In 2001, when ACER was reorganising itself, 50-year-old Kuen Yao Lee managed to convince the Group Founder Stan Shih to let him take the company he headed, Acer Communications and Multimedia, independent. Today, the spin off, rechristened BenQ, is a $3-billion, Taiwan-based contract manufacturer of consumer electronics, with its own brands that fetch almost a third of the revenues. Lee, an engineer from one of Taiwan's elite schools, wants BenQ (short for Bringing Enjoyment and Quality to life) to become a big branded player in flat display panels and mobile phones. He also wants BenQ to shed Acer's low-cost image, and take on the Sonys and Samsungs of the world. His strategy: Capture the two big emerging markets of China and India. Lee was in India recently and met with BT's Vidya Viswanathan to talk about how he plans to turn BenQ into a premium brand. Excerpts:

The last time you came to India was five years ago. Do you see a very different India today?

Yes, there are more cars, there is such heavy traffic, people are getting so global. They are concerned about what is happening outside the country. Many global companies have R&D centres, call centres, and software centres in India. International banks have their back offices here. The knowledge workers are global, not just for India. There are new it education systems. States like Kerala have a very high literacy rate.

Is this exciting for you and in what way?

A new Indian middle-class is emerging. They are the major customers for it products. There is a new mobile generation here. The younger generation is also a major consumer of it products. A mobile phone is an important lifestyle product. It changes the lifestyle of the younger people. And they in turn shape the opinion of senior people. The young people are defining our lifestyle. This kind of momentum from India will push the country into a different plane in the future.

In the past two decades, computing has always been driven from the West. They are very much the consumption centre and that is how American companies like Intel and Microsoft became very dominant players. But in the past two or three years, we are seeing a shift from the West to East. The generation X in Asia is adapting to technology rapidly. For BenQ, the users of digital lifestyle technology products are generation X. So things are changing.

You want BenQ to be seen as a lifestyle product, which you said means not just computing technology but great interface technology. But Taiwan is not exactly known for design. Are you saying you will drive the Taiwanese design ethic?

Yes. However, we will not employ Taiwanese designers alone. We have a lot of designers in our company. They were educated in Germany and the United States. We also have subcontracted to design houses in London and Germany. We have a lot of Australian designers in the lab. For a global company like BenQ, we need to do our best to recruit global resources. So design from Taiwan is not important. Design from BenQ is more important.

Let me re-phrase. What will BenQ's design be?

We want a young, vivid, original and enjoyable message. We actually won six awards in a design competition held in China in October this year. This was sponsored by if, the German design society and is very prestigious. We won more than Samsung there. In Japan, there is a famous magazine called Digimoto. People jokingly call it Sony magazine and it features all digital products in Japan. BenQ is the only non-Japanese brand picked up by the magazine. Our CD Man 591 was featured there.

You said BenQ meant young, vivid, original and enjoyable. Can you give me an example of how this is translated into the product and to the logo?

We went to our designers with our theme. They came up with the butterfly idea. We amplified the wing shape of the butterfly. We chose the organic shape and the feel of a butterfly. We chose purple and pink. Purple is our corporate colour. It stands for youth, mystery, possibility and dream. Pink is just a colour of a butterfly.

Traditional it products are targeted at business. Our notebook product is called Joybook. We notice that a lot of people are using the notebook for entertainment purposes while travelling. They watch DVDs. So you need a capability to read the title, to listen to music. The idea is to employ computing power to add these features. Our Joybook displays are very unique. They are optimised for DVD watching. The sound effects are suitable for music listening.

"Young people pay more (for technology). They need to adapt to technology"

You are targeting entertainment for youth. So in spite of all these features, it has to be priced below a business notebook, right?

Not necessarily. Young people pay more. Take my daughter as an example. My wife is always complaining saying why are you buying this or that. She buys expensive handsets and changes it every six months. Their attitude to money is very different. They are very emotional about things. They need to adapt to technology. It is the same world over.

In addition to design, you are focusing on some technologies of the future. What are they?

Yes. Liquid crystal display (LCD), for example. Display is everywhere and it is also very expensive. Seven years ago we started a company called AU Optronics. It is the seventh-largest player in the world. New display can enable new products. TFT display makes this notebook possible. Good display can turn the mobile phone into a videophone and can be used for pictures or multimedia applications. We also invest in wireless technologies-cellular, wireless broadband and wireless LNA. 3G is emerging. We are delivering 3G CDMA handsets to local operators. We are also combining 3G and wireless LAN handsets. So you can move seamlessly from one network to another.

You have gone public saying you are going to take on the Samsungs and Sonys of the world? So are you going to get into what has traditionally been their market---audio systems and TVs, for example?

No, we will only be in digital products. We are launching LCD TVs (large flat ones) in India. This is digital inside, although TV broadcast is analog. But we believe that TV broadcast will move to being digital. The FCC has mandated the US move to digital TV by 2005. That will have more channels, better pictures, higher resolution and will integrate into the home entertainment management system. BenQ is 100 per cent digital.

How many markets are you in now? If you are coming to India, are you going to tailor design to the country like LG and Samsung have done?

In Taiwan, we are the second-largest brand after Acer. If you take the whole BenQ group (including recentacquisitions), we are bigger than Acer. Our priority markets are Asia, Middle-East, and Europe. Our design will mostly be global. But we have flown in lifestyle designers from Taiwan to study the mobile lifestyle here. For example, Indians use a lot of SMS, they need a larger memory size, a bigger phone book and products need to be more women-oriented. But these products will take time.

What is the vision for the R&D team, how do you measure it? Is there a difference between the long term and the short term?

We have a large R&D team. Intellectual property is most important in the long term and that is where companies will compete in the long term. American companies, for example, have given up manufacturing. So it is important to keep track of the R&D effort and convert intangible assets into tangible property. So we request a productivity of one patent per person in the team. We set up the goal three years ago and we are close to the goal. Engineers are used to that idea now. This year alone, we have filed more than a thousand patents. This is BenQ alone and not the group.

"If India has to get into manufacturing, it needs to build a components infrastructure"

For our R&D, which is near term, the business development people look at a two-year time frame. Some R&D for products is targeted at three years and beyond. That is a different mission. For the very long-term research, we join up with the university. For example, we participated in the Oxygen product launched by MIT in Boston. We also have ties with Taiwanese universities.

Is there a target for the number of products you bring out? Do you have a lot of designers?

We have a group called Lifestyle Designers. They understand the customer behaviour, understand emerging lifestyle, and find out what products can be developed in the future. They also study user behaviour and interface. This involves both hardware and software and they define the best compromise for the future. We don't put the name researcher to anyone. Everyone is an engineer. A researcher belongs in the university. We have a whole range-notebooks, memory, mobile phones, digital cameras, home servers, essentially everything digital.

You are still in contract manufacturing. Who drives the innovation there?

We are not in contract manufacturing. We design and manufacture. Our design engineers work with the customers. In some cases, we are involved from concept to manufacturing. Sometimes they have their own designers. In that model, they buy volumes-for example, half-a-million LCD displays. Some customers will not trust us because we have our own brand. So we can't work with them.

What is your India agenda in the long term? Are you going to be in manufacturing? Acer, for example, has a venture capital fund.

We get management resources in this country. Some are our global candidates. Indian managers are working for us in the US and Canada.

If India has to get into manufacturing, it needs to build a components infrastructure. For example, our mobile phone has 300 components. So India has to support most of them-PCBs, cables, connectors etc. The components factories have to be clustered within a two-hour drive. There has to be close interaction. We need efficiency. We will look at it if the government sets up special economic zones that have easy access. Taiwan is the best for manufacturing. We are also in Malaysia, China and Mexico. But we will use Indian designers, especially those that want to come back from the US. However, we will not use Indian product designers just yet.

How do you see technology panning out in the future and what is Asia's position?

Five years from now, Asia will be the largest market for technology products. China, India and northern Asia together will be the largest market. Asia will define the next generation of technology products. America and Europe define the products today. That will change in the future. Americans and Europeans will work for Asian companies.