Why doesn’t L.A.’s tech industry get the national media recognition it perhaps deserves? Blame people like James Chu.
From his modest office in an unassuming building in the decidedly unsexy city of Walnut, Chu has quietly built a $1 billion computer-monitor business, ViewSonic Corp. without a penny of outside capital. And he’s just getting warmed up. The 43-year-old businessman, who never got past high school but is today among L.A.’s richest residents, has set his sights on replacing the personal computer as the preferred interface with the Internet. In the coming months, the company will roll out 21 different devices allowing consumers to do everyday things like shopping and banking with a handheld or stationary gadget that’s cheaper and easier to use than a traditional PC. “It’s a very natural move for ViewSonic to go into Internet appliances,” said Chu, during a recent interview at his office. “The desktop PC is getting smaller and smaller and will eventually disappear; the Internet will become the biggest computer and provide all the software users will need. So, the display is all that will be left of the PC, together with the Internet.” The market for Internet appliances is expected to grow exponentially in the coming years, according to International Data Corp., a market research group. By 2002, an anticipated 40 million units will be shipped in the U.S. alone and 89 million worldwide, surpassing the number of PC shipments. These appliances range from TV set-top boxes for Internet access to Internet-enabled game consoles, handheld devices such as the Palm VII and even Internet-enabled picture frames. It’s yet another intriguing move for Chu, who came to the U.S. from Taiwan in 1986 as a sales manager for a Taiwanese manufacturer of computer keyboards. Just a year later, he launched his own PC component business, Keypoint Technology Corp., which eventually became ViewSonic. “I saw that to be successful ultimately in the U.S., you needed a more customer-oriented approach, and I decided to start my own company,” Chu said.
A college dropout like so many successful high-tech entrepreneurs, Chu is no longer embarrassed by his lack of academic credentials. “In the last 10 years, I’ve found it looks prestigious not to have finished school,” he said. “There are many rich college dropouts, and now I’ve become one of them.”
ViewSonic’s chairman and CEO is as unassuming as his company. He shuns the trappings of corporate privilege, dresses informally and occupies a no-frills private office in Walnut, in the eastern San Gabriel Valley. On a recent afternoon, he’s decked out in a polo shirt, emblazoned with his company’s logo rather than the prototypical polo pony. ViewSonic’s logo is a group of multicolored finches, meant to represent the company’s computer monitors bright, colorful and friendly. The same might be said of Chu, who appears anything but the hard-charging, aggressive entrepreneur he is. For fun, Chu likes to work “I enjoy my work,” he said. “I like marketing and advertising. I like talking to other people in the industry and thinking about how to take ViewSonic to the next level. That for me is a lot of fun, and my biggest hobby.”
That “hobby” is now focused on launching Viewsonic’s new devices, which include a portable Web “pad” with a 10.4-inch screen and a Web-compatible phone with a 3-inch monitor. Many of the new machines won’t require a keyboard, instead using a stylus to surf the Web. Prices for the most basic models start at less than $500, considerably less than the cost of a PC. ViewSonic looks to sell its hardware through partnerships with Internet content providers for example, major banks and brokerages that will include the devices as part of a package of services.
Marketplace risks
Clearly, there is a multibillion-dollar market for Internet appliances, but there are also lots of questions about which platforms and business models will ultimately conquer the market. As a result, ViewSonic can expect to face some tough competition from the likes of Compaq Computer Corp. and Microsoft Corp., which have formed a partnership to develop a line of Internet appliances and services, as well as an alliance between America Online and Gateway Inc., which are also looking to exploit the new market. “The challenge for ViewSonic is that these other companies have established brand names and customer bases,” said Bryan Ma, an analyst with International Data Corp. “ViewSonic’s brand is that of a monitor manufacturer, and it will require the right partnerships for them to compete successfully in this new market niche with some of these big names.”
Chu isn’t one to flinch in the face of giants.
He has grown ViewSonic into the largest independent computer monitor company in the nation, with annual revenues in excess of $1 billion competing with the likes of Compaq and Dell Computer Corp., which sell monitors packaged with their computer systems.
And he’s driven that growth without giving up any equity. He owns 90 percent of ViewSonic and his family owns the rest. But while his company’s success is considerable and opportunities in Internet appliances abound, Chu still faces big risks.
No standard format
One unresolved question is whether the market will eventually embrace a single wireless Internet platform at the expense of many others, as was the case with home video, when VHS won out over Betamax. If one maker’s platform prevails, that will be detrimental to the competition. “There is no standard wireless format in the U.S., but Europe is already moving to a uniform format,” said Aubie Goldenberg, partner in charge of the e-commerce group for the Pacific and Southwest with Ernst & Young LLP. “This represents a gamble for U.S. developers because they may end up with a model that does not find market acceptance. There is even the question whether the mobile phone will be the winner in wireless Internet access rather than Internet appliances.” Already, some companies in the UK are marketing Internet access services as part of their mobile telephone services. For instance, Virgin Mobile connects phone users with Internet content providers using the latest generation of mobile phones. To position itself for the wireless world, ViewSonic has partnered with a phone company as well. It signed a strategic agreement with AT & T; WorldNet Service, the Internet service provider division of AT & T; Corp. AT & T; will provide the connection between the appliances and the Internet, with a third partner providing customized content to the end user. “The content will be much more exclusive to the service provider,” Chu said. “It’s a tremendous opportunity for a service provider to create new, continuing relationships with their customers. That is the biggest value for corporate users.” For example, a firm like Merrill Lynch could sell a package of online financial services to a customer and include a ViewSonic Web pad with an AT & T; Internet account in the package. This new method of selling company-specific Internet content and services has an added advantage for ViewSonic: It will shift the costs of marketing the company’s appliances to the corporations that sell its services to the end users.
Solid positioning
In spite of the risks attached to entering a new market niche, ViewSonic looks well positioned to become a leader in the Web appliances industry in particular because many of these appliances are not much more than a computer terminal with a few added microchips. In addition to Internet appliances, Chu is also planning to enter the market for digital television monitors, which have four times the resolution of traditional television sets and can be used for watching TV and accessing the Web, which is pretty much impossible on current low-resolution TV sets.
As digital television replaces analog television in the coming years, heavy demand is expected for these new sets. Currently, a digital TV set can still cost $7,000 to $8,000, but that is expected to drop, according to Chu, and ViewSonic is planning to sell its model for $2,000 to $3,000. Despite his past success and future plans, Chu is not looking to take ViewSonic public anytime soon. He started the company with just $100,000, half of it his own savings and the other half borrowed from relatives. The company’s growth has been financed internally ever since. “We’ve been operating for the last 13 years very successfully without outside capital,” Chu said. “So, we’ve made a choice to continue this way, but we like to keep our options open.”
