Posted by: Bruce Einhorn on May 11, 2007
Another electronics manufacturer from Taiwan trying to break out of the commoditization trap. As I wrote here yesterday for BW, smart phone pioneer High Tech Computer Corp. is switching strategies and trying to build up a brand name of its own. Like many other Taiwanese companies, HTC built a nice business as an ODM (original design manufacturer, industry-talk for a company that designs and produces a product and then sells it to another company that slaps on its own brand name). That worked well for years but the rise of China and the exodus of Taiwanese manufacturing to low-cost factories in the mainland increasingly makes that model unsustainable.
Maybe HTC can pull this off, despite the fact that no other Taiwanese company really has. Acer is a top brand worldwide - and the company execs are crowing now because they have pulled ahead of Lenovo in the race for the No. 3 spot globally - but Acer was going nowhere until it finally jettisoned its manufacturing business and decided to focus just on marketing its own brand. Other Taiwanese companies, most notoriously Acer offspring BenQ, have sought to build up their own brands while still maintaining a strong manufacturing side. Most haven’t been able to have it both ways. BenQ has turned into a disaster, with top execs accused of insider trading and the company bleeding money from its unfortunate attempt to jump-start its name-brand business via an acquisition of the old handset division of Siemens.
There’s a basic problem that all Taiwanese face. It’s just reasonable that ODM customers from the U.S., Japan or even China aren’t going to want to give business to a company that is also a competitor. Acer learned that the hard way and now BenQ is, too. I saw Peter Chou, HTC’s affable CEO, yesterday in Hong Kong and asked him about this. He says that HTC is different. Of course, BenQ was different, too.