Taiwan's companies are entering an era of lower gross profits, but a lot of David-sized firms have achieved stunning results. These firms are not heavily capitalized, nor are they mover-and-shaker transnational companies. But they are soundly structured and well managed. In order to identify these somewhat obscure "pearls" scattered among various economic sectors, China Credit Information Service (CCIS)-which annually announces its list of Taiwan's Top 5000 firms-decided that this year they would not just keep on polishing the crowns of the well-known big firms, but would focus instead on an intriguingly original "Survey of Golden Brick Companies." From among the Top 5000, they first identified 2600 firms that are not publicly traded, and chose from among this group those companies that show the most promise.

Panning for gold

To make sure that they found only up-and-coming firms that would be worthy of attention, the selection criteria were very strict. First, besides being headquartered in Taiwan, firms could not be listed on the stock market, traded over the counter, or have made any public share offering. In addition, revenues for last year had to be at least NT$800 million with at least 20% growth over the previous year, while after-tax profits had to be at least NT$100 million, with a net profit rate of at least 10%. Finally, the firm's earnings per share (EPS) had to exceed NT$4.

CCIS president David Ta-wei Chang recalls with amusement how the survey team thought the criteria would be too tough, especially considering that only 34 of the 1800 listed firms in the Top 5000 had an EPS of over NT$4. They little expected that ten firms would meet all the standards.

Little-known leaders

Although few people have ever heard of the vast majority of the companies to make the list, in their respective specialized fields they are all leading names. For example, Moxa Technologies, which is at the top of the board, got its start 20 years ago manufacturing industrial-use serial communications products, and thereafter sold its own brand in Taiwan and overseas. It is now one of the world's top three manufacturers of serial device servers. Second-ranked TMC Metal specializes in recycling waste metals, and they are not only popular with many high-tech companies in Taiwan, but they also have cooperated with organizations in the US, Germany, Belgium, and Japan to do the R&D to create "pollution-free technology" to reclaim valuable metals. As environmental consciousness rises around the globe, the company's prospects look brighter than ever.

Many other companies to make the list, including Ho Shing (or HS) Machinery, Optoma, Ruentex Industries, Chimei-Asahi Corporation, and the Eagle Eyes Company, have been innovators in products or operational techniques. Tenth-ranked Meishih Taren, meanwhile, is the only service-sector firm. Since being established three years ago, its coffee shop chain-known as 85°C-has swept the market with its promise to deliver "five-star indulgence at everyday prices." By the end of last year it became the king of coffee-and-cake shops in Taiwan with a 30% market share, surpassing even Starbucks (23%).

Focus and creativity

These ten companies have all performed brilliantly when it comes to the financial numbers. For example, both Moxa and Meishih Taren enjoyed EPSs of over NT$20 last year, whereas the globally renowned Taiwan Semiconductor Manufacturing Company had an EPS of only NT$4.93. Broadly surveying the successful experiences of these firms, David Chang points out: "What they all have in common is that they stay focused on their core business activities, and take creative approaches to managing their own brands. Also, they all found market niches and then successfully broadened their operations from there."

Take for example Eagle Eyes, which specializes in the manufacture and sale of automobile headlights. This was always considered a "greasy hands" industry in the past, but this firm has gone after the specialized markets for customized vehicles and replacement parts for high-end cars. They can now supply headlights for over 8000 vehicle models, including Mercedes Benz and BMW, with appearance and quality in no way inferior to original factory parts, but at prices 20-30% lower. Besides selling in the Taiwan market, the company has also received quality certifications in the UK, Germany, and US, and markets its products worldwide.

Another example is Optoma Technologies (capitalized by Coretronic), now the number-one brand name for digital light processing (DLP) projector equipment in the world. The company has made repeated innovations, including the first all-in-one combination projector, DVD player, and stereo and the first projector with photocatalyst air filter functions. Including overseas subsidiaries, last year revenues were roughly NT$10 billion. Meanwhile, Ho Shing has focused on the industrial sewing machine market. It has developed a number of products, including ones using eddy-current electromagnetic motors and servo motors, a far cry from the clutch motors of the early days. The company sells overseas as well, and is now a designated supplier for famous firms like Juki, Brother, and Pegues.

As David Chang analyzes the situation, "Taiwanese manufacturers often get started doing OEM or ODM, but we discovered that the vast majority of the firms that made our list have their own brand names. Developing your own brand will not get you 'easy money' in the short term like manufacturing for someone else will, but in the long run manufacturing for other people's brands can only yield narrow profits within a range set by those people. You can only earn high profits with your own brand and continuous innovation, in which case there will not be any ready substitutes for your products either. The success of these ten firms is the best evidence."

In these tough economic times, with rising costs for energy and raw materials, these nearly invisible companies scattered in various corners of Taiwan have been quietly, step by step, achieving brilliant results swimming against the tide. They are like "golden bricks" discovered by panning in a river. Their success has not been easy, but they still offer lessons others can learn from. Even more, they are the hope for Taiwan's economic future.