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Taipei. Wistron Corporation, a spin-off of giant PC maker Acer, is facing a simple choice: Diversify or see profit margins vanish.

Like many other Taiwanese technology suppliers, the company is opting to broaden out of its established strengths.

Wistron, which gets 70 percent of its $13.5 billion revenue from notebook computers, is adding handheld devices, flat-panel televisions and three-dimensional TVs to its product portfolio.

“Wistron is lowering the portion of notebook computer production” and increasing new products, company spokeswoman Joyce Chou said.

Wistron is not alone. Fierce global competition has prompted Taiwanese technology companies more generally to diversify.

“Taiwanese high-tech firms mostly operate as contract manufacturers. They have to find alternatives to maintain profitability as cheaper makers emerge to depress pricing,” said Simon Yang of Topology Research Institute.

China, with cheap and increasingly well-educated workers, has proved a particular threat to Taiwan’s high-tech industries.

Wistron’s gross profit margin was 5.5 percent in September 2009. Without the diversification, it would have fallen “precipitously below 5 percent”, said Angela Hsiang, an analyst at KGI.

HTC Corp., one of Taiwan’s leading smartphone makers, has also been widening its reach, expanding the software that powers its products. In 2008, HTC launched its first phone using Google’s Android platform: The T-Mobile G1.

To enrich its product line, HTC last year rolled out HTC Hero, its latest model featuring built-in Google mobile services, including search, maps, Gmail and YouTube.

HTC had for years made smartphones powered by Microsoft’s Windows Mobile, but now to gain a share in the mobile Internet, “HTC has to work with Google to get access to its open-source operating system,” Topology’s Yang said.

Even Taiwan Semiconductor Manufacturing, the world’s largest contract microchip maker, is diversifying, targeting solar energy and light-emitting diodes.

In December, TSMC announced it would buy 20 percent of Taiwan’s Motech Industries, one of the world’s leading solar-cell producers, while investing in LEDs through venture capital.

“Compared with our microchip foundry business, the solar energy and LED parts are very small. But TSMC is confident that they will become part of its core business,” company spokesman J.H. Tzeng said.

The output of Taiwan’s solar-cell sector will grow nearly 48 percent this year to 106.3 billion Taiwan dollars ($3.3 billion), according to the government.

“TSMC already has an advantage in technology development. It has deep pockets. I expect it will capitalize on the new investments in a big way,” said Julian Wang, an analyst with Grand Cathay Securities.

Meanwhile, Hon Hai Precision Industry, which is the world’s largest contract manufacturer in the electronics sector and works for companies such as Dell, Nokia and Sony, has teamed up with Amazon.com in e-book development. Amazon’s Kindle, the most successful e-book reader, has boosted Hon Hai’s visibility.

“To my estimate, Hon Hai has grabbed a 70- or 80-percent market share in global e-book device manufacturing,” said Kuo Ming-chi, a Taipei-based analyst with industry journal Digitimes.

Hon Hai spokesman Edmund Ding said the company “always grows with its customers”.

Those Hon Hai customers have included Apple, whose new iPad will offer the stiffest challenge yet to the Kindle — and another revenue stream for Taiwanese suppliers.



Agence France-Presse