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Issued on : 27-08-2002
Diamond in the Rough – Special Report on Taiwan’s DRAM Module Vendors (Excerpt)
ADATA – Pioneer That Gets an Early Head Start

ADATA Technology Co., Ltd., Established in May 2001, recorded a NT$3.77 EPS against NT$200 million share capital in the first year after becoming operational. The company’s sales target for 2002 is NT$5.8 billion, which would translate into a NT$13.05 EPS against an expansion in share capital to NT$232 million. EPS amounted to over NT$8 and NT$2, respectively, in the first and second quarters of the year.

Simon Chen already ranked alongside three others as Taiwan’s “four kings” perceived as holding sway over the DRAM module industry soon after he started his own business in 1993. However, he was really far from an expert when he set out in the DRAM industry. His perseverance over nearly a decade has certainly paid off. He has adhered to his own beliefs unwaveringly in dealing with business partners and running the business itself.

Of Simon Chen’s personal traits, the most talked about is his duly flexible approach that has enabled him to forge a sustainable partnership with DRAM suppliers and his clients alike. Despite being a new entrant that started out just over 14 months ago, ADATA is already ranked alongside other industry veterans among the top four pricing leaders. This achievement attests to Chen’s extraordinary capacity for building and enhancing brand-name awareness.

Simon Chen stresses that he devised a double-brand strategy for ADATA the day it was born. “ADATA” and “V-DATA” carry different price tags given their difference in quality appeal. For a DRAM module company, Chen believes, the value of brand-name awareness can never be overemphasized.

The essence of Simon Chen’s business philosophy can be epitomized as “give” and “take”. Most of his peers tend to get hold of one single supplier, but Chen favors a far-reaching network of partners. He has been able to establish close connections with Samsung Electronics and Hynix of South Korea, Elpida Memory of Japan, and Taiwan’s Winbond, Powerchip, Nanya and Vanguard. He never hesitates to take the lead in extending his goodwill and giving support to both his clients and suppliers. It has paid off well. “Trust” has been the foundation for Chen in starting his own business and subsequently key to his success.

With future expansion in mind, Simon Chen has looked beyond DRAM modules and diversified to flash memory and TFT-LCD areas. The choice of the TFT-LCD monitor front that represents a major departure from IA storage products, Chen says, has been made with a view to its prospect of future growth. Such a strategy is definitely reminiscent of his launch into the DRAM module industry nine years ago. He believes that his well-rounded experience and a high-caliber management team will once again lead to success on the new frontiers.

Simon Chen’s Profile – An Easy-Going, Down-to-Earth Entrepreneur

Simon Chen, who has set out from humble origins, always keeps a smile on his face. His friends believe Chen’s success as an entrepreneur has much to do with his easy-going personality. Whenever a friend has something to be happy about, Simon Chen is always the first one who calls to say “congratulations”! As most people will find it fairly easy and natural to call him a friend, Chen certainly stands out from his peers in the DRAM module industry.

Simon Chen’s career path has not been lacking in dramatic turns. He set out as a product engineer at the Electronics Research & Service Organization (ERSO) of the Industrial Technology Research Institute (ITRI) before joining Winbond. Nine years ago, he launched into the DRAM module industry by starting a trading company with a view to accumulating capital. Luckily, Chen was able to cash in on a booming industry as an explosion at Sumitomo in 1995 led to undersupply. He not only was ranked as one of the “four kings” in his line of business but also laid a solid foundation for even more vigorous expansion going forward. The more than nine years Chen has spent in the DRAM module industry spans such names as Hui Lien, Twin Best and TwinMOS before ADATA was born. Success is certainly the fruit of any number of failures. In seeking to build his own career, Chen has been fully aware of the importance of putting together a competent management team all along. This awareness was fully reflected in the May 2001 establishment of ADATA. Both management and shareholders were carefully chosen, alongside a well-thought decision to diversify to other promising product lines such as flash memory cards.

To be sure, trial and error is crucial to surviving and prevailing in the DRAM module industry. Of the “four kings” crowned for the industry, only Chen remains an active figure in the present-day market. He is ready to take ADATA to higher ground and to give birth to a new empire of his own.

Simon Chen - Youngest of the “Four Kings,” an Emerging Force to Reckon With Resolute on launching into DRAM module industry

I had got involved in virtually all the sub-segments of the semiconductor industry as early as 16 years from now. The memory segment was the only exception that was indeed totally strange to me. Against a booming DRAM industry on the world arena, it was by contrast no more than a fledgling line of business in Taiwan at the time. Still, I decided to venture into it because I foresaw great potential therein. That was precisely the way I am. I would be bold enough to take on a new frontier with great potential even though I may know little about it yet. Nine years have elapsed. With all other logic products taken into account, however, DRAM is indeed the only viable area for Taiwan to venture into module business. Given its nature as a widely used commodity, it is only natural and sensible for DRAM module companies to flourish in Taiwan that happens to command a superior strategic position.

There are only two winners: “Pioneer” & “Terminator”

Not different from other lines of business, there are only two winners who can prevail in the DRAM module industry. You have to be either a pioneer who leads the path for others to follow or a terminator who puts an end to competition. Only with a full understanding of this fact can one expect to maintain an enduring competitive edge. ADATA knows perfectly that it has yet to qualify as a terminator, so it must work harder on outrunning others. One fine example is that ADATA was the first DRAM module supplier that started volume production of DDR400s in step with the new product launches by domestic and foreign chipset companies. ADATA has once again won extensive recognition of its speed-to-market superiority.

Minimizing risks: professionalism, competent staff, credibility, readiness to give

All DRAM module companies must cope with the following risks: order cancellations, excessive number of competitors, account receivable defaults and excessive inventory. Therefore, one who knows not enough about the industry runs a higher risk than others. In contrast, the risk is certainly much lower for a seasoned veteran. Minimizing risks certainly requires expertise. Furthermore, a competent management team is equally important; one must find a group of good people who can work hard together. In this line of business, what really counts is long-term partnership. I have held that belief all along. Credibility is both the foundation and key; one must also be willing to take the initiative to “give” when the need arises. Of course, the importance of seeking out clients and suppliers who share the same values can never be underestimated.

Account receivable/inventory management is the most formidable challenge

Transactions of DRAM modules are largely done in cash. The industry’s reasonable average period for accounts receivable to be collected should be around 7-10 days. ADATA makes it a point to keep the average for its clients at not more than five days. In terms of inventory management, an average of 5-7 days is kept when prices are stable. This will be reduced to three days when prices are under pressure; up to10 days of inventory becomes the norm in the event of an upward trend. As such, ADATA gives top priority to keeping a tight lid over accounts receivable and inventory management so as to keep risks to a minimum.

Main consideration for migrating to a new product line

How to optimize its limited resources is the foremost consideration when ADATA weighs the viability of migrating to a new product line. This concept can be approached from the perspectives of clients as well as supply sources. The best-case scenario is for the company to enjoy both repetitive orders and easy access to supplies. The big picture is certainly not to be overlooked. ADATA must determine if a certain product is suitable for the company and if it promises potential of growth and high gross margins. At any rate, ADATA is ready to take on all products that can easily find buyers and sellers as it commands reliable access to supplies as well as a solid distribution network.

Keen eye for choosing products, brand-building

ADATA has decided to launch into flash memory cards on the view that they also account for another commodity item in the semiconductor sector. The timing of entry may seem a bit late but is likely to prove perfect. I think flash memory output is set to exceed DRAMs in value terms in 2006-2008, so now is indeed a perfect time for our getting prepared. On the other hand, we also chose TFT-LCD monitors as the sector continues to promise solid growth prospects. Other than the request of our clients, we decided to get involved in the TFT-LCD monitor sector also because of its growth prospects and presenting a business mode entirely compatible with the company.

ADATA – Fast-growing new brand that has risen to the top

ADATA has sped on a fast track in building up a viable brand-name. In just 13 months, ADATA’s pricing is already ranked on a par with PQI, Panram and TwinMOS. The key lies in the company’s early decision to promote its own brand-name. Upon ADATA’s establishment, a double-brand strategy was devised for its DRAM module products, with “ADATA” and “V-DATA” meant to differentiate the high and low ends of the spectrum in both pricing and quality terms. “ADATA” is the company’s brand-name for its flash memory products and TFT-LCD monitors, complemented by the company’s taking in OEM orders when it sees
fit.
Compiled and translated from DigiTimes, Aug 27, 2002, Page 16.











 
 
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