Taipei Times: Have people stopped buying mobile phones in response to Beijing slowing its overheated economy to stem inflation?
Lee Kun-yao (李焜耀): I think that only the Chinese market will be the one to suffer a setback, if there is any. The effect is also unlikely to spread to other markets. It is unclear if consumers will stop spending on mobile phones. The spending spree during the seven-day holiday starting May 1 proved that engineering a soft landing didn't dampen handset demand.
But we heard that the Chinese distributors of some local PC makers are suffering from the credit crunch. They lost short-term financial support from Chinese banks over making regular payments.
PHOTO: SEAN CHAO, TAIPEI TIMES
For our part, we haven't heard of any of our distributors complaining about the credit squeeze.
TT: Some industry watchers have warned that ongoing weak demand for flat-screen TVs is likely to throw the industry into an oversupply nightmare as early as the second quarter of next year, at the time when most local flat-panel makers, including HannStar Display Corp (瀚宇彩晶), will launch sixth-generation plants. Do you agree?
Lee: Their calculations could be inaccurate. The factor that determines whether supply tilts toward a glut is how fast flat-panel makers can expand their capacities. Industry analysts usually gauge expansion by the timetables offered by flat-panel suppliers.
But the timetables can be disrupted, which in turn can cause a spike in output of LCD panels due to a tight supply of key components and extended learning curves.
TT: Chi Mei Optoelectronics Corp (奇美電子) has forecast that the prices for large-sized TV panels will drop by 5 percent each quarter from the April-June period until year's end. This could result in TV vendors cutting prices by at least 15 percent to spur demand. As chairman of AU Optronics Corp (友達光電), what is your opinion on this?
Lee: A drop in prices will vary according to panel size. Prices for TV panels 30 inches or larger will drop more drastically, but prices for panels below 30 inches will not because of stronger demand.
TT: When will demand for LCD TVs take off?
Lee: The high price tag keeps most consumers away from sleek LCD sets. Demand for small-sized TVs is stronger because of the lower prices.
We expect that growth will jump in 2005 and 2006. By then, the prices for LCD TVs will have fallen further to affordable levels because flat-panel makers will be able to supply lower-priced panels from sixth- and seventh-generation factories.
We do not expect significant growth this year, except in areas with digital broadcasting. In the US and Japan, the switch from analog broadcasting to digital has already boosted sales of LCD TVs.
TT: BenQ Corp's (明基電通) brand-name business has already made up one-third of the company's total sales in the first quarter, which is not far from your target of 50 percent by 2008. Is BenQ ahead of schedule?
Lee: There are always opportunities to help achieve this. To bring brand-name business up to one-half of total sales is healthier for BenQ, which has adopted the strategy of developing its brand-name and original equipment-manufacturing [OEM] businesses simultaneously.
But our previous targets remain unchanged. We hope our brand-name business will double sales this year from last year.
TT: Is BenQ making progress selling brand handsets?
Lee: In Europe, we work together with local telecom operators when selling our phones. We are set to roll out new handsets in about July or August. Our mobile phones will be available in handset stores in the UK, Spain, Italy and France.
In China, we started selling our brand-name handsets earlier this year in partnership with CECT Telecom (中國通信), because Beijing prevents foreign handset vendors from selling phones there.
This year, we expect handset shipments will exceed 13 million units. But over 30 percent of sales will come from brand-name mobile phones.
TT: Two-and-a-half years after BenQ developed its brand-name products, including handsets and LCD TVs, many Taiwanese companies are following suit. Any suggestions for them?
Lee: I think our determination convinced those companies that it works to have your own brand. Some of the most aggressive of these are local PC motherboard makers.
I suggest they develop a wide range of products and distinguish their products from those already on the market. If they continue to use low prices to vie for market share, there will be a deadlock all over again.
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