BenQ slashes its own-brand sales target

BenQ Corp (明基電通), a leading domestic consumer electronics vendor, yesterday drastically cut its own-brand sales target for this year, citing slower-than-expected demand for its electronics products.

Sales from brand-name electronics, including liquid-crystal-display (LCD) televisions, LCD monitors and cellphone handsets, are expected to rise to just over NT$50 billion (US$1.47 billion) this year, which would make up about 35 percent of BenQ's total sales, company vice president Jerry Wang (王文燦) said yesterday.

This figure, representing an annual growth rate of 43 percent, would fall short of the company's previous expectation of doubling own-brand sales to nearly NT$80 billion this year. Last year, sales from branded electronics increased to NT$35 billion.

"Most companies overestimated the market's appetite for electronics in the beginning of the year," Wang said.

In spite of the disappointing growth in the brand area, international brand consultancy firm Interbrand Corp ranked BenQ sixth in terms of brand value among the nation's top 10 brands.

Interbrand, owned by advertising company Omnicom Inc, assessed BenQ's brand value at NT$9.12 billion this year, giving the electronics vendor a place on the top 10 for a second consecutive year in the brand's three-year existence.

The survey was conducted by Interbrand, the Taiwan External Trade Development Council (TAITRA, 外貿協會) and the Chinese-language biweekly Business Next.

Three years ago, BenQ was still unknown to most consumers and some might even have mistaken it for an Italian brand owing to its vigorous brand image, chairman Lee Kun-yao (李焜耀) said.

"A lot of people cast doubt on [our decision] to break away from providing a contract-manufacturing service when we launched our brand three years ago. But now we have no doubt that branding business is a must," Lee said.

BenQ, originally a computer-related peripherals manufacturing affiliate of Acer Inc, separated from its parent company in a large-scale restructuring plan led by Acer chairman Stan Shih (施振榮) in 2002.

Lee has set a long-term target to boost its own-brand business to constitute half of the company's sales.

"Doing contract manufacturing is not enough to boost growth," said Vincent Chen (陳豊丰), an analyst with CLSA Ltd in Taipei.

"But there are challenges for BenQ to develop its brand-name business," Chen said, adding that the industry as a whole suffered a 37-percent cut in own-brand sales primarily owing to slow demand.

Chen said BenQ's own-brand business would probably only show moderate growth next year, without giving specific numbers.

BenQ's total sales are expected to climb 35 percent to NT$173.3 billion this year from NT$121 billion last year, according to Chen's projection. Net profits are also expected to rise to NT$10.07 billion, or NT$4.35 earnings per share, according to CLSA.

The growth for next year, however, will slow to about 10 percent, he predicted.

The company holds a dominant position in the LCD TV sector with access to advanced technologies and sufficient flat-screen supplies from affiliate AU Optronics Corp (友達光電), in which BenQ owns an 18 percent stake, he said.

"But BenQ is still several steps away from tasting the fruits, as the LCD-TV industry will not take off until the second half of 2005 at least," Chen said.