China’s IT manufacturing power seen rising
Posted Dec 20, 2004, 9:40 AM ET by Subramony S.
Infoworld has an interview with K.Y. Lee, the chairman and chief executive officer of BenQ,
Contract manufacturing is a brutal business. The Taiwanese companies face continuous pressure from their customers to cut costs and they must constantly look for the lowest-cost ways to manufacture their products, Lee said. In coming years, this will likely mean moving their factories from China’s increasingly prosperous — and costly — coastal regions to less developed areas in China’s interior, or perhaps to areas outside of China such as Vietnam or Africa, he said.
Faced with this challenge, BenQ, which was formerly called Acer Communications & Multimedia, began a push in 2001 to build a business selling its own products, including LCD (liquid crystal display) monitors, MP3 players and projectors, under the BenQ brand alongside its existing contract manufacturing business. By selling products under its own brand, the company is able to earn greater profit margins than would otherwise be possible as a contract manufacturer, Lee said.
Taiwanese companies that decide to stick with contract manufacturing, or are unable to build a branded businesses, face the growing threat of competition from Chinese companies that understand the contract manufacturing business and have access to a pool of local executives trained by their Taiwanese rivals, Lee said.
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