World's cell phone leader keeps alert

Almost everyone in Taiwan uses cell phones, but few know that one-fifth of the world’s cell phone keypads are made by Taiwan’s Silitech Technology Corporation in Tamsui, Taipei County. According to the Commonwealth monthly, the five largest cell phone makers are all Silitech’s customers.

Becoming the largest supplier

Located in the countryside where global positioning systems (GPS) are ineffective, Silitech has nevertheless grown to be the largest supplier of cell phone keypads in the world. Defeating its top three Japanese competitors (ShinEtsu, Polymatech and Sunarrow), the company grabbed 21 percent of the global market share in 2009. With steady profits, Silitech’s stocks have reached record earnings of NT$6.5 (US$.20 cents) per share for five straight years.

Silitech, originally named Silitek, was founded in 1978 to make rubber keypads for calculators. In 1995, Silitek started researching and developing cell phone keypads, a market dominated by Japanese manufacturers at the time. In 2002, a new and independent company called Silitech was formed to take over the rubber department and Silitek merged with Lite-On Group.

Commonwealth reported that Silitech was not the first Taiwanese company to enter the cell phone keypad market, however, its success and reliance on their “talent bank” makes them unique. The majority of Silitech’s mid- to top-level executives came from Texas Instruments and Lite-On Group. Its success could also be attributed to the company’s aggressive engagement in R&D which has made them the leader in their field. Unlike other companies, once they began making money, they did not focus on constructing an impressive corporate headquarters, but rather, Silitech spent its money on R&D after its stocks rose to NT$200 per share.

Business secret: low turnover of personnel

Cell phone keypads are not a high technology sector by nature, but rather the complicated engineering of materials. The leading firms are the ones with more experienced professionals, and “the biggest advantage Silitech enjoys over its competitors is a lower turnover of personnel. Experienced senior engineers stay with the company. The passing of experience from seniors to newcomers is easy,” said Chuang Hong-wen, a deputy manager with Silitech.

In just six years, Silitech has become one of the full suppliers to cell phone keypads for Nokia, which annually sells more than 400 million cell phones. About one-third of Nokia’s cell phone keypads are manufactured by Silitech.

According to International Data Corporation, a well-known market research and analysis firm, the global cell phone market grew 11.3 percent with total quarterly sales of 325.3 million units in the fourth quarter of 2009. Nokia gained the top spot shipping 126.9 million units and a global device market share of 39 percent, followed by Samsung (68.8 million units and 21.1 percent market share), LG Electronics (33.9 million units and 10.4 percent), Sony Ericsson (14.6 million units and 4.5 percent) and Motorola (12 million units and 3.7 percent). These manufacturers accounted for almost 80 percent of all mobile phones sold at that time.

Samsung and LG of South Korea are the largest cell phone makers in Asia, and the second and the third largest in the world. It is extremely difficult for a Taiwanese business to be part of the supply chain for Korean cell phones. However, Silitech has done so.

Ready for the worst case scenarios

The speed of introducing new cell phone models by Samsung and LG is far faster than their competitors. This creates a lot of pressure for their suppliers because they have to modify the tooling in a very short period of time.

The big European and American cell phone makers would usually give Silitech at least three days from tooling modification to sample inspection, while Samsung and LG only allow one day to finish the process.

Silitech is ready for the challenge. It keeps itself alert, mindful of solutions to deal with the worst case scenarios in developing new products and managing new growth in the company, observed Commonwealth. This ability to adapt will become increasingly important as more people switch to touch-screen smart phones.