How does a company get out of the quagmire of the free-fall in gross margins that have long plagued Taiwanese electronics makers? Build a brand. That is what Taiwanese consumer-electronics maker BenQ Corp (明基電通) opted for three years ago.
Taking a road rarely travelled by most Taiwanese companies, BenQ's expansion into own-brand business has converted a former skeptic.
"It is the biggest adventure I've ever had in my life [to join the stable of world-class brands]. ...Now we are feeling more comfortable about it [the decision]," BenQ chairman Lee Kun-yao (李焜耀) said recently.
Most Taiwanese electronics manufacturers still stick to making products for international computer hardware vendors such as Dell Inc and Hewlett-Packard Co. Over 70 percent of the world's laptop computers are made by Taiwanese manufacturers, but few of them carry local names.
BenQ is one of them. In just a few years, BenQ has emerged as an up-and-coming brand both at home and abroad. The purple butterfly-shaped corporate logo is mushrooming from its home turf to Europe.
Powerful Chinese brands, by contrast, have a low brand awareness outside the country, despite companies' aggressive moves to expand overseas by acquiring multinationals. The latest case in point is Lenovo Group Ltd's (
BenQ will not consider using this strategy to boost its overseas market position, Lee said, as the Taiwanese company has already made significant progress in foreign markets, especially in Europe.
A quarter of BenQ's total sales was recorded in the European market, where people favor trendy products, the company said.
Own-brand business made up around 40 percent of BenQ's total sales in the current quarter and is expected to exceed that ratio next year, well ahead of the aim to boost brand-name operations to account for half of the sales in 2008, Lee said.
The remaining 60 percent came from OEM (original equipment manufacturing) business. BenQ makes mobile phones for the world's top cellphone vendor Nokia Oyj and makes LCD monitors for Dell Inc.
With the increasing contribution from its own-brand operations, BenQ secured a gross margin of 11 percent in the third quarter, while Compal Electronics Inc (仁寶電腦), the world's second-largest notebook computer contract maker, struggled to sustain the margin at 5 percent.
A frequent question is how BenQ, a new brand from Taiwan, diverted consumers' eyes from established players in just three years?
"BenQ is quite right in its brand strategy. Take a look at its faster-than-expected brand expansion and you'll find it did work," said Steven Tseng (
Talking about BenQ's brand positioning, Lee said "we hope to bring enjoyment to our customers through our products."
The clear brand strategy saved BenQ half the time its local predecessors such as Acer Inc needed to boost brand awareness, Tseng said.
But, novel industrial design has been key to establishing the brand concept in BenQ's electronic devices, from digital music players to liquid-crystal-display (LCD) televisions, Tseng said.
"BenQ is gradually cultivating a cult following among its users, like Apple Computer Inc did with its popular iMacs and iPods. This is the highest goal a brand can achieve," Tseng said.