The last year of the first decade of the 21st century proved alarming for Taiwanese enterprises, but they hope the worst is behind them after experiencing their second deep recession in the past 10 years.

According to CommonWealth Magazine's 2010 Survey of Taiwan's Top 1000 Manufacturers, the revenues of Taiwanese manufacturers contracted 8.1 percent in 2009 to NT$19.6 trillion. The last time sales growth was negative was in 2001, when the dot.com bubble burst. This time, the main culprit was the global credit tsunami that engulfed the world in late 2008.

A look back at February 2009 shows just how deep the downturn was. More than 230,000 workers were on unpaid leave, and stories of companies laying off full-time employees to hire contract workers from manpower agencies flooded the media. The impact of the severe economic slump, which pummeled both conventional and high-tech sectors alike, was reflected in this year's survey. The Formosa Plastics Group's "Big Four" have been among the country's top-ranked manufacturers for the past 30 years, but three of the four – Formosa Petrochemical Corp., Nanya Plastics and Formosa Plastics – not only fell in the rankings, but also saw their sales plummet by an unprecedented 10-20 percent.

Top Manufacturers See Profits Triple

Despite the steep decline in sales, however, most companies actually saw their profits rise. The top 1000 manufacturers' combined earnings in 2009 reached NT$666.34 billion, NT$438.67 billion more than the NT$227.67 billion registered a year earlier. Their average margin was 3.3 percent, triple the 1.1 percent seen in 2008.

The results suggest that a new era in corporate management has arrived. "The ‘top line' era has passed. Now it's the ‘bottom line' era," says Walsin-Lihwa Corp. chairman Yu-Lon Chiao, referring to the new focus on profits instead of sales.

Walsin Lihwa produces 350,000 tons of stainless steel coils and sheets a year and is the world's biggest producer of stainless steel wire rods.

"In 2000, China had no steel pipe factories to speak of," Chiao says, but over the ensuing decade, local steel factories began to sprout up, spurred by China's vast domestic market and a large infusion of capital. Shanxi Province-based Taiyuan Iron & Steel (Group) Co. alone produced 2.48 million tons of stainless steel last year.

"No matter how much production capacity is expanded, it's still small," Chiao says, suggesting that over the next 10 years companies won't compete on size but rather on how agile and flexible they are.

Walsin Lihwa has actively pursued creating value-added throughout its product line, and the strategy was reflected in its 2009 earnings. Though sales fell 15.4 percent, income rose 128.4 percent, as the company remained ranked 27th in the Top 1000 list. Others in the wire & cable industry, such as Tai-I Electric Wire & Cable Co, Pacific Electric Wire & Cable Co., Ta Ya Electric Wire & Cable, and Hua Eng Wire & Cable Co., all fell at least 30 places in this year's rankings because of the adverse impact of the global economic slump.

Notebook, Auto Makers Buck the Trend

Some companies, however, thrived despite the economic turbulence. A closer look at this year's Top 1000 shows that notebooks and automobiles were the most robust sectors among enterprises in high tech and conventional industries, respectively.

In fact, notebooks were the true stars of the Top 1000. Of the top 10 companies in the rankings, six are notebook makers, led by the Hon Hai Group. The world's biggest manufacturer of consumer electronics, which formally announced it would plunge into the OEM notebook business last year, remained at the top of the list with NT$1.95 trillion in consolidated revenues. Perhaps more noteworthy, Quanta Computer jumped past state-run oil refiner CPC Corp., Taiwan to rank second for the first time in history, with sales of NT$839.79 billion.

Compal Electronics, Wistron Corporation and Inventec Corporation, also benefited from the global rush to replace desktop computers with notebooks, attaining their highest rankings ever in the Top 1000 Survey by placing fourth, sixth and eighth, respectively. According to the Topology Research Institute, their momentum will likely continue, with notebook shipments expected to increase by at least another 20 percent in 2010.

"After 20 years of perseverance, notebooks have won both fame and fortune for Taiwan around the world," says Max Fang, chairman & CEO of venture capital firm Maxima Capital Management Inc.

As former regional director of Dell Computer's Asia Pacific SCM office, Fang helped Dell buy computers in Taiwan and has intimate knowledge of the local market. He has been impressed by a number of milestones achieved by Taiwan's notebook vendors – their resilience in steering clear of the global financial crisis; Acer's ability to overtake HP as the world's biggest PC vendor; and Acer chairman J.T. Wang being ranked second in Time magazine's list of the World's 100 most influential people.

Among conventional industries, the automobile sector made impressive inroads in the Top 1000, getting a major boost from a government program in 2009 that subsidized the NT$30,000 excise tax on most new car purchases. According to Ministry of Transportation and Communications statistics, the number of new car licenses issued in Taiwan rose 28.3 percent in 2009, and carmakers Kuozui Motors, Yulon, China Motor Corporation and Ford Lio Ho all saw their revenues rise by at least 25 percent from a year earlier. Not coincidentally, they also moved up 30 places or more in the Top 1000 rankings.

Big Isn't Better

This year's list of Taiwan's top 1000 manufacturers also reveals some future trends. In particular, companies at the forefront of new trends saw their profits soar, demonstrating that competence can trump size.

Taiwan's five big TFT-LCD flat panel makers – AU Optronics, Chi Mei Optoelectronics, Innolux Display Corp., Chunghwa Picture Tubes, and HannStar Display Corp. – lost a combined NT$114.53 billion in 2009, but helped by a new wave of optoelectronic display technologies, vendors of niche products and critical components performed better than their much bigger cousins.

UBright Optronics Corporation, which led the Top 1000 with revenue growth of 372.18 percent, typifies this group of smaller upstarts. With LEDs (light-emitting diodes) replacing CCFLs (cold cathode fluorescent lamps) as the preferred backlight source in panels, the prism film used to enhance the brightness of the LEDs has become an increasingly important material. UBright, a Shinkong Group subsidiary that develops and manufactures brightness enhancement films, made it into the Top 1000 for the first time in only its seventh year in business.

The Top 1000 also saw a big group of newcomers – the TDR (Taiwan depositary receipt) gang. Following in the footsteps of Tingyi (Cayman Islands) Holding Corp. and Want Want China Holdings Ltd., which made their debut in the Top 1000 last year after issuing TDRs, another 14 TDR issuers, including Sandmartin International Holdings Ltd., made the list for the first time in 2010.

CommonWealth Magazine's list of the Top 1000 manufacturers in 2010 also points to an improving economy, boundless new opportunities and a flock of new competitors.

As Hon Hai Group chairman Terry Gou asserts, "The most critical time for change will be in the next 10 years." In an era where change has become the norm, companies' ability to change with the times will be the key to their performance in the coming decade.

Translated from the Chinese by Luke Sabatier