Thursday, February 22, 2007

Making New Connections

Taiwanese firm BenQ Heads West
Jonathan Adams
Newsweek International, June 11, 2005

When the news broke last week that the German conglomerate Siemens would hand over its flailing cell-phone division to BenQ, the response from many was: Ben who? The deal is all about raising the profile of BenQ, a Taiwanese manufacturer of laptops, cell phones, computer monitors and other devices. Chinese firms like Lenovo and TCL have been cutting big deals in an effort to build global brands, and BenQ's agreement with Siemens is the boldest move yet by a Taiwanese firm to follow suit.

Taiwanese firms already lead the unsung market for building the tech gadgets on which Western and Japanese brands glue their labels. But now, spurred by falling margins, a few Taiwanese companies are trying to break out of the subcontractor's ghetto. In 2001, BenQ was spun off from Acer, which has since become a leading name for laptops and PCs in Europe. Asustek, the world's top maker of motherboards, is now selling laptops and phones under its own brand. But BenQ is the first Taiwanese firm to reach for global renown by taking over a major Western name. The deal will more than double BenQ's annual revenues and vault it into the top 10 cell-phone vendors.

That's not to say the strategy will work: analysts tend to doubt that Taiwanese firms have the marketing savvy to build global brands, which is exactly what they say about China. They also point out that this particular deal brings together two companies with falling sales in a union ripe for culture clashes between cost-cutting Taiwanese and unionized Germans. The fact that Siemens actually agreed to pay BenQ 300 million euro to take over its business roused the suspicion of Steven Tseng, an analyst at Yuanta Core Pacific Securities in Taipei. "You can't help but wonder if the seller considered this piece of property worthless," he says.

Still, BenQ chairman Lee Kun-yao boasted that the new company would turn a profit in two years. Even skeptics like Tseng called the deal a "quantum leap" toward establishing BenQ as a well-known brand. Whether it works or not, BenQ is now an interesting name to watch.

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