Gadget maker aims for global reign

Lee is chief executive of BenQ, a former subsidiary of Taiwanese computer maker Acer that sold peripherals such as CD-ROM drives. From this unglamorous beginning, Lee now has begun a campaign to elevate the company step by step into a global electronics giant.

Lee speaks of his plan to bring his company recognition almost as if it's a patriotic duty. Taiwan has long been a crucial but largely hidden part of the computer industry; it began with assembling tech products but now is tackling sophisticated tasks such as design, engineering and chip fabrication.

"Taiwan has been a technology provider for a long time. It's time for us to build a strong brand to support a global business," Lee said in an interview this week in a gleaming, marble-floored corporate office here.

Lee is ambitious, but at a measured pace. "We are not aiming too high," he said. "We are beginning in our home base."

The branding campaign is already under way in Malaysia, Hong Kong, Taiwan, Singapore, Australia and Japan. It's just beginning in Europe, where the company has branch offices in seven countries. Last will come North America, though BenQ is already dipping its toes in those waters with LCD monitors, digital projectors and DVD drives, Lee said.

The company has prepared a multimedia blitz. It has a feel-good message, with BenQ standing for "Bringing Enjoyment and Quality" to life. There's official imagery, too: the purple-and-pink pattern of a highly magnified butterfly wing.

It even has a song to try to lure young gadget buyers. Sample lyric: "Oooh, BenQ, BenQ, I'm so crazy/Crazy and in love with you." (BenQ, pronounced "Ben-kyoo," rhymes well.) It is a message aimed at individuals, not corporate buyers.

In BenQ's rose-colored view, digital gadgetry will be the basis of an "enjoyment network" that links people with cheerful communal activities such as sharing pictures or movies, talking on the phone or listening to music. The hub of this network will be the company's Joybook mobile computer line.

Financially, BenQ is still getting settled. In 2002, BenQ had net income of $213 million on revenue of $3 billion--a 50 percent increase in revenue over 2001. But with the severe acute respiratory syndrome (SARS) epidemic and the complications of a broad product portfolio, profitability is not improving at the same rate, Lee said.

"Our second quarter was very bad," he acknowledged.

SARS triggered some changes for the company. BenQ has requested that suppliers add an extra half-month of inventory to their stocks to ensure that its supply chains won't be snapped so quickly if new crises hit, and the company has begun a plan to find second sources for its supplies, Lee said.

The situation is looking up in the second half of the year, though. Lee expects revenue growth for the full year to be between 20 percent and 25 percent, compared with 2002.

A quiet beginning
Lee's work to expand BenQ's products began quietly while the company was still under Acer's wing.

The executive started his career at Acer after graduating from National Taiwan University. He rose through Acer's ranks until he led its peripherals subsidiary. Some of his broader ambitions began shining through in 2000 as he renamed the group Acer Communications and Multimedia.

But the real product explosion began after December 2001, when Acer spun off and renamed the group BenQ. Today, BenQ's product lines include monitors, portable digital music players, notebook computers, mobile phones, digital cameras, digital projectors, and CD and DVD drives.

Even though Acer still holds a 21 percent stake in BenQ, the newer company's unrelenting expansion now means it competes with its progenitor in notebook computers, monitors, digital projectors and handheld computers.

Diversification of BenQ's finances is coming more slowly. Most revenue comes from the display business--54 percent in the second quarter of 2003. Geographically, though, the company is already global. In the second quarter, 39 percent of revenue came from the United States, 25 percent from China, 21 percent from Europe and 11 percent from other parts of Asia besides China.

Most customers buying a BenQ product aren't likely know it, though. In the second quarter, 71 percent of the company's revenue came from sales to other companies that sold goods under their own names.

Lee sees three areas as particularly significant for his company's growth: liquid-crystal displays for notebooks and LCD TVs; DVD drives; and mobile phones.

BenQ has its own supplier of displays: It's the largest shareholder in AU Optronics, and Lee is that company's chairman. AU Optronics is building a sixth-generation LCD production line for LCD TVs, a product that Lee believes will surpass computer displays in units in three or four years.

"In the future living room, the digital TV will be central product of the whole situation," Lee said.

DVD formats and phone design
In DVD drives, Lee is a believer in the DVD+RW format, not in the rival DVD-RW format or in combination drives that can handle both. "We see today the momentum for DVD+RW is much stronger than for DVD-RW. I cannot say (it will) win, but it will dominate," he said.

For future optical-storage products, BenQ is aligned with Philips and several other consumer electronics companies behind the Blu-ray Disc technology, not the rival Advanced Optical Disc from Toshiba and NEC.

And in phones, BenQ plans to add more sophisticated models. The company will launch its Symbian-based smart phone in the fourth quarter, Lee said, with a Microsoft Windows-based model in mid-2004.

Working with Microsoft has been mixed, Lee said.

"They need some time to learn about the phone market. They are trying to adapt the PC approach to the phone market, but that doesn't work," he said. For example, Microsoft previously mandated a specific screen size, he said, but phones must be able to use a wide variety.

Microsoft is coming around, though. "Now they are trying to be more flexible. After that adjustment, they should have a good opportunity in the future," Lee said.

While BenQ sells displays and DVD drives in North America today, phones aren't yet a priority for Lee in that market. In China, too, where Lee says eager companies have flooded the market with products that now sell at deep discounts, BenQ is taking a more conservative approach.

It's an example of Lee taking the long view, despite his grand aspirations. "This is a long journey. We don't expect we can be successful overnight."