Wistron Corp (緯創), a spinoff of giant PC maker Acer Inc (宏碁), is facing a simple choice: Diversify or see profit margins slowly vanish.
Like many other Taiwanese technology suppliers, the company is opting to broaden its strengths.
Wistron, which gets 70 percent of its US$13.5 billion revenue from notebook computers, is adding handheld devices, flat-panel TVs and 3-D TVs to its product portfolio.
“Wistron is lowering the portion of notebook computer production and raising the weighting of these new products,” company spokeswoman Joyce Chou (周文玲) said.
Wistron is not alone. Fierce global competition has prompted Taiwanese technology companies more generally to diversify.
“Taiwanese high-tech firms mostly operate as contract manufacturers. They have to find alternatives to maintain profitability as cheaper makers emerge to depress pricing,” Topology Research Institute (拓墣產業研究所) vice president Simon Yang (楊勝帆) said.
China, with a cheap and increasingly well-educated workforce, has proved a particular threat to Taiwan’s high-tech industries.
Wistron’s gross profit margin was 5.5 percent in September. Without the diversification, it would have fallen “precipitously below 5 percent,” said Angela Hsiang (向子慧), an analyst at securities firm KGI Securities (凱基證券).
HTC Corp (宏達電), one of Taiwan’s leading smartphone makers, has also been widening its reach, analysts said.
In 2008, HTC launched its first phone using the Android platform developed by Google, the T Mobile G1.
To enrich its product line, HTC last year rolled out HTC Hero, its latest model featuring built-in Google mobile services, including search, maps, Gmail and YouTube.
HTC had for years made smartphones powered by Microsoft’s Windows Mobile, but now to gain a share in the mobile Internet, “HTC has to work with Google to get access to its open-source operating system,” Topology’s Yang said.
“HTC is taking advantage of strengths from both Microsoft and Google. The strategy has helped HTC become more flexible,” he said.
Even Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract microchip maker, is diversifying, targeting solar energy and light-emitting diodes (LED).
In December, TSMC announced it would buy 20 percent of Taiwan’s Motech Industries Inc (茂迪), one of the world’s leading solar-cell producers, while also investing in LEDs through a venture capitalist.
“Compared with our [microchip] foundry business, the solar energy and LED parts are very small. But TSMC is confident it will become part of its core business,” company spokesman Tzeng Jin-hao (曾晉皓) said.
The output of Taiwan’s solar-cell sector is likely to grow nearly 48 percent this year to NT$106.3 billion (US$3.3 billion), the Ministry of Economic Affairs said. “TSMC already has an advantage in technology development. It also has deep pockets. I expect it will capitalize on the new investments in a big way,” said Julian Wang, an analyst at Grand Cathay Securities (大華證券).
Meanwhile, Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract manufacturer in the electronics sector with clients including Dell, Nokia and Sony, has teamed up with Amazon.com in e-book development.
Amazon’s Kindle, the most successful e-book reader to date, has boosted Hon Hai’s visibility.
“In my estimate, Hon Hai has grabbed a 70 [percent] to 80 percent market share in global e-book device manufacturing,” said Kuo Ming-chi (郭明錤), a Taipei-based analyst at industry journal Digitimes.
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