Quanta Computer Inc.
Quanta Computer Inc.
Sales: NT$131.09 billion (2001)
Stock Exchanges: Taiwan
Ticker Symbol: QCI
NAIC: 334110 Computer and Peripheral Equipment Manufacturing
Quanta Computer Inc. operates principally as a manufacturer and designer of notebook personal computers, ranking as the largest producer of notebooks in the world. Quanta also makes LCD desktop personal computers, computer components, Internet appliance devices, servers, and cellular phones. The company’s notebooks are produced and designed for major computer manufacturers such as Dell, Compaq, Gateway, Apple, IBM, Sony, Hewlett-Packard, Sharp, Siemens, and Fujitsu. Dell ranks as the company’s most important customer, accounting for approximately half of annual sales.
Hailed as the “Laptop King,” Barry Lam built a business empire and a fortune that befitted his epithet. He was born in Shanghai, raised in Hong Kong, and received his education in Taiwan, where he earned a degree in engineering. In his early career, Lam worked as a pocket-calculator salesman and as an engineer for several computer makers based in Taiwan, before striking out on his own as an entrepreneur. Although he deserved much of the credit for the success of his entrepreneurial creation, Lam was also indebted to circumstance, to the time and the place of Quanta’s corporate birth. The rise of his company was part of a general trend unique to Taiwan, representing a case study of success in the evolution of the country’s electronics industry.
For years, Taiwanese electronics firms produced equipment under contract for other manufacturers, generally U.S. companies. Their existence as such provided a means for survival, but the profits were meager. Contract manufacturing represented the bottom of the profit scale, well below the margins recorded by engineering-driven firms who designed electronics goods. Taiwan’s importance to the global electronics industry, and its own wealth as a manufacturer within the vast marketplace, increased exponentially after the country’s manufacturers began to assist in the creation process. This evolutional leap, which was largely a Taiwanese phenomenon, occurred during the 1990s, when Taiwan, long the home of “ghost,” or contract manufacturers, assumed its more pivotal role as the base for designer-manufacturers. The Taiwan government aided in the development of its high-technology industry, providing tax and venture capital incentives, which helped speed the country’s technological maturation. Barry Lam’s Quanta helped lead the way toward the more lucrative end of the business. By the beginning of the 21st century, Taiwan accounted for 25 percent of the desktop computer production in the world and 55 percent of the notebook computer production in the world. Lam’s Quanta, on its own, accounted for one-seventh of global notebook computer production, making its mark not only as the leading manufacturer but also as a capable engineering and design firm.
Lam’s rise toward dominance began modestly. With the help of a colleague, C.C. Leung, Lam founded Quanta in May 1988, using less than $900,000 in capital to start the company. The lack of resources relegated Lam’s initial operations to a small space located in Shin-Lin, an old industrial district in Taipei. In a building, on the sixth floor, Quanta began its existence, endeavoring to become one of the first companies of its type on the small, island nation.
At the time of Quanta’s formation, few firms in Taiwan were involved in the production or design of what would become known as notebook computers. Lam, however, threw himself into the task of developing a portable personal computer (PC), laboring in the cramped, “office-factory” in Taipei. In November 1988, six months after starting Quanta, Lam completed work on his first version of a portable personal computer, a notebook prototype remembered as a bulky, briefcase-sized machine. He took his creation to trade shows, hoping to spark interest.
Although the reaction to Lam’s awkward prototype was not immediate, orders for the Quanta machine gradually arrived. In August 1989, the company opened its first genuine production facility, a building located in Linkou, a suburb of Taipei. The following year, Quanta began production of its first commercial notebook PC, a machine that featured an Intel 386 processor.
Early 1990s Growth
Quanta’s success became measured by the stature and number of its customers and by what services the company performed for them. The design work completed by the company’s engineers increased, as major U.S.-based customers agreed to let Lam’s Quanta construct, and in some cases, help design their notebook computers. During the first half of the 1990s, Quanta secured contracts with important customers such as Apple Computer and Gateway, Inc. To better serve these customers, Lam established a network of offices to serve his clients. In 1991, an after-sales office was established in Fremont, California. In 1994, an office was established in Augsburg, Germany. A turning point in the company’s history occurred in 1996, when Quanta reached an agreement with Dell Computer Corporation. For years, Dell ranked as the company’s largest customer, accounting for a significant portion of annual revenue and profit totals.
Lam prided himself on presiding over a design firm, as opposed to a pure contract manufacturing operation. Quanta’s engineers, whose ranks swelled as the company blossomed into global force, increasingly lent their talents in the design of notebook computers sold under the brand names of U.S. and other foreign manufacturers. Although the major, well-known computer companies were reticent about disclosing the contributions of ghost designer-manufacturers, Quanta, in many instances, was the company behind the prolific growth of portable PCs during the latter half of the 1990s.
In 1995, Quanta reached an agreement with Apple Computer that called for Lam’s engineers to exhibit their talents on the design side of notebook production. Apple Computer, wishing to reduce costs and development time on its new Epic line of PowerBook notebooks, turned to Quanta to co-develop the product. Based on the success of this agreement, a lasting partnership was formed that saw Quanta engineers assume much of the responsibility for the design of later generations of Apple Computer’s notebooks. For the company’s G4 notebook, released at the start of the 21st century, Quanta’s 500 engineers in Taiwan accounted for half of the design work that went into the highly popular model.
Quanta also was credited for salvaging the fortunes of California-based Hewlett-Packard Company. In 1999, the U.S. industry giant was close to shuttering its notebook division when company executives decided to hire Quanta in a last ditch effort to keep the Hewlett-Packard name in the notebook computer market. Quanta applied its production and engineering talents to the Hewlett-Packard cause, taking over nearly all the responsibilities previously assumed by the Palo Alto company. Quanta assembled the hardware, installed the software, tested the final product, and even began shipping the Hewlett-Packard notebook computers to customers. Hewlett-Packard’s success in the notebook computer market quickly improved, impressing the company’s director for notebook operations. Turning to Quanta, according to the Hewlett-Packard director in a November 5, 2001 interview with Business Week, “saved our business.” He noted that the intervention of Quanta represented “the biggest turnaround in Hewlett-Packard’s history.”
Lam, who took Quanta public in 1998, registered much of his success because of the company’s nimble and sophisticated manufacturing operations. Quanta’s competitors based in the United States typically engaged in a number of manufacturing activities, whereas Lam specialized exclusively on designing and manufacturing notebook computers. In this specific area, Quanta excelled, its notebook assembly factory in Linkou representing a paradigm of efficiency, adaptability, and profitability in the computer industry. Lam’s assembly lines mass-produced notebook computers 24 hours a day, able to accommodate different product specifications and configurations for the company’s various customers. Dell, which accounted for half of the company’s annual sales, had its own secured floor at Quanta’s Linkou facility, where Quanta engineers performed between 60 and 70 percent of the design work on Dell’s Latitude models.
We believe that we are well positioned to take advantage of the increased global demand for notebook PCs, and our goal is to become the largest notebook PC manufacturer worldwide. We intend to build upon our existing strengths in product design, efficient production and high quality customer service to become the “manufacturer of choice” for top-tier notebook PC vendors with global brands. We also intend to develop new products and technologies which we believe will be in demand in the future, including GSM cellular phones and mobile digital data devices that can be used to access the Internet by establishing a wireless connection as well as perform many of the functions currently performed by notebook PCs and cellular phones.
Emergence of a 23st-Century Giant
By 2000, little more than a decade after Lam had set out in his cramped office in Taipei, Quanta was exuding considerable strength. The company’s roster of customers was impressive, comprising essentially all the major notebook manufacturers in the world. Among Quanta’s customers were Dell, Compaq, Apple, Hewlett-Packard, IBM, Sony, Sharp, Fujitsu, and Siemens. The company had also begun to vertically integrate and diversify its operations, seeking to add alternative revenue streams to its mainstay business. In February 1999, the company formed Quanta Storage Inc., a subsidiary that manufactured data storage devices such as CD-ROM drives and DVD drives. In July 1999, Quanta Display Inc., a producer of liquid crystal display (LCD) panels, was formed. In March 2000, the company created Quanta Network System Inc., a manufacturer of web pads with wireless data transfer capability, personal digital assistants (PDAs), and cellular phones.
In 2001, Quanta stood apart from the rest of the computer industry, the same year the company achieved global dominance. The year marked the most debilitative market crash in the history of the high-technology industry, yet Quanta displayed energetic growth, recording double-digit increases in sales as other computer makers endured crippling declines in business. During the year, Lam anticipated shipping four million notebook units, a 50 percent increase from the total recorded in 2000. Quanta vaulted past Toshiba to become the world’s largest producer of notebook computers, its factories accounting for one-seventh of all notebooks sold worldwide. Although the company’s forays into cellular phones and Internet devices had yet to generate any appreciable profits, Quanta represented a glowing success story at a time many computer makers chose to forget.
As Quanta embarked on its future in the 21st century, the company continued to garner praise for its high level of efficiency in an increasingly competitive market. In 2002, production was being shifted to China, where Quanta hoped to realize a 10 percent reduction in costs. Plans called for an $18 million investment in plant improvements in China, part of the company’s goal to reach $10 billion in sales from operations in China and Taiwan by 2004. In the years ahead, analysts maintained, Quanta’s biggest challenge consisted of keeping its lead as growth in the notebook market declined, reaching the same saturation point experienced by makers of desktop personal computers. Prices of notebooks were expected to fall, and consequently, profit margins were expected to shrink, giving Lam a considerable obstacle to surmount if he hoped to retain his title as the Laptop King.
Quanta International Ltd. (British West Indies); LINKO Computer GmbH (Germany); Access International Co.; Quanta Storage Inc.; Quanta Display Inc.; Quanta Investor Inc.; Advanced International Investor Inc.; Quanta Network Systems Inc.; QCE Computer B.V. (Netherlands); Quanta Manufacturing Inc.; Quanta Service Inc.; Quanta Computer USA, Inc.; Q-Lily Computer Inc.; QCH Inc.
Solectron Corp.; Celestica Inc.
- Lam starts Quanta with $900,000 in capital.
- The company’s first production facility is opened.
- Dell Computer becomes a Quanta customer.
- Quanta converts to public ownership.
- Quanta becomes the largest manufacturer of notebook computers in the world.
“Barry Lam,” Business Week, January 14, 2002, p. 61.
Gore, Andrew, “Apple to Polish PowerBooks; New Line to Be Developed by Taiwan PC Manufacturer,” PC Week, October 16, 1995, p. 39.
“Hitching a Ride on the Wireless Web,” Business Week, August 7, 2000, p. 58J.
Hung, Faith, “Compaq Signs Major Laptop Deal with Taiwan’s Quanta,” Electronic Buyers’ News, July 10, 2000, p.4.
——, “Quanta Holds Course in Turbulent Times—EMS Provider to Make Headway Where Others Have Foundered,” EBN, December 17, 2001, p. 48.
“Laptop King,” Business Week, November 5, 2001, p. 48.
“Quanta Computer Obtains iMac PC Orders from Apple,” Taiwan Economic News, December 7, 2001, p. 46.
“Quanta’s Quantum Leap,” Business Week, November 5, 2001, p. 79.
“Quanta to Serve As Sole OEM Supplier of Notebook PCs for Gateway,” Taiwan Economic News, December 19, 2001, p. 13.
Tänzer, Andrew, “Made in Taiwan,” Forbes, April 2, 2001, p. 64.
—Jeffrey L. Covell