To make inroads into the consumer electronics sector and meet future demand for digital products, the company plans to roll out a third-generation (3G) handset model in the second half of the year.

"As the 3G market is not mature yet, shipments will be minimal this year," said Alex Lee (李祖堯), Asustek's spokesman.

He said the company wanted to ship tens of thousands of handsets next year, both own brand and original design manufactured products.

Asustek plans to develop a manufacturing base in Suzhou -- where it produced 90 percent of its motherboards and original equipment manufactured laptops -- as a manufacturing hub, in addition to its plants in Mexico and the Czech Republic, where it has adopted a "configuration-to-order" model for real-time delivery to clients, Shih said.