Taiwan High Tech - Contract Manufacturing and Beyond

One of the most interesting stories is Mainland China’s decision to create its own WLAN standard (also called WAPI).  We are not surprised at all, it’s not the first time that China’s government has insisted on having its own encryption stuff inside chips and software when imported.  They are always afraid of the west coming in through the “back door” and taking over something sensitive or related to national security.  Take firewall software vendor penetration into China as an example – those that are having success are only those that have agreed to implement as special China-standard/made object-encryption code.  Crazy, but reality.  So, Intel, don’t be upset – this is China’s thousands of years of history, don’t take it personally.  Those companies that were quick to respond to China’s request were almost all Taiwan NB makers (such as Acer and BenQ) who have announced that they will provide WAPI-based NBs next month.  You can see what we call the “blood entreprenuership” of the Taiwanese in action here again.

BRING ON THE ORDERS:

HP ODD
Hon Hai has received an optical disk drive order from HP, with shipments to begin 2Q04 for a total of 1M for the year.

Toshiba LCD TV panel
CMO has received orders from Toshiba for its 27-inch LCD TV panels, with shipments to begin in April.

ADSL modems to Germany
Tecom has received a US$30M order for 350-400K ADSL modems from a European telecom in Germany. Delivery will begin in May.

Matsushita LCD TV
Quanta has added Matsushita Electronics (Japan) to its list of OEM customers. Quanta will make 17-inch LCD TVs for the Japanese customer. It also makes LCD TVs for Gateway. Quanta expects to ship 500K LCD TVs in 2004. Subsidiary Quanta Display will use 1/5 of its 5G capacity to make panels for Quanta’s LCD TV.

Sony PSX
Hon Hai and Asustek are reportedly to be contracted to make Sony’s nex gen PSX consoles.

IBM NB
Rumors say that Asustek will make IBM NB this year. Asus is expected to ship 3M NB total in 2004.

TAIWAN @ CHINA
Trading machine
China’s exports grew 28.7% YoY for Jan/Feb and imports grew 42%. Largest import growth in crude oil and iron ore.

Tsinghua Tongfan-Proton
Proton (Taiwan) is forming a US$20M JV with mainland PC supplier Tsinghua Tongfan to make digital TVs. The JV will produce 17-, 20- and 32-inch LCD TVs and 29- and 34-inch CRT TVs beginning 3Q04, In 2005 it will introduce 46-, 50-, 56- and 60-inch LCOS TVs. Tsinghua will have 60% stake; 40% for Proton.

COMPANY NEWS AND MARKET TRENDS

Hon Hai is confused
… they forgot that they’re OEM only. Foxconn has launched its own-brand (Foxconn) motherboards. The MB includes a micro BTX motherboard it co-developed with Intel, according to the Commercial Times. Watch out Asustek!

Philips is wrong… (USITC)
The US International Trade Commission has ruled that Philips misuses its patents and cannot stop Taiwan companies Gigastorage and Princo from shipping their products to the US. Taiwan companies ship 70% to 80% of the U.S. CD-R market. If the decision stands, Taiwan suppliers will be able to ask Philips to lower royalty fees or even refund fees.

Shuttle LCD news
Mini-PC maker Shuttle is joining the LCD craze – it plans to introduce LCD monitors and LCD TVs in 2Q04. That’s one more ODM company for all the Japanese, Korean, and US LCD TV/monitor brands to choose from.

Yageo in trouble?
Rumors have it that IBM has returned a shipment from Yageo and requested NT$1B in compensation. This is just a rumor and Yageo has denied it, so don’t start selling your stock yet…

TECO
TECO is doing well in the LCD TV market in the US – it shipped 200K TVs to US retail stores at the end of February. The shipment was mainly 17-, 20-, and 30-inch models.

NEW: R&D IN TAIWAN:
A couple of years ago Taiwan’s government announced plans to turn the country into a regional R&D and logistics center through government incentive programs. This corner tracks the results of this initiative.

AKT, Unaxis
Two more companies are setting up R&D centers in Taiwan. This time it is flat panel display makers Applied Komatsu Technology (US) and Unaxis (Germany). AKT will spend US$18.02-21.02M to build its center to develop technologies for next-gen cooper production-process equipment. Unaxis will invest US$51M to develop seventh-generation PECVD equipment.

IBM
IBM plans on setting up a PC server R&D center in Taiwan. The center will have 80 members initially, expanding 6-months later. IBM has 8 R&D centers world-wide.

EXHIBITIONS

CeBIT – PDA
Taiwan device makers will exhibit own-brand PDAs at CeBIT too, including PDAs with built-in cameras, WLAN, Bluetooth, and GPS. Among the companies are Asustek, Mitac, and BenQ.

Taiwan DSC at CeBIT
Taiwan companies will be displaying own-brand digital cameras at CeBIT Hanover this year. They include Aiptek, BenQ, Microtek, and Premier, which will display slim, high-megapixel cameras. Taiwan will ship 23.5M DSC in 2004, out of a global market of around 60M.

2008 International Expo
Taiwan will hold its planned 2008 International Expo (world fair) in Taoyuan and in Tainan counties. Taiwan will invest US$912M in the fair, targeting US$1.6B in tourism generated business and 5.5M tourists.

SMARTPHONES/PDA NEWS

Smartphone
CICIT (Chinese Information and Communication Technology) is wooing Taiwan smartphone makers to China, where the market is expected to reach 82M handsets, including 1.6M smartphones.

Starmap Mobile Alliance
HTC was chosen as Starmap’s first ODM supplier of advanced data products, including GPRS, MMS, etc. The alliance includes Amena (Spain), O2 (Germany, the UK and Ireland), One (Austria), Pannon GSM (Hungary), sunrise (Switzerland), Telenor Mobil (Norway) and Wind (Italy), so HTC has won a big prize…. HTC’s products, such as its Xda II handheld, will be marketed under the Starmap name in the future.

Motorola smartphones
Motorola has ordered Microsoft smartphones from Taiwan companies. Its models MPx100 and MPx300 will be made by Compal and CMCS will make the MPx220. For more information about which Taiwan companies make which international branded products, check out THT's paid report

Mobile phone shipments
According to MIC, Taiwan’s domestic mobile phone sales rose 9% in 4Q03, reaching 1.6M units. MIC predicts similar shipment levels this quarter, and 6.2M for 2004.

Smartphone up, PDA down
If you’d bought THT’s Smartphone and PDA report you would already know this, but for those of you too cheap to do so, the (old) news is that the PDA business has been stagnant for two years, with only around 11M shipped worldwide in 2003. Smartphones are eating in to low-end PDA sales in particular.

Mitac Mio 168
Mitac has launched its Mio 168 pocket PC with a built-in GPS module. It also has: Microsoft Windows Mobile 2003 Pocket PC OS, 300MHz Intel PXA255 processor, 32MB ROM, 64MB SDRAM, 3.5-inch, 65,000-color transflective TFT LCD screen, and a SDIO slot. It will be sold initially in Taiwan and then in greater China.

ACCOUNTABILITY CORNER

Big companies may not feel they're accountable to their shareholders anymore, but THT holds everyone accountable! Welcome to our accountability corner - where we tell you which companies made exaggerated claims and forecasts that they've subsequently had to back down from

Wistron:  Forecast 3.5M 2003 NB shipments, but shipped only 1.8M. It's punishment? Asustek surpassed Wistron to become Taiwan's #3 NB maker (1.9M), after Quanta and Compal. 

 ACER: Acer was predicting sales of 2M desktops in 2003, but sold only 1.5M. The company is blaming SARS, but YD thinks that's Acer b.s. (anyone notice a pattern here? YD's a little down on Acer these days. Let me assure you, it's not for personal reasons - he doesn't have any business with it, nor is he looking for any).

SiS was faking it: it cut its 2003 profit forecast by 71%. SiS blames poor 4Q sales, but a 71% cut can't be the result of just one bad quarter. Someone hasn't been straight with the public for a while.

BenQ:  early in the year BenQ claimed it would ship 3M units of slim-type optical drives this year. Now they're predicting shipments of 1M for the year, yet they still have the gall to claim they're seeing "surging shipments" of the drives...
 
Amigo Technology had forecasted shipping 1M ADSL modems in 2003, but now suggests that it will ship 750K (although that may be a stretch too, as it's only shipped 250K in 1H03).

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