Sunonwealth Electric Machine Industry says its miniaturized cooling fans, as small as 1 centimeter (0.4 inches) in thickness, are found in one out of every three laptops, including top brands such as Dell and Hewlett-Packard.
"Innovation is very important for us," William Li, vice director of Sunonwealth's finance division, told Reuters at the company's headquarters in southern Taiwan.
"Risks are high for contract makers because they are in a low-margin business, but we add value to our products," he said, pointing to an IBM laptop fitted with a "Sunon" fan.
Li has confidence in economic growth in the United States and Japan, which he said will further stimulate demand for consumer products next year. PC users are also replacing boxy desktops with gadget-filled portables--good news for Sunonwealth.
The Taiwan firm has two factories in China, pumping out nearly 90 percent of its small fans for.
It plans to boost its monthly output to 10.7 million units in 2006, from the present 8.5 million units, Li said. To fund that expansion, he is eyeing a possible euroconvertible bond (ECB) issue of $15 million to $20 million.
"If Taiwan's capital market is good, we will raise the funds at home. If not, we will consider an ECB and the time is probably in the second half of next year," Li said.
Sunonwealth, whose rivals include Japan's Nidec, made inroads into China about 10 years ago to take advantage of lower labor costs.
Its net profit nearly doubled in 2004 to T$126.3 million, with sales rising 24 percent to T$4.21 billion. Li declined to give financial forecasts.
He said the key to the small company's success is brand strategy and patented technology. Unlike many Taiwan firms that specialize only in contract manufacturing, Sunonwealth registered the brand "Sunon" in 1982, two years after the firm's founding.
The 25-year-old company allocates 6.5 percent of its revenue to research and development, more than most of its peers in Taiwan. It has registered more than 800 patents around the world.
"You can find our products in one in three laptops in the world, and with good manufacturing quality, we have bargaining power when we do business with those PC vendors," Li said.
While increasingly powerful computers and electronics gadgets are making cooling devices crucial, Sunonwealth is also sniffing for opportunities in the cell phone and automobile markets.
"More multimedia functions will be integrated into a small mobile phone and we think we are in the right direction," Li said, adding that higher-end handsets with even tinier fans will be seen in the near future.
Sunonwealth's shares have fallen 18.5 percent since hitting a year high on Feb. 24, as investors were concerned about profits after the firm asked distributors in the United States and Europe to clear inventories to meet new EU environmental standards.
"We've made improvements to meet the standard, so it won't be a problem," Li said.