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Top 50 Best Performing Enterprises

Electronics Waning, Five Star Sectors on the Rise


The Taiwanese companies with the most stellar business results are those able to grasp what consumers need, and they come from sectors as diverse as renewable energy, conventional industry, and the growing stay-at-home economy.



Electronics Waning, Five Star Sectors on the Rise

By Jerry Lai
From CommonWealth Magazine (vol. 421 )

In 2008 the economy went through a huge shakeup. Surprisingly, the information and communication technologies (ICT) industry, once the unchallenged champion of Taiwanese business performance, turned out to be least resistant to this economic earthquake. The number of ICT companies which made it into the 2009 Top 50 Best Performing Enterprises has more than halved. Just eleven ICT companies are still in the Top 50, the lowest number ever.

Replacing ICT in the spotlight are five star sectors – solar energy, bulk shipping, construction, precision machinery, and businesses catering to the stay-at-home economy.

The photovoltaic industry accounts for four of the Top 20 enterprises, namely Green Energy Technology, Neo Solar Power, E-ton Solar, and DelSolar. What all these companies have in common is skyrocketing revenue and explosive growth. Neo Solar Power, which was incubated by the Industrial Technology Research Institute (ITRI), moved from the emerging stock board to the main board of the Taiwan Stock Exchange in January this year. Over the past three years, the solar cell maker has registered revenue growth of a whopping 417 percent. Rarely has a company displayed such energetic growth.

Solar Power Still Hot, but for How Long?

However, while the solar energy sector is going strong, its growth is expected to slow in the future. Over the past two years supply has greatly increased as worldwide more than 50 companies got into the photovoltaic business, so that a greater number of competitors are vying for a piece of the same pie. Whether demand for solar cells and other photovoltaic systems will continue to increase largely depends on legislative measures in the United States and Europe. In the past, demand soared because European governments generously subsidized solar energy. This was particularly the case in Germany, the largest market for solar energy systems worldwide. But such subsidies will be gradually reduced or phased out in the future. If the current global economic recession is factored in, end-user demand is likely to suffer.

Contractors, Bulk Carriers Stay the Course

The construction industry benefited last year from a massive increase in government investment in public works projects. As a result 10 construction companies, mostly small and medium-sized general contractors, have made it into the Top 50. In the coming four years, the government will gradually open the tender process for NT$500 billion worth of public works projects. Companies that manage to win many of these public sector contracts can expect to continue to do well.

Huaku Development, known for its high-end residential properties, is one of the few developers that won a spot in the Top 50. During the industry boom in 2006 and 2007, Huaku launched new projects worth NT$23 billion. As a result it raked in more than NT$10 billion in 2008, posting new record highs in terms of both revenue and profits. Huaku will continue to launch new commercial and residential projects in the Neihu and Nangang districts of Taipei this year, which will put its selling power to test amid the dismal market climate.

Another industry that plays a prominent role in the Top 50 this year is bulk shipping, with such booming companies as First Steamship Group, Taiwan Navigation, Chinese Maritime Transport, Shih Wei Navigation, U-Ming Marine Transport, China Steel Express and Ta-Ho Maritime. The Baltic Dry Index (BDI), which measures changes in international sea transport prices for raw materials, fell a drastic 94 percent last year, indicating economic contraction. But because most of the bulk shipping industry operates according to long-term lease agreements, its profits still reflect the economic peak of two years ago. However, the industry is likely to face tougher times this year as sea cargo volume is expected to continue to decrease while new bulk carriers will be put into service.

Precision Machinery, Stay-at-Home Economy Going Strong

As capital investment froze globally in the fourth quarter of 2008, the output of Taiwan's machinery industry also declined. But five small and medium-sized precision machinery makers – YouJi Machine Industrial, China Steel Machinery, Cheng Ho Hsing Heavy Industries, King Slide Works, and Buffalo Machinery bucked the trend, because they make products that are irreplaceable. Not only did they post revenue growth rates of 20 to 50 percent, but they also made robust profits. YouJi Machine Industrial, a maker of electronic lathes, for instance, stood out from the pack with after-tax net profits growing 258 percent last year.

Another shimmering light amid the economic gloom are businesses that cater to the growing number of people who hole up at home, such as online entertainment and shopping, as well as delivery services. Online gaming vendor Softworld International Entertainment and game developer Chinesegamer International last year did not feel the slightest pinch from the economic recession, instead doing even brisker business, with growth rates of around 30 percent.

Meanwhile, online shopping, which has been growing at the rate of 30 percent a year, has become the new gold mine for retailers with the total output value standing at NT$300 billion. Online payment provider PayEasy and President Transnet, which runs the Takkyubin home delivery service, last year posted after-tax net profit growth of 32 percent and 58 percent, respectively.

Wistron, a leading ODM-OEM supplier for many computer brands, is the only ICT company that made it into the Top 50. Wistron bought Lite-On Technology's LCD display unit last year. And since its exposure to business notebooks and netbooks is low, the company was not much affected by the economic downturn. On the contrary, Wistron shipments grew 10 percent in the fourth quarter of 2008, and annual revenue grew 55 percent despite the sluggish economy.

A stable ranking in Taiwan's Top 50 Best Performing Enterprises demonstrates the competency of a company's management team and underlines its position within the industry.

Powertech Technology is the only company that has made it into that illustrious ranking for five years in a row. Due to the disastrous situation of the entire DRAM industry, Powertech Technology slipped to a lower rank, but with annual revenue growth of 28 percent last year and after-tax net profits reaching almost 17.5 billion over the past three years, the company still produced much better results than those of its industry peers, both in terms of business performance and share price.

Translated from the Chinese by Susanne Ganz

Chinese Version: 電子退位,看見五大新亮點