Lite-On set to invest heavily in China

Lite-On Group (光寶集團), which makes everything from personal-computer parts for Dell Computer Corp to mobile phones for Sony Ericsson Mobile Communications Ltd, plans to invest as much as US$1 billion in expansion into China in the next six years, moving plants closer to customers to cut costs.

"Lots of our customers have gone to China and so must we," Vice President Stephen King said in an interview.

The Taipei-based group, whose Lite-On Technology Corp (源興科技) unit was the biggest gainer on Taiwan's benchmark index in the first quarter, plans to build an industrial park in the southern city of Guangzhou for Lite-On Technology, GVC Corp (致福) and other units. About half its 36 worldwide plants already are in China.

Lite-On follows other Taiwan companies that are expanding in China to take advantage of lower labor costs and one of the world's biggest markets for phones, computers and other electronics.

"Taiwan will keep the high-capital expenditure industries, such as semiconductors and flat-panel displays, and all the others will move to China," said Yang Hsi-ming, who manages NT$1.5 billion in stocks at Fu-hwa Securities Investment Trust Co (復華投信). "Lite-On's customers are already in China, so it has no choice but to expand there."

Lite-On also plans to build a China plant for its Lite-On Information Technology Corp (建興電子) unit, Taiwan's biggest maker of optical disk drives, to replace factories that are currently leased on the mainland, King said.

Silitek Corp (旭麗), which makes mobile-phone keypads for the world's biggest mobile-phone makers, such as Motorola Inc, plans to combine its facilities in China into one plant, he said.

GVC, which makes modems at a plant in Guangdong province, may start producing handsets in China. The company currently makes mobile phones for Ericsson in Taiwan.

Lite-On group employs more than 20,000 workers on the mainland, almost four times its Taiwan workforce, King said.

Lite-On Technology shares rose almost three-quarters after sales surged more than two-thirds in the first three months of the year. The shares of Lite-On Information Technology almost tripled in the period.

"Lite-On Information Technology is the best unit in the group in terms of profitability," Yang said. "I'd buy it if I could." The stock is listed on the second-tier market of the nation's over-the-counter exchange. According to stock exchange regulations, local mutual fund managers can't buy the company's shares until it shifts to the main market, expected in September.