The hottest topic of discussion among foreign investors in the second half of 2006 was whether Quanta would become HonHai's next acquisition target.

“Quanta is not for sale!” emphatically states Michael Wang. This is how Wang, who took over as president of notebook computer giant Quanta in mid-June, squashes the rumors whenever he addresses corporate figures or media.

Michael Wang is a 1988 graduate of National Chiao Tung University with a degree in electrical engineering. As one of the company's “founding troika” – along with Barry Lam and C.C. Leung, both students from Hong Kong – Wang has been instrumental in shaping Quanta into the preeminent electronics firm it is today.

Unlike the other two members of the founding troika, who speak Cantonese-accented Mandarin and present the withdrawn demeanor of a typical engineer, the naturally outgoing Wang speaks to the hearts of American clients and Taiwanese suppliers alike in fluent English and Taiwanese. Rising before six each morning to head to the golf course, Wang's nearly professional level golf skills are another unique weapon he uses to secure customer orders.

“Whenever clients that play golf come to Taiwan they specify that they want to challenge Michael,” says Max Fang with a touch of awe in his voice. Former regional procurement director for Dell Taiwan, Fang was the first captain of the famous Little Tigers golf team composed of members of the Taiwanese high-tech sector.

Despite 2005 operation revenues of NT$479.2 billion, second among privately-held manufacturers behind only HonHai, Quanta's growth in 2006 lagged behind that of competitors ComPal and Wistron. Meanwhile, the company finds itself in danger of giving up its second-place position among private manufacturers, which it has held for four years running, to Asustek. Despite these challenges, Wang – obscured all these years while Lam held the spotlight – has chosen this moment to stand up and take over the helm at Quanta. Standing on the steps in front of Quanta company headquarters in Taoyuan's Linkou with a warm smile on his face, Wang agreed to grant CommonWealth an exclusive interview. Wang likened technological progress to fire and compared corporations to bulls with flaming bales of hay tied to their tails, their horns affixed with sharp knives (an effective “blitzkrieg” battle technique in ancient Chinese history), charging inexorably forward as the fires blaze away. Wang also exhibited great candor in discussing Quanta's future development and strategic positioning: 

Q: It seems like a long time since the PC industry came up with a killer ap. As a notebook computer heavyweight, what trends do you foresee in the high-tech industry for 2007?

Wang: First is Microsoft's new operating system, Vista. The professional edition is already available, and the home edition is about to be released early this year. This can be expected to bring about a wave of new PC purchases.

Windows hasn't introduced a new operating system in a long time. Previously they rolled out a new version of their OS around every three years, but since the introduction of XP in 2001 it's taken them until 2007 to launch a new edition. That's a long time, so I'm sure we'll see some demand stimulated, and this is why we'll see good developments in the PC industry this year.

In the Internet realm, after Web 2.0, it's a peer-to-peer era. Individuals create goods, everybody shares, and everyone creates value together. This is a new business model. It used to be that on the Internet you just took whatever people gave you, but now it's a whole process of sharing, which creates a new paradigm.

Meanwhile, entities like Yahoo! and Google are very seriously, resolutely going after the telecoms, including mobile phone and telephone companies – they're all shaking in their boots!

These days a lot of vendors are introducing hardware they claim can be used for calls under the WLAN environment, but this actually touches upon a whole host of technical, compatibility, and security issues. Right now this power is quite diffuse, so they (telecoms) won't be displaced that soon. But the alarm has been sounded.

Sounding the Alarm

Another area is IP content. Once network links are established, content becomes a vital added value. TiVo (the US-based DVR pioneer) has done pretty well and is a good content provider. The key in this sector is looking after consumers' needs.

Next is the rise of the GPS (global positioning systems) industry. Google Earth can do incredible things. Once it's linked up to a location base, all portable devices will not only show you a clear map, you'll even be able to see the actual restaurant you're going to. So location base service will also become a huge industry in the future.

Then there's WiMAX, which can overcome issues such as the penetration of the 802.11 Wi-Fi standard, bandwidth, and transmission rate. So WiMAX is a very, very important technology for future development with tremendous potential.

Lastly, I want to mention that we don't just need to see product and technical issues, as future challenges will not be about resolving the supply chain but the value chain. So all the products and technologies we just mentioned will come down to the ultimate objective of technological development, which is creating value – value that people need and demand.

Q: What products do you believe will manifest this value in the future? What are the core products of future technology in our lives?

Wang: It's really a question of “a part of me in you, a part of you in me.”

Before, with 3C (computers, communications, consumer electronics), everyone was divided into separate camps. But since 2000, what we have actually seen is the integration of the 3C realm.

So the real technological development of the future is application-driven integration.

Q: What kind of pressure is a corporate executive under from 3C integration, and what is the strategy for coming out on top?

Wang: There's always pressure, but we like pressure, because it's our motivator for growth (laughs). Why was (Chinese historical figure) Tian Dan able to recover lost territory for the realm? Because he used the blitzkrieg of “fire bulls.” Fire bulls were bulls with their tails literally set on fire, released in a frenzied headlong rush. So pressure means barreling forward!

Technological progress is like that fire, and we're like those bulls, rushing forward as soon as that fire is lit! Otherwise we'd get burned (laughs).

Taiwan's real competition comes not from within Taiwan itself but from the world's top competitors. Frankly, Taiwan's biggest competitor is Korea. If you want a name to go with that, it's Samsung.

Whether it was a mob mentality or misguided decision-making that caused it, Taiwan is fortunate that so many companies got into the TFT-LCD panel industry, which has kept Taiwan's notebook industry from losing the market. If we hadn't invested in LCD panels, Samsung and LG could have been in position to go to Dell and HP and say, “If you want to buy LCD panels, then you'll have to buy notebooks from me!”

Retaining the PC industry helped sustain and bring along IC manufacturing, design, and companies making other parts and components, like power supplies. So that's the result of competition and hard work among all concerned parties. It's like someone was looking out for Taiwan.

Of course, Taiwan doesn't rule out future integration that would result in a handful of big companies. That would be a good thing. So I think the current overall economic development of the industry is quite good for Taiwan.

Q: What is Quanta's strategy going forward, given the trend toward 3C consolidation and Korean competition – especially with margins diminishing and you taking over the helm?

Wang: I didn't take over the helm. I just work here (laughs).

Our strategy is quite simple: to make notebook ODM our foundation, and based on the foundation of the Quanta Computer, Inc. Group, to develop vertical integration.

We're not looking to achieve blanket vertical integration, but to pick and choose. Take molds for instance. We don't completely refuse to buy anything from outside suppliers. In principle we make half of them ourselves and buy the other half from HonHai, because we've always had a good relationship with HonHai. Of course, we also have other suppliers.

With vertical integration we can develop our EMS (electronic manufacturing services) very quickly.

Why do customers go to HonHai when they're looking for an EMS partner? HonHai offers comprehensive vertical upstream/downstream integration, so customers feel good about going to them for one-stop shopping. That's the “cluster” concept.

For Quanta's value to climb further we have to move to the SSDMM (System Solution Design Manufacturing Move) we've recently come up with. In a nutshell, system solution is how we are positioning Quanta's value. We need to raise our game from single-product to system solution supplier.

But system solutions inevitably touch upon sales channels and branding. That causes conflicts with clients, right? And that's why we spin off certain solution-based operations.

In addition to six notebook business units, Quanta currently has seven new business units, namely handsets, multimedia, servers, storage devices, OLPC (US$100 computer), automobile electronics, and family entertainment (including TV).

Starting this year, over the next three years some of these seven new business units will be spun off as necessary to establish new, independent companies.

Meanwhile, we'll absorb outside companies through mergers and acquisitions for quick and effective integration with our R&D or marketing resources, and we'll consolidate them with our spun-off independent companies. These independent companies can also have their own IPOs in the future. These independent companies won't fly our colors, but they'll have the huge support platform of Quanta Computer, Inc. backing them.

Starting this year you'll see us make some moves.

Q: So I take it that Quanta will have an independent Seven Dwarves?

Wang: Not quite (laughs). It's not a set number, but decided by need. Besides being big you have to be good… and strong.

Q: What are your views on competitors like ComPal and Wistron outpacing Quanta last year in terms of growth rate, and Asustek passing you in revenues?

Wang: Since you mention revenues, it's key to reach a certain level. If you're only doing a few billion or tens of billions in NT dollar sales, there is a limit on how great and powerful you can be, because you lack big enough muscle. But once you get past the NT$50 billion point there isn't all that much difference between NT$80 billion, 100 billion, or even a trillion, because it's just an issue of scale. For me, besides being big I think it's important to be good, and strong. In other words, where is your value? Since taking my new position I haven't lowered our drive for the top line, but I'm more interested in our performance in terms of the bottom line (profitability). This is more about how much we really make, what I say to our shareholders, and where Quanta's value is.

We've been the world's biggest notebook manufacturer since 1999. ComPal, Inventec, and Wistron all showed 40 percent to 60 percent growth this year (2006). Of course, we have to give credit where credit is due, but they were already two years behind us. We recorded over 100 percent growth in 2004, so we're standing alone on high ground while the others are running up the slope below us. You can't judge the race based on just one year – you have to look at it long term. And we're going to remain in the lead, maintaining a thirty-odd percent global market share.

Are we going to chase after even higher market share of 40 or 50 percent? We'll try hard, but it's not easy. You've got to look at it from the customer's perspective. Why should he give most of his business to you? He has his own considerations, and customers all like the feeling of being in control. We need to satisfy that need of theirs, too! (laughs)

Everyone plays a different role. Our top-line growth was relatively poor this year (2006), but our bottom line will be better than last year! Does Quanta have the drive and ambition to become a trillion-dollar (NT dollars) corporation? Of course! But that's not our main objective.

Q: Under your plans for continued spin offs, what will the Quanta home base be like? Will it be a holding company?

Wang: No, it won't. It will stay focused on ODM, plus EMS business. The EMS business is huge. The worldwide EMS market is at least a US$50-60 billion industry, and it's poised to surpass even 100 billion (USD). So there's tremendous room for development in this sector.

So for Quanta the ODM and EMS segments are two businesses with great sustainability and potential.

Q: How come, when Quanta was getting ready to enter the EMS business dominated by HonHai, rumors were circulating about a Quanta-HonHai merger?

Wang: Let me formally restate: Quanta is not for sale! This much is certain. No doubt about it. Just take this R&D building we're in here. This is also our headquarters. If Quanta were ready for sale, what would we be doing messing around with this? This building makes our commitment clear – our commitment to future growth.

Another way of looking at it is, HonHai is big, and so are we. The two of us combined together would actually be too big. That would intimidate customers, who would divide their orders up to others. So the synergy wouldn't be there if the two companies merged. Plus, our corporate cultures are different.

Quanta Is Our Baby

Q: How has your work or life changed since taking over as company president last June?

Wang: Nothing about my work has changed. Actually, everything is about the same since I took over as chief operating officer in 2004.

Barry (Lam), and C.C. (Leung, vice chairman), and I have always been a closely-knit triumvirate, so no matter how the job titles change around it has little effect on what we do at our jobs.

Of course, the pressure is greater, because it becomes your responsibility, so that's how I think of it. But Quanta has always really been like a baby to me – my baby with Barry and C.C.

Q: That's pretty amazing. The three of you have always gotten along well from the time you founded the company until now?

Wang: We're all pretty traditional (laughs).

Each has his strengths and weaknesses. We happen to complement one another very well.

Q: How do you take care of yourself?

Wang: I take health very seriously. The answer is eating less and exercising more. Because once a person gets fat all sorts of ailments start cropping up. Companies are the same way. They have to stay slim, which in business means costing down. So running a company is just like approaching life. I just try to eat less and get more exercise, and when I get a chance I'll play a round of golf. It helps keep me in a good mood, and doing what you enjoy is all that matters!

Just think positive and you can be happy. Look on the bright side of all things, that's all.

(Compiled by Jimmy Hsiung) 

Translated from the Chinese by David Toman