Taiwanese firm says it can raise margins to 3pc in two years at new monitor arm TPV Technology aims to raise net margins at its newly acquired Royal Philips Electronics' monitor business to about 3 per cent in one or two years from nearly zero, TPV chairman Jason Hsuan Chian Shen says. The monitor business TPV acquired from the Dutch electronics giant for US$358 million was 'marginally profitable', said Mr Hsuan yesterday. 'We aim to improve the net margin of Philips' monitor business. We hope to make this US$2 billion-a-year business as profitable as TPV.' TPV would achieve this through economies of scale and by consolidating supply, he said. After the monitor business was fully integrated, it would yield annual revenue of US$2 billion, he added. Clement Wong, an analyst with SBI E2-Capital, said: 'Definitely, the net margin of the Philips monitor unit will improve. Running factories in an efficient way is a strong point for TPV.' However, Mr Wong said TPV's overall net margins would fall this year as a result of the acquisition - which will take three to six months to integrate - and growing competition in the sector. Kim Eng Securities forecasts that TPV's net margin will fall to 2.4 per cent this year from last year's 2.9 per cent for the same reasons. 'TPV is under threat from aggressive LCD monitor-makers such as Foxconn Tech,' wrote analyst Mark Po Ka-kit in a report. 'We expect a 9 per cent earnings dilution in 2005 after completion of the acquisition of Philips' monitor operation.' Fierce competition eroded profit margins for TPV's two core products - CRT and LCD monitors - by 19 per cent and 46 per cent, respectively, between the third- and fourth-quarter results last year, according to Mr Po. 'Any sharp rebound seems unlikely in the first and second quarters of 2005,' he added. TPV's annual report for last year said restoring profit margins would be a challenge this year. Mr Hsuan hopes the acquisition, which will push TPV ahead of Samsung Electronics to become the largest display maker in the world, will be completed in July. The purchase of Philips' monitor business did not include the brand name. TPV bought the unit's manufacturing, research and development, and logistics facilities. 'The greatest challenge is human. How Philips and TPV can work together as a team,' said Mr Hsuan. Mr Po said he was 'not that positive on the acquisition'. 'Philips and TPV have common customers, who may shift to other suppliers to avoid relying too much on one supplier. The fact that TPV doesn't have the Philips brand means it will face pricing pressure.' Mr Wong was more optimistic, saying the acquisition would be positive in the long term. Profits would rise as TPV had expanded its television business, as LCD sets were priced several times higher than LCD computer monitors, he said. LCD television sets form 90 per cent of Philips' monitor business. TPV would ramp up production of LCD televisions to between 300,000 and 400,000 this year from 45,000 sets last year, said Mr Hsuan.