FY2000: A Watershed Year of Milestone Achievements
The financial year ended December 31, 2000 was an exciting and memorable one for the Achieva Group. Numerous significant strides and beachheads were achieved during that year.
Operationally, Achieva made significant and strategic progress in all its key business segments. In terms of geographical markets, Malaysia, Singapore and Australia continued to be the top three performers, accounting for 29%, 28% and 27% of Group turnover. While Singapore and Malaysia were also the top two contributors to Group operating profit, Vietnam has overtaken others to become the third most profitable market.
Our China operations are expected to turn around in FY2001 after the initial start-up phase. We have started selling software and peripherals in the PRC and will be extending our distribution activities to include semiconductor products.
In FY2000, we clinched eight new distributorships. They are from XIOtech Corporation, Telecommunications Devices Inc, LynuxWorks™, Inc., Intarsia Corporation, Flextronics Semiconductor Inc, Basis Communication, Sinbon Electronics Co Ltd and Tai Sol Electronics Co., Ltd. These wins brought the Group’s total distributorship portfolio to 38 brands. For most of these brands, Achieva is the distributor for ASEAN and Asia-Pacific markets.
PC Peripherals, Parts, and Software
Turnover in the peripherals, parts and software business grew 41% to $275 million — accounting for 81% of turnover — from $195 million in FY1999. Profit from this segment was $7.7 million or 52% of Group operating profit (before tax and interest), as compared to $3.5 million in FY1999.
The market for this peripherals, parts and software is consumer-oriented, volume-driven, fast changing, price-sensitive and highly competitive. Our ability to secure and retain distribution rights to well-established brands such as Seagate, Intel, ASUSTEK and Microsoft, coupled with our value added services, extensive network, good relationships with suppliers and dealers, has contributed to our competitive success.
Overall, our outlook for this business segment in FY2001 is positive. This is because of the increased revenue from the TDI distributorship which will offset the loss of income from the Thomas and Betts.
The Electronic Components business accounted for $60.7 million or 18% of Group turnover in FY2000, an increase of 104% compared to $29.7 million in FY1999. It contributed $8.1 million or 55% of Group operating profit (before tax and interest), compared to $5 million for the same period last year.
Our success in securing distributorships in this segment is due largely to our ability to provide electronic design and application support to our customers. Some of our clients in this segment include Venture Manufacturing, Natsteel Electronics, Solectron Technology, to name a few.
In July 2000, we set up the Design Centre in India to provide design and other consultancy services for the electronics industry. Manned by a team of 17 R&D engineers, the Design Centre is already on a revenue-generating track, and to date has garnered about six on-going projects.
In FY2000, our distributorship for Thomas & Betts ended due to its acquisition by Tyco Corporation in July 2000. However, this was offset by our success in securing the sole representation of Tyco’s subsidiary TDI, in Southeast Asia and Greater China. TDI specializes in battery packs and its major customers include Motorola and Ericsson.
Data Network Products and Others
Most of our data network products and services are offered to corporate customers and educational institutions in Malaysia. Due to insufficient resources, we were unable to grow this business in FY2000. However, with better utilization of resources and improved efficiency, we expect to secure more projects and increase our customer base to include more MNCs. And with the strengthening of the Malaysian economy, we are therefore optimistic that this business will turn around and register positive growth in FY2001.
TECHNOLOGY AND R&D
Intellectual Property & Technology Patents
As part of Achieva’s strategy to enhance its knowledge-based activities, we have made significant progress in the area of Technology and R&D. Currently, we have put in place a team of 12 R&D engineers in Singapore. Although we have already filed two patents – one for a universal notebook and the other for HDD connectivity — in December 2000, we are confident that our R&D efforts will deliver more successes, and we intend to file up to 10 patents for year 2001.
We have also committed to invest $5 million in our maiden technology venture — Nano Storage Pte Ltd. This is a joint venture with Kent Ridge Digital Labs, a research and software organisation, and Nanochip Inc, a US-based manufacturer of MEMS-based storage systems. This strategic step signified Achieva’s maiden investment in high-growth, high-volume proprietary technology products focusing on the dynamic and high-growth portable consumer electronics and communications sectors.
Nano Storage will develop products focusing on portable storage devices and silicon chips that support digital portable electronics and communications applications/appliances such as digital cameras, MP3 players, PDAs as well as networking equipment. Under the agreement to set up Nano Storage, Nano Storage will develop and sell the controller chip. KRDL and Chieva will develop the error-correction coding system (ECC System) while Nanochip will provide the micro-electro mechanical storage device (MEMS device) and technology to Nano Storage for its digital multimedia storage products.
Nano Storage, which targets OEMs and manufacturers of portable electronic devices, will revolutionise the data storage industry. The market for high capacity storage devices such as those created by Nano Storage is huge. Demand for digital products such as digital cameras and MP3 players is expected to grow exponentially.