Lenovo's recent purchase of IBM's computer business does not worry BenQ. Instead, the Taiwanese manufacturer sees it as an opportunity to challenge its mainland rival.

While the US$1.75 billion deal gives Lenovo access to a popular brand - most notably the ThinkPad laptop - those branding rights last just five years.

What is more, instead of making the Lenovo name stronger, the deal may wind up confusing consumers.

"The takeover by Lenovo of IBM is a very risky proposition because Lenovo's brand equity will be distorted after the acquisition," said BenQ chairman Lee Kun-yao.

"The two will have to deal with internal restructuring for at least two years. Now is a good time for us to challenge their positions."

While some Chinese electronics manufacturers are buying brands to win sales overseas, BenQ has taken a different route, building its brand organically since it was founded three years ago and gaining consumer recognition especially in Europe.

The company is a spin-off of the Acer Group, probably Greater China's first and best-known global electronics brand, and a one-time original equipment manufacturer (OEM) of IBM computers.

In fact, according to Mr Lee, IBM offered to sell its computer business to BenQ, but the Taiwanese company rejected the idea.

The name game is a matter of survival for Greater China companies. Although OEMs and original design manufacturers (ODMs) do a brisk business making PCs and gadgets for the likes of Dell and Hewlett-Packard, margins are under constant pressure.

"We prefer to be an influential company rather than just a sizeable business without any influence," BenQ chief marketing officer Jerry Wang said.

"With a brand, you are creating more value for your business than by being an OEM."

The company, formerly known as Acer Multimedia and Communications, continues to rely on OEM and ODM orders for the bulk of its sales, although this is slowly changing.

BenQ reported NT$124.62 billion ($30.31 billion) in revenue and NT$7.42 billion in profit in the first nine months of last year. Of its sales, 34 per cent was from branded businesses, versus 29 per cent for 2003 and 24 per cent in 2002.

Mr Lee said he hoped branded business would bring in US$3 billion in sales this year, compared with an expected US$1.9 billion to US$2 billion for last year.

From its production base in Suzhou, Jiangsu province, BenQ churns out cameras, digital music players, laptops, LCD monitors and televisions, projectors and printers. It makes handsets for companies such as Nokia and Motorola.

While BenQ is not yet a household name in Hong Kong, its notebooks, LCD monitors and mobile phones are already among the top five brands in parts of China and Europe.

"Many think that in China only ODM is viable, but we have proven them wrong," Mr Lee said.

Although North America was BenQ's largest market in the third quarter, accounting for 33 per cent of its sales, Mr Lee saw Europe playing a greater role - especially as about 70 per cent of the company's branded business comes from there.

BenQ has spent heavily promoting its name in Europe, splashing out US$100 million on marketing over the past three years. Last year, the company sponsored Uefa Euro 2004 as the European premier football tournament's official IT partner.

BenQ executives claim sponsorship of the event resulted in a tripling of European sales.

"We needed a global event [such as Uefa Euro 2004] to leverage our brand," Mr Wang said.

An analyst who follows the company said BenQ's branded LCD TVs and monitors sold well in Europe because they were generally cheaper than similar models from LG and Samsung.

Closer to home, Mr Lee's long-term target is to derive 30 per cent of sales from the mainland and Taiwan. BenQ plans to expand its sales points on the mainland to 200 this year from 70, and will focus primarily on the consumer market.

But Lenovo has a home-court advantage on the mainland that will be tough to beat. It has about 27 per cent of the market there for PCs, compared with a scant 1.5 per cent for Acer.

While the Lenovo name is not yet known worldwide, Chinese consumers have long been familiar with the brand.

Source: CRI News