As Barry Lam (林百里) shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian (張大千).
The painting is called "Dawning Light in Autumn Gorges," and Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer Inc (廣達電腦).
PHOTO: CHIANG YING-YING, TAIPEI TIMES
After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the nation's economy hit bottom late last year and will recover gradually along with the industry.
Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer Inc and Dell Computer Corp to overtake Japan's Toshiba Corp as the world's No. 1 maker of notebook PCs.
But that raises a question: If bad news ended up being good news for Quanta, then what will good news mean for the company? Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up US$5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a US$10 billion company.
A fan of outsourcing
"Once companies begin to outsource, they never go back," Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R&D and marketing. It's just very logical."
That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway Inc, Compaq Computer Corp or Hewlett-Packard Co, and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.
The company already produces PCs for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than 5 million notebooks this year, 30 percent of all those made in Taiwan. The nation, in turn, makes 55 percent of the world's notebook computers.
"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."
Keeping an eye on the us
Taiwan has a handful of these anonymous giants -- outfits with names like Compal Electronic Inc (仁寶電腦), Asustek Computer Inc (華碩電腦), Arima Computer Corp (華宇電腦) and Taiwan Semiconduc-tor Manufacturing Co (台積電) -- and they have turned this industrious nation into the subcontractor of choice for the global technology industry.
That is why, when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.
Quanta's sales rose 32 percent in February over the previous year, to US$294 million, as US companies began placing orders for notebook computers, liquid-crystal displays, and other equipment. But the rebound is not across the board: United Microelectronics Corp (
"So far, the recovery has been primarily in the area of consumer PCs," said Matt Cleary, the head of Asian technology research at Lehman Brothers in Taipei. "Telecom equipment and general corporate purchases have yet to come back."
Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PCs. But Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reach a plateau.
This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.
In the short-term, Lam said, such trends favor Quanta.
"The IT market is not growing as it used to," Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."
Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the nation's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.
By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.
By delivering PCs so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.
"A marketer like Dell has to have complete confidence in its supplier," said Kurz of Insight Pacific. "I call it a chain of trust."
Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.
The focus on design flows from Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.
"Barry is different than anyone I know," said Max Fang (方國健), the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."
Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.
Tony Tseng, a technology analyst at Merrill Lynch in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.
"The reason Barry is so bullish is because he got the iMac contract," Tseng said. "Quanta was hitting the ceiling with its existing clients."
One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.
Joining the exodus to China raised ticklish issues for Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian (陳水扁), whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.
Getting a head start
Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.
By the end of 2003, Lam said, two-thirds of Quanta's notebook PCs will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.
Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.
"I love my country so much," Lam exclaimed suddenly, after the conversation drifted back to China. "I'm OK with our president."
Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.
When Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.
Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about US$1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.
"You cannot build another Acer Inc (宏電) without Stan Shih (施振榮)," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."
Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.
"Taiwan has been so well developed economically," Lam said. "But we are underdeveloped culturally."
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