CHAPTER 3 : : COMPANY PROFILE

3.2 HISTORY

3.2.1 Acer Offshoot in the 1980s

Stan Shih and a group of university friends founded Multitech in 1976, becoming one of the pioneers of Taiwan's computer industry. Among the new company's earliest employees was Kuen-Yao Lee, a graduate from Taiwan's prestigious National Chiao Tung University who also held an M.B.A. from Lausanne University in Switzerland. Lee quickly became an important member of the fast-rising Multitech group. In 1984, when the company--which adopted the Acer brand name in 1986--formed a dedicated contract manufacturing subsidiary, Lee became head of the new subsidiary, originally known as Continental Systems.

Continental Systems at first began producing components such as power supplies and monitors for integrated engineering workstations and other computer systems, supplying both Multitech and the fast-growing OEM market. As such the company was part of a strong trend through the 1980s, which saw Taiwan become one of the world's most important centers for contract computer component manufacturing. After Multitech adopted the Acer trade name in 1986, the subsidiary became known as Acer Continental.

In the late 1980s, Acer Continental began to focus more strongly on the computer peripherals market--leaving the development of completed systems to its parent company. The subsidiary then changed its name to Acer Peripherals to underscore its commitment to the components market. The production of monitors then became one of the company's main markets, and by the early 1990s, Acer Peripherals emerged as a significant supplier to the global OEM computer market, supplying computer manufacturers such as IBM and others.

The early part of this phase, however, occurred without Lee. After being passed over for the CEO position at the Acer parent in 1989, Lee left the company to take a position in Lausanne instead. Meanwhile, Acer Peripherals continued to expand in the early 1990s, opening a manufacturing subsidiary in Malaysia, and a series of global sales offices, such as the Acer Peripherals Labs in the United States in 1992. In this way, Acer Peripherals was able to supply support for Acer's own global expansion effort, which saw the Taiwan Company emerge as one of the world's top PC makers by mid-decade.

Acer Peripherals turned to mainland China in 1993, establishing a manufacturing facility in Suzhou in order to meet the rapidly rising demand for computer peripheral products. Among these were the first CD-ROM drives, which began appearing in the early part of the decade. By 1994, Acer Peripherals had succeeded in producing its first 2X CD-ROM drive. The development of this new technology, permitting the extension of the computer's multimedia capabilities, became one of the primary drivers behind the mid-decade personal computing boom worldwide.

Acer Peripherals further extended its product range in 1995, when it debuted the AcerScan 300C flatbed scanner, one of the first scanners made affordable as a consumer-level product. This launch coincided with Acer's own emergence as one of the world's top consumer PC brands. It also coincided with K.Y. Lee's return to Acer in 1995. Arriving back at the firm, Lee was placed in charge of the Acer Peripherals subsidiary.

As a mark of independence, and of Acer Peripherals' own importance not only as a supplier to Acer, but as a leading supplier to the OEM and contract manufacturing markets, Lee moved Acer Peripherals out of the parent company's headquarters, and into its own--in Taoyuan, more than an hour's drive from its parent's headquarters.

3.2.2 Diversification in the 1990s

Lee now led Acer Peripherals on an ambitious drive to diversify its range of products and deepen its international penetration. One of the company's first moves was to set up Acer Display Technologies in 1996 in order to produce TFT-LCD panels for the rapidly growing LCD monitor market. Acer Peripherals also took a step toward independence that year, when it launched its stock on the Taiwan Stock Exchange.

By 1997, Acer Peripherals had succeeded in developing its first LCD-based computer monitor. The company also extended its scanner technologies with the launch of its first sheet-fed scanner that year. Meanwhile, Acer Peripherals had spotted the potential of the market for mobile telephone handsets, and in 1997 the company debuted its first GSM 900-compatible cellular phone.

The company backed up its diversification effort with the 1998 opening of a new production plant in Suzhou, called the Acer Suzhou Technology Park. In that year, as well, Acer Peripherals debuted a number of important new products, such as its first CD-RW drive, its first digital projector, and its first dye-sub photo printer. The following year, the company added a new factory in Taoyuan, and a research and development center in Taipei. The company also expanded through acquisition, buying Bri-Link Technology Co. in 2000.

Acer's rise as a world-leading computer brand had by then brought the company into increasing conflict with the customers of its contract manufacturing business--most of which were direct competitors on the computer market. In response, Acer moved to refocus itself around its core computer business and transfer its contract manufacturing and peripherals businesses to independent companies. As such, Acer Peripherals was itself spun off as a separate company, Acer Communications & Multimedia, in 2000. Acer maintained a share of just 14 percent of its former subsidiary, and also remained one of its most important customers.

The new company, led by K.Y. Lee, now grouped many of Acer's former contract manufacturing specialists, including the Acer Display Technologies (ADT) unit and others. With his new freedom to guide the company, Lee set out to turn Acer Communications & Multimedia into a global computing giant in its own right. The company took a step in the right direction in 2001 when it engineered the merger of ADT with Unipac Optoelectronics, creating AU Optronics, the world's third largest maker of TFT-LDC panels.

3.2.3 Global Brand Leader in the 2000s

Lee's ambitions ran still higher, however. In 2002, the company decided to adopt a new corporate and brand name, BenQ, an acronym suggested by the company's new slogan: "Bringing Enjoyment and Quality to Life." The success of the BenQ brand was swift: the company's sales began to soar, climbing from $1.7 billion in 2000, to more than $3 billion by the end of 2002--and nearly $4 billion by the end of 2003.

By then BenQ was one of the world's leading computer peripherals brands in certain segments, such as LCD monitors and optical drives and other products. The group's production and technology capacity was further enhanced by the formation of a joint venture with Dutch appliances giant Philips to produce digital store products, including CD-ROM, CD-RW, DVD-ROM, and DVD+RW drives, which were then marketed under the Philips, BenQ, or as OEM products for other brands.

Sales of BenQ's LCD monitors and televisions also took off in the early 2000s, and by 2004 the company had emerged as the world's number two-selling LCD monitor brand, trailing only Samsung of South Korea. The company also was quick to spot openings in new trends, such as the emergence of the so-called convergence of computing and home entertainment systems. In 2002, the company launched its first product to meet this fast-growing new category, the Joybook 8000 "multimedia hub." This product also marked the group's entry into the highly competitive notebook computing market.

By 2004, BenQ had become Taiwan's top-selling consumer electronics brand. BenQ also had become a prominent brand in markets such as Japan (where it was the leading seller of 17-inch monitors), China, and India. The company also was making strong headway in its drive to enter the North American and European markets. Europe was seen as holding special potential for the company, given the relatively small numbers of locally based brands there. Under K.Y. Lee's guidance, BenQ promised to fulfill its ambition to become a global brand leader in the new century.

3.2.4 The Rationale for Chance

Acer Peripherals (Acer CM) gave three main reasons for the change of name to BenQ:

• Superior customer service: launching an independent brand allows us to dedicate our resources to strengthen and build relationship with end-users and resellers. 
• Channel support: we are now aligned to better serve our channel as an independent entity away from other affiliated Acer companies. 
• Brand identity: with leading technology designed to encompass and support the digital convergence era, it became essential for us to differentiate ourselves from other entities under the Acer umbrella. To do this we are focusing on the seamless integration of technology and quality of life. Why? Because enjoyment matters… 

According to Wilbur Lin, a marketing and communications specialist for BenQ, “A lot of people asks ‘Who is BenQ?’ They say, ’Oh, they are a spin-off of Acer’ But the Acer name no longer is associated with us. They have nothing to do with us or our products. Acer is gone and we are now BenQ.”

Nevertheless, BenQ says it will still support Acer Peripherals (Acer CM) products, and that they “are still the same core company and will honor all contracts made by Acer Peripherals (Acer CM).”

The real reason behind the name change to BenQ is to build a global brand. Presumably, with Acer remaining in any part of the company name, this was regarded as a limiting factor. As K.Y.Lee, Chairman and chief executive of BenQ Corporation says, “You must have a brand in order to wield any influence.” He is critical of Taiwan`s companies in that they are often content to stay as contract manufacturers.

According to Lee, at present, Taiwan has only large companies, but they have no influence; they are only big businesses, but no movers and shakers… The Taiwan government should also consider how to consolidate and develop brand-name companies. After all, with contract manufacturing what products you make or which markers you pursue is never your own decision.