TAIPEI, Taiwan (AVING Special Report on 'Candid Talks with Taiwan IT Leaders') -- <Visual News> BenQ, one of a few renowned brands in Taiwan, once stood in the limelight in global market by merging German Siemens mobile business, but unfortunately the attempt met with failure with huge losses at the subsidiary within less than a year. However, seeing past failure as a stepping stone to success, BenQ is now seeking a new opportunity to renew and make a second start with recent separation of its own brand business and ODM business.
AVING had a chance to talk with Jerry Wang, Vice president of new BenQ Corporation, who was executive vice president and chief marketing officer in former BenQ and used to lead BenQ-Siemens mobile business at the forefront, to discuss how BenQ is preparing for the future.
How BenQ is doing these days since last year? Especially you experienced some ups and downs with BenQ-Siemens mobile business in Europe.
It was a great strategy for us to have mobile phone business. However the result was not as good as we expected. So, last September we stopped funding to Siemens mobile. And we had very busy days in managing over actual insolvency issues like handling customer service issues in Europe market and some turbulence in administration. But now most of uncertainties have gone and we are much better now.
On the other hand, from this month we separate BenQ brand business and ODM business. On June 15 it will be proven on our annual share holders’ meeting. One of the key reasons behind this is that last five years, we saw rapid growth in our brand business in terms of market presence and economic scale. And that gave stress to our ODM customers. Internally the brand business was growing and we had conflicts with our customers. However, after the separation, we see a strong signal that our customers will increase in the second half of this year. New customers are coming and existing customers start to place an order.
For the brand part, since it was operating as one of our business unit until separation, we didn’t know whether it was a profitable business or not, although management showed some capability. But during the last six month of preparation, we saw some profits there. Last year, the brand business reached about 2 billion USD. And we though this size would be able to sustain by itself.
With this kind of off-link between the two entities, ODM can have access outside sources and they could also compete with companies outside, which increases efficiency and price competitiveness. We’ve already seen some healthy competition coming in. For our products, projectors recorded No.1 in the last two quarters in Korea market as well as Indonesia market. globally we are No.3 position. In Europe, Asia pacific, China and Thailand, we are No.2. In our brand business, our strong products are LCD monitors, projectors, laptop, and digital camera. We launched the world’s slimmest 7M camera six month ago. And even thinner 8M camera is going to come in next year.
There was a report recently saying that BenQ withdrew digital camera business. Do you still have digital camera in your brand business product lineup?
That was misunderstanding of media. It is very important to point out the following. In fact, the digital camera business was not big in the past, so we used to depend on outsourcing although we did have technology inside our company. Since the scale didn’t reach a certain level, in order to improve efficiency in production, we decided to sell the business once we separate brand business from ODM business. So, we transferred this manufacturing capacity to an outsourcing supplier, in fact ‘Ability Enterprise’, which has had a long relationship with Canon. They provided ODM and we were one of key customers to them. We also transferred some R&D staff to the company so that they can survive or work in better environment where the volume is large enough. The company will also have dedicated support from BenQ in terms of marketing. Meanwhile, BenQ also continue to have digital camera business with some R&D staff for new technology development, product definition, and design area. In other words, the digital camera business used to belong to our ODM business in the past. And with the separation between brand and ODM business, ODM part stopped producing digital camera since the scale was too small and it didn’t have competitiveness. So they’d better give up and transferred manufacturing and certain part of R&D staff to Ability Enterprise whereas BenQ brand business by definition it doesn’t product any product, but design and marketing still remain within. It was a bit complicated story but that’s the whole story.
For Ability Enterprise, it has been one of the largest ODM producers in digital camera in Taiwan, and has been supporting BenQ already for a long time. So, we understand each other and now they are happy with this event. Since they can be supported and enhance its performance with BenQ in term of design, engineering ability to make it slim and better with optical lens area.
What about other products like LCD monitor and laptop business?
For joybook our laptops we are getting some market share in China and certain countries. Over all, this type of products we will put more resources to them in the future.
For the last 5 years since the launch of actual BenQ brand, we have had acquires two kinds of competences. One is visual technology with respect to LCD panel and projector related while another is mobile technology. This is very important point and we were able to enhance performance in visual display products. For example we developed senseye technology, which brings better picture quality from even different kinds of panel.
Do you purchase LCD panels 100% from AUO?
No. we buy from other suppliers as well. We never depend on one single supplier. It is about strategy actually. We have a strong tie with AUO and co-develop new technology, but on the other hand we need to access other resources as well since sometimes they have different technologies, ability, and resources. So we do buy from other Taiwan or Korean panel makers, even Japan vendors.
As for the mobile technology, another competence we’ve acquired over the last five years, now we see there are new opportunities coming regarding convergence. New emerging technology is coming out and we have discussions with key operators to co-develop in this area. The issue at this time is internet goes mobile. Now telephone line, wireless communication and other networks begin to merge and we see a sort of ‘network convergence’.
In the past, we used to pay different bills to different companies; ADSL, telephone, mobile, cable and everything was separated. However, now in Europe and US, from the end of last year, people can pay one bill for using all those services like fixed line call, wireless call, and IPTV. You can also browse the internet altogether with one bill. In the future, we will see this one window-based mobile phone will support all those service.
With one telephone number, you can make an internet call through WiFi and if you go out, you will have access through mobile network. And we will see this ‘seamless roaming between WiFi network and mobile network’. Since the connection will automatically switch from one another very easily, people would not notice any chance at all. That’s we call ‘network convergence’.
This kind of service has already begun in UK and France. Since this is what makes ‘E-Home’ possible. You don’t need to pay 2G or 3G mobile network separately.
Specifically what would be advantages of having network convergence compared to 3G?
For 3G, the bandwidth is not wide enough and another thing is cost is still high. In contrast, WiFi is becoming more available and since WiFi is cap price, it is not so expensive at all. In the future we will also be able to use WiMax. This is the evolution of network convergence. For users’ point of view, they would not notice the network change at all and nobody knows which network they use in a certain place. In the past, they knew since they used something and for another thing.
Another point to make is that now you can have specific application for consumers. They seek primary functions than others. Now easy-to-use display becomes more important since watching TV, using email, and browsing internet on the mobile phone become more popular. Readability under sunlight also becomes issue, and noise-, light-related technologies are being developed. We work together with vendors like AUO for this kind of design. Gradually more things come from visual side together with network convergence.
LCD monitor, projector, laptop, and digital camera are all very key products for BenQ to sustain our business, recording 2 billion USD last year. This year we expect to have slight growth. But at the same time we start to work on for this new particular ‘network convergence product’ using display and mobile technology. This will no longer be a phone and people will be able to use special application on it.