Tag Archives: TPK Holding

Taiwan seeks to keep edge in hi-tech production

Whereas in the past, Taiwanese firms played a significant role in the production of the iPhone, this was not the case with the iPhone 5 when it was released in September, according to a recent study by iSupply. Taiwanese companies made a contribution of just 10 percent to the whole supply chain of the iPhone 5, accounting for profits of less than one percent.

Despite this worrying situation for Taiwan’s original equipment manufacturers (OEMs), Taiwan’s Ministry of Economic Affairs announced that the share of Taiwan-made and OEM smartphones reached 37 percent worldwide, placing the island as the world’s leading manufacturer of smartphones. It is expected that Taiwan will continue to hold this top ranking into 2013, solidifying its position as the worldwide epicenter for makers of smartphones and other hand held devices. Taiwan’s domestic production is estimated to reach US$43 billion in 2015, bringing in new investment of US$678 million in 2015, and creating 150,000 job opportunities by 2020, reported the Commercial Times.

In the new age of tablet computing, Global Views monthly said, Taiwan is losing its edge in terms of component sourcing. This affects gross profit and reduces the influence of Taiwan’s electronics industry. Taiwan used to control this area, but now the ball is in Apple’s court.

In the past, Taiwan’s notebook ODMs like Quanta Computer, Compal Electronics Inc., and Wistron, enjoyed the ability to influence components ahead of global brand names such as HP and Dell. They could increase the importance of Taiwan’s component supply chain. But now Apple controls 70 percent of global tablet computing market, exerting more bargaining power and the ability to suggest components. Taiwanese companies are increasingly being relegated to mere assemblers of Apple products, rather than designers and innovators.

Of all the Taiwanese firms, only Foxconn maintained its previous share, accounting for 4.5 percent of the total component assembly for the iPhone 5, while other makers of touch screens and shells did not get any orders from Apple.

A senior product manager in Taiwan pointed out that Apple’s CEO Tim Cook, who took over the reins of the company following the death of Steve Jobs, is an expert on hardware specifications and a tough squeezer of supply chain production costs. As such, the iPhone 5 mainly focuses on upgrading and improving, the hardware, such as adopting the 4G LTE chip set module made by Qualcom and Retina screens made by Sharp. For those component providers, if they were lucky to get orders from Apple, it was at a reduced price, according to Global Views.

In fact, it is getting harder and harder to get orders from Apple. Starting from 2012, many Taiwanese electronics manufacturers, including some ODMs of Apple products, have turned to China for orders. According to Topology Research institute, the global total cell phone production volume, including traditional cell phones, is expected to grow 4.5 percent in 2013, in which the total volume for the Asia Pacific region including China is expected to grow up to 51 percent, far more than the 10 percent expected in North America.

Global Views reported that Foxconn, one of Apple’s main manufacturers, has long been taking orders from China’s brand name cell phones. For example, the company started assembling the “Happy phone” series of smartphones in 2011 for Lenovo, which started by making PCs and is now positioned to take some market share from HP. Foxconn also started this year to take orders of the popular MI-One, a smart mobile phone designed by Xiaomi Tech Company.

Besides Foxconn, TPK Holding (a manufacturer of touch panels) and Catcher Technology (a manufacturer of cell phone shells), and MediaTek Inc. (a fabless semiconductor design house) are all turning to China. These Taiwanese companies have formed new market links between Taiwan and China.

However, when Taiwanese companies apply their smart phone manufacturing technology to China’s brand name products, the advantage of Taiwan’s smart phone technology over China’s counterparts has also narrowed. The challenge now for Taiwanese companies is how to maintain the lead, Global Views stressed.

Now the only irreplaceable value of Taiwanese companies is the optical lens made by Largan Precision Co., in addition to the system assembly.

According to analysis by Business Weekly, the electronics industry was one of the key locomotive forces driving Taiwan’s economic growth, but now most of those related job opportunities have moved overseas leading Taiwan to shift its focus increasingly toward the service sector. More and more manufacturing resources are drawn to the service industry, namely, the so called high technization of services. Once the service industry is integrated with high technology, more innovation will develop.

At present, no one can predict exactly where the next big economic growth momentum will come from, but opportunities are certain to open up. One suggestion is for the government to continue to lift restrictions and let new businesses emerge. In either case, Taiwan still has the most treasured resource – manpower.

According to the global competitiveness report 2012-2013 released by the World Economic Forum in September, Taiwan remains in 13th position due to its sufficient manpower in R&D, its industrial clustering effects, and the low cost of its financial services. According to Business Weekly, Taiwan’s high quality manpower provides unlimited potential for the future.

Taiwanese companies profit with iPhone/iPad success

As consumers around the world unpacked their newly purchased iPhone 4 or iPad, few realized that Taiwanese manufacturers played a crucial part in bringing these American gadgets to the marketplace, reported Taiwan Review. In fact, three large Taiwanese contract manufacturers and components suppliers are the workhorses behind the hardware for Apple’s popular products.

Based in Cupertino, California, Apple is famous for its Macintosh computers, along with its iPod, iPhone and iPad. The iPad alone sold one million units in just 28 days when it was introduced in April 2010. The iPhone’s metallic casing and its 5-megapixel built-in camera, as well as the touch panel of the iPad, which allows access to programs and on-screen typing, are all made by Taiwanese companies. On top of that, these companies also assemble the finished products and help Apple dispatch them to retail stores worldwide.

Hon Hai Precision

In fact, the success of Apple’s products has everything to do with the profitability of these firms, and vice versa, said Taiwan Review. “Steve Jobs’ achievements would not be possible without Terry Guo,” said Chang Tien-wen, author of The Tiger and The Fox: Terry Guo’s Global Competing Strategy. Guo is the founder of Hon Hai Precision Industry Co., the world’s largest electronics parts manufacturer, which is traded under the name Foxconn. He is the richest man in Taiwan, estimated to have a fortune of US$5.9 billion by Forbes magazine.

In 1974, Guo started his company in a Taipei suburb making plastic channel knobs for black-and-white television sets. He later expanded into the computer industry, and in 1988, with rising costs and surging orders in Taiwan, Guo set up plants in China to take advantage of that country’s cheaper land and labor costs. Over the years, Guo has expanded his company’s capabilities from producing PC exteriors to handling the production of internal computer components as well.

By making its own components  Hon Hai is able to undercut its competitors on finished product price without reducing its overall profit margins, Taiwan Review reported. According to Taiwan-based analysts, besides being the current exclusive supplier of Apple’s iPhone and one of the few makers of the iPad, Hon Hai and its affiliates also make products or parts for Hewlett-Packard, Motorola, Dell, Nokia, Sony, and Nintendo.

Fubon Securities analyst Allan Pu said Hon Hai’s impressive sales in the third quarter of 2010, the second consecutive quarter that it has achieved record revenues, were attributed to Apple, which remained the biggest contributor with its hot-selling iPhone 4 and iPad. In that quarter, Hon Hai raked in sales of US$21.4 billion, up 29.1 percent from the previous quarter and 71.3 percent from the corresponding period a year earlier.

This year looks to be even rosier, according to Citigroup analyst Kevin Chang, because Hon Hai is expected to assemble 70 million iPhones, 35 million iPads and 10 million iPod Nanos, worth US$42 billion.

Quanta Computer

Another company that benefits from relations with Apple is Quanta Computer Inc., the major assembler of the iMac all-in-one desktop computer, MacBook notebook and iPod Touch. Quanta is currently the world’s largest design manufacturer of notebook PCs,  producing about one-fourth of the world’s laptops in 2009, reported Taiwan Review.

According to Merrill Lynch Taiwan research analyst Tina Chang, in addition to Apple, other computer companies such as HP, Dell, Acer, Asustek, Lenovo, Sony and Toshiba all outsource their notebook production to Quanta. Notebook PCs account for 80 percent of Quanta’s revenue and the balance comes from other products such as GPS, MP3 players, handsets, servers, storage devices and LCD TVs.

Barry Lam started Quanta in 1988, just as the notebook computer was starting to grow in a market dominated by larger, bulkier desktop computers made by IBM. Today Quanta has grown into the world’s No. 1 notebook contract manufacturer based on revenue. The company’s revenue reached US$25 billion in 2009. In 2010, around 50 million laptops were shipped, a growth rate of 40 percent from 35 million units in 2009.

TPK Holding

Another company whose business is tied with the ups and downs of Apple’s products is TPK Holding Co., inventor of the glass-based capacitive touch panels (CTP) used in the iPad and iPhone, reported Taiwan Review.

When it launched an initial public offering on the Taiwan Stock Exchange on October 29, 2010, TPK’s shares soared to US$16 from the offer price of US$7. This first day surge gave TPK a market value of US$3.6 billion, a 55-fold increase from a capitalization of only US$62.2 million when the company was established in 2005.

Yuanta Securities analyst George Chang said, “TPK is a clear beneficiary of the booming smartphone demand given its status as the top supplier for leading smartphone makers – Apple and HTC Corp. – which have been gaining market share.” In 2009, Apple accounted for 46 percent of TPK’s revenue with three major products: the iPhone, iPod Touch and Trackpad, a multi-touch pad to go with Mac desktop computers.

Since the launch of the iPhone 4 and iPad in 2010, the proportion of Apple production in TPK’s total sales has risen to 73 percent. One of the reasons that TPK has continued to be Apple’s manufacturer is its ability to stay at the top of the industry technologically. George Chang cited the 9.7-inch iPad, which represents a significant size migration from the 3.5-inch iPhone, saying that TPK has demonstrated its ability to achieve a decent yield rate with production occurring in a timely fashion.

Another advantage, according to Taiwan Review, is that Taiwanese companies produce up to 60 percent of the key electronic components used in these devices, allowing them to assemble these products quickly.

Taiwanese companies are reaping the benefits of working with consumer favorites like Apple. However, if Apple products wane in popularity or other non-Apple devices catch up,  the falling value of Apple stocks would be a significant blow to the business performance of Taiwanese manufacturers, Chang cautioned.