Varitronix cuts cloth according to the client
DIFFERENTIATING itself from mass commercial liquid crystal display (LCD) manufacturers, the research-based Varitronix calls itself an 'engineering boutique'.
Although Japanese manufacturers cornered a sizeable share of the mass consumer market, they left the small industrial orders to the few local custom-made manufacturers such as Varitronix.
Managing director Chang Chu-Cheng said: 'We do not just acquire a technology and then mass produce it. We are rather like an engineering boutique: we devise technologies for whatever specific requirements you have.' Analyst from Sun Hung Kai Research, Lawrence Chan, said that despite competition, Varitronix held a secure position owing to its stable international client base.
Although foreign competitors produce better quality, Varitronix offers mid-range quality at a reasonable price.
Among its local competitors, even Yeeno aims at the consumer market and few follow the rigorous custom-made industrial line.
Varitronix said that it was not threatened by new technologies being developed in the field, spurred on by cheaper component parts.
On the contrary, it increased the demand for quality and reliable monochrome LCD displays to cope with more complex and powerful machines, and to reduce reading cumbersome manuals.
'As technology becomes more complicated to operate, the demand for LCDs is expected to increase because of the need for more man and machine interaction,' Mr Chang said.
Improving the resolution of colour LCDs available currently through screen printing was being researched, but developments were hindered by the tightness of raw materials from Japan, he said.
He disclosed that new research plans were under way for the projector market, but research on ferro-electric had been put on hold temporarily, owing to client GC-Marconi's performance results.
While Canon in Japan was developing ferro-electric for its fast switching video application, it had concentrated on its energy saving memory application.
The introduction of a new wireless radio version of the hand-held CIT terminal, to be discussed with the Royal Hong Kong Jockey Club in the middle of next year, is expected to raise some eyebrows.
The obvious advantages of the more expensive radio version will be its mobility and wide-ranging applications to receive and send other types of information.
Analysts noted that CIT sales were small though plans were under way for international applications of the new telebetting terminal in Australia and Malaysia.
The company intends to augment the labour intensive component of products finished in Hong Kong by tripling the floor space of one of its Shawan sites to 70,000 square feet.
In addition, land rights are expected to defer heavy capital investments for expansion plans for the Heyuan factory, which will be embarked on subsequently. The unit began production in February.
However, a shift to the mainland, where most of the production is based, was unlikely because skilled workers, mainly in the research and development department, would be unwilling to relocate, he said.
In anticipation of the trend for cleaner rooms to meet higher resolution displays, making the switch from multi-storey to high ceiling low-rise plants would be necessary if Varitronix's products were to surpass the looming saturation point.
'To make further improvements in our multi-storey buildings in Hong Kong will be slightly harder,' he said.
'Despite the facilities for anti-dust clean rooms, up to a certain point, it will not be possible to improve any more,' he said.
'In order to meet the future trend for higher resolution we need to make cleaner rooms,' he said.
Higher-margin production will emerge as a result of doubling the land space to 19,368 sq ftin the new, low-rise factory in Tseung Kwun O when it is completed in three years' time at a cost of $150 million.
With economies improving in Europe and America, Mr Chang anticipated demand for LCDs to exceed last year's.
Orders had been stable and were expected to grow steadily, he said.
However, both Varitronix and analysts expect a conservative profit growth this year.
Mr Chang said the temporary disruption in moving the factory to Heyuan, because of the expansion of the Shawan plant, contributed to running the unit at a lower capacity during the first half of the year, but he expected profit growth to be higher in the next half-year.
Sun Hung Kai forecast $163.8 million profit in 1994, rising slightly to $211.3 million in 1995.
Although analysts differ over the counter, they agree on its stability with a low debt rate and a recently issued convertible note worth $200 million.
Sun Hung Kai recommended that buyers hold the counter because of the high share price of $10.75.