What? You Haven't Heard Of Mitac?

Matthew Miau is resigned to being one of the computer world's least-known powers. As chairman of Mitac International Corp., the former Intel engineer has built his company into Taiwan's No.2 computer maker, behind Acer Inc. But most PC users have never heard of Mitac. During the computer industry shakeout of the early 1990s, Miau pulled the plug on efforts to sell Mitac's brand-name computers and monitors in the U.S. "We weren't as daring as Acer," he says. "We lost a few million and decided to cut our losses."

At a time when the Taiwanese government wants local companies to publicize their own products, Mitac is content with the obscurity of being an original equipment manufacturer (OEM) for others. By focusing on production of PCs, notebooks, and monitors that bear other companies' brand names, Mitac has lifted itself out of the red and won contracts from some of the biggest names in the industry. Indeed, rather than pushing their own brands, other Taiwanese manufacturers might be better off with Mitac's back-to-the-future plan. "The changes in the computer industry have squeezed the room available for brand-name products," says Chen Hsiu-hsian, manager for Coopers & Lybrand Consultants Taiwan.

DEALS-A-POPPIN'. Mitac won't reveal the names of its OEM customers. But industry sources report deals between the company and AT&T, Compaq, and Apple Computer. To win this business, Mitac is providing not only design and manufacturing services but also final assembly and global distribution. That has helped Mitac become "increasingly important in the global marketplace," says Jennifer Wu, marketing research development manager with Dataquest Taiwan.

Even so, Mitac has a long way to go before it catches up with Acer, seventh among the world's PC makers. Chairman Stan Shih has revamped Acer's management, in particular giving more autonomy to overseas units. That, in addition to Shih's focus on brand-name marketing, has paid off well for Acer. In 1994, its sales topped $3 billion--compared with Mitac's $610 million.

To Mitac executives, though, Acer's success in marketing its own computers provides them with an opening. "Most of our customers are more comfortable with us than with a company like Acer, because they know we won't be competing against them," says Francis Tsai, Mitac's general manager. In some cases, Mitac even operates like a manufacturing and distribution arm of its customers, shipping goods directly to retail outlets. For example, Mitac ships PCs to Sears Roebuck & Co. outlets across the U.S. The company whose brand name appears on the computers never touches the product.

Another key plank in Mitac's growth strategy is customization. Factories in China and Taiwan handle the initial labor-intensive production of the basic systems. Then, assembly facilities in Australia, Belgium, Britain, Mexico, and the U.S. add keyboards, software, and other components to suit the needs of local customers. "It's service such as this that companies like Compaq need to have from their manufacturing partners," says Coopers' Chen.

DEFENSE VENTURE. Mitac also has the advantage of being part of a large group of companies. Miau's family dominates Lien Hwa Industrial Group, one of the biggest conglomerates in Taiwan. The group provides valuable financial backing for Mitac joint ventures and strategic alliances with both local and multinational companies. Getac, a venture with Lockheed Martin, produces defense electronics equipment. With Electronic Data Services, Mitac formed China Management Systems, a software development house.

Most recently, Miau has thrown money into semiconductors, investing in Taiwan Semiconductor Manufacturing Co. (TSMC) and Vanguard International Semiconductor Corp. Miau also formed a company that operates nine semiconductor plants in Taiwan's Hsinchu Science Park.

Much like his company, Miau has kept a low profile outside of Taiwan. But industry analysts believe that needs to change. "The company's inability to communicate with the international investment community shows a lack of sophistication," says Matt Cleary, an analyst with Peregrine Securities Taiwan. For this reason, Cleary does not recommend Mitac's stock to his international clients.

Miau acknowledges that the company needs to be more forthcoming, adding that he hopes to release details of Mitac's OEM business deals, if its customers agree. But for now, it appears Mitac's name will remain one of the best-kept secrets in the computer industry.

Before it's here, it's on the Bloomberg Terminal.