Quanta still leading Notebook Manufacturing

Quanta is still in the lead when it comes to contract manufacturing of notebook computers. According to DisplaySearch, Quanta has 31% of the market. DisplaySearch says:

Among Taiwanese notebook PC OEMs, Quanta was the leading manufacturer with a 31% market share on a unit basis, followed by Compal at 24%, and Wistron with 16% share.

In fact, the top five notebook manufacturers were all Taiwanese including Quanta, Compal, Wistron, Inventec and Pegatron. These five manufacturers together captured 91% of the market.

Article: Quanta #1 Notebook PC OEM Maker in Q1’08; HP #1 Notebook PC LCD Panel Customer of Samsung, LGD and AUO

Misperceptions about Taiwan

I saw an interesting article yesterday on the Brand Strategy website (http://www.brandstrategy.co.uk/) by a Dr Tim Jones. The article is titled: "Innovation in Asia" and can be downloaded @ http://www.brandstrategy.co.uk/freearticle/Browse.view.

The article is interesting and highlights some important points about innovation in Asia. However, the author doesn't seem to be aware about much of Taiwan's innovation. The article spends a lot of time talking about China and India and how these are the top innovators in Asia. Towards the end of the article we read:

If these are two extremes of innovation cap ability across Asia, what is the future for Taiwan and Singapore? These are the two Asian economies that, alongside Ko rea, have most improved the technological performance of their industries.

While nothing can be taken for granted, it is most likely that both will become centres of further global innovation over the next few years. Whether they will make it into the premier league by 2010 alongside India, China and Korea is another question.

It is a little disturbing! True, Taiwan is never going to become an innovator in the automotive industry but innovation in Taiwan's high technology sector is robust as ever and the technology industry is the national strategic industry selected by the government in the 1970s. I would argue that rather than Taiwan making it into the premier league, they have already arrived in the premier league of Asian innovation and continue to dominate.

Remember a few weeks ago we spoke about Business Week's Info Tech 100. When speaking about Asia's top tech companies, Business Week said:

Despite regular predictions that an ever more confident China will eclipse Taiwan, the island remains Asia's clear technology leader. This year's version of the BusinessWeek IT 100 has 37 Asian names, up from 35 a year ago, and once again, Taiwan dominates the list. With 16 companies (including Foxconn International, listed in Hong Kong but controlled by Taiwan's Hon Hai Precision), the island is behind only the U.S., which has 36.

Actually, if you look on the interactive table Business Week put out, there are 18 Taiwanese companies listed in the Top 100 tech companies. Both India and China only had six on the list, Korea had four companies on the list and Singapore none. Consider also Tsai et. al. comments about the Taiwan electronics industry in their book The Silicon Dragon:

To judge from its size, Taiwan, an island of about 30,000 km2, is only a tiny dot on the globe. Its size, almost equal to that of the Netherlands, is about one seventh the size of the United Kingdom, one 250th the size of the United States, one 260th that of China, and cannot even be seen on a world map. Taiwan had nonetheless achieved a production value of US$21,000 million by 1999 and become the third biggest manufacturing centre of information hardware with over 40 computer-related product ranked first in the world. These products include scanners, monitors, motherboards, desktops and notebooks, and key components such as computer chips. Considering its size, Taiwan's achievements in the computer industry ae remarkable.

And consider another 2005 Business Week article called "Why Taiwan Matters" which said:

The Sun Yat-sen is as bland as any U.S. interstate, but it's the highway of globalization. Though it snakes along the whole west coast of Taiwan, the key 70-km stretch starts in Taipei's booming new Neihu district of high-tech office buildings and ends in Hsinchu, home to two of Taiwan's best universities, its top research center, and a world-renowned science park. Along the way, the Sun Yat-sen leads to some of the most important but anonymous tech outfits in the world: Asustek Computer, whose China factories spit out iPods and Mini Macs for Apple; and Quanta Computer, the No. 1 global maker of notebook PCs and a key supplier to Dell and Hewlett-Packard.

Dr. Jones ignoring Taiwan is nothing new. Most people outside of Taiwan and analyst circles do not know the contribution Taiwanese companies have made to the world and how dependent the world is on the products they provide and have provided for a long period of time. Dr. Jones talks about Lenovo being a PC powerhouse but what about Acer and ASUSTek. Aren't these power houses? And lets not forget that Lenovo developed their market share by purchasing IBM's PC business unit. Unlike Acer or ASUStek which developed market share through their own innovation, Lenovo purchased a ready made solution with a ready made market.

Let's be honest, innovation in Taiwan is alive and well and they arrived a long time ago. Taiwan's problem is to stay ahead of the pack. The problem for Taiwan is naturally size. I have no doubt that in years to come Chinese and Indian companies will take the lead in technology. Their size warrants it and just from a perspective of natural resources its difficult for Taiwan to stay ahead. But Taiwanese companies have been around for a while, they know how to fight, and they know how to defend their market share. The fight may be harder than many think.

So why do these misperceptions about Taiwan persist? I would suggest branding is the biggest issue. Most Taiwanese companies are clueless about branding and how to effectively communicate the value proposition of their products and brands. There are a few exceptions (e.g. ACER, Giant) but generally branding is deficient. The main cause of this deficiency would be the business-to-business (B2B) business model used by most tech companies. They don't sell directly to consumers and into consumer markets and therefore have not concerned themselves with developing international brands.

This is changing however. The government has realized branding is important and is now promoting Taiwan brands and encouraging Taiwanese companies to develop their own brands instead of being OEM/ODM. Taiwanese companies are agile and adventurous enough to learn and succeed in this realm too. Don't be surprised if over the next few years Taiwan brands become more prominent and increasingly important!

Attracting Taiwan

We learn today from the China Daily that China is increasing their expenditure on infrastructure to 31 cities in order to attract Taiwanese businesses.

Thirty-one central and western mainland cities have been selected to strengthen cooperation with Taiwan companies, the spokeswoman for Taiwan Affairs Office of the State Council said on Wednesday.

The 31 selected cities, which will be developed as centers for labour-intensive processing trade industries, will benefit from preferential policies and financial support from the government to help them build necessary facilities, Fan Liqing said at a regular press conference in Beijing.

Between now and 2010, the government will spend 30 billion yuan ($4.37 billion) on infrastructure developments to help attract Taiwan firms to set up or expand existing operations on the mainland, she said.

Also by 2010, 19 more cities will be added to the program, taking the total to 50, the spokeswoman said.

"The government understands the importance of Taiwan companies based on the mainland and is keen to improve their investment and operating conditions", Fan said.

"We will also collect feedback from Taiwan companies before deciding on the final industrial structure," she added.

Taiwan companies are well aware of the major changes to the mainland's industrial policies, she said.

This blog is not a political blog. I have my own views on the cross-straits relationships. However, this article does highlight the dependence of Chinese economic growth on Taiwanese investors and other foreign direct investments. The economies of Taiwan and China are interlinked. Any discussions by any parties of the future of Taiwan and China relationships should always remember how highly-integrated the two economies are. Many people are excited by what they perceived as the potential economic benefits from improved cross-straits relations. However, the certainty of such benefits are not clear.

According to China Economic News (CENS):

Taiwan's China-bound investments witnessed a whopping annual growth of 145.12% to US$1.157 billion in May of this year, according to the statistics released by Investment Commission under the Ministry of Economic Affairs (MOEA).

CENS continues

In the first five months of the year Investment Commission approved China-bound investment totaling US$4.104 billion and outbound investment of US$2.136 billion, both showed rises. However, in the same period Taiwan-bound investment experienced an annual decline of 12.82% to US$3.037 billion.

How does this benefit the Taiwan economy? I am not sure. It certainly seems some investments are fading in Taiwan (here I assume they are referring to foreign direct investments or FDI). That may not be good for the economy. More money invested in China by Taiwanese companies means less money available for on-island job creation. This may even heighten the disparity between the rich and the poor in Taiwan (and this disparity is growing).

Anyway, it seems for the industrious, entrepreneurial minded Taiwanese person, with money, there are even more opportunities in China. However, as many failed Taiwanese investors in China would attest, here be dragons!

Article 1: 31 cities selected to attract Taiwan firms
Article 2: Taiwan`s China-bound Investment Shoots Up 145% in May

Advantech Buying BCM Embedded

Advantech is, according to China Economic News (CENS), set to buy a controlling stake in BCM Embedded, a motherboard distributor.

To accelerate the development of dual-branding strategy, Advantech Co., one of Taiwan`s major manufacturers of industrial computers, will merge with BCM Embedded Computer Inc. through its fully-owned Advantech Fund A by the end of June.

Advantech Fund A has a 50% stake in BCM which focuses on distribution of industrial motherboards. In mid-June, Advantech director board passed a proposal to increase investment of NT$200 million (US$6.6 million at US$1:NT$30.3) in Advantech Fund A to take controlling stake in BCM, which will become Advantech`s distribution unit after the merger. Advantech will continue to engage in M&As at home and abroad, with the effect of the M&A to show sometime in 2009.

It seems M&A are all the rage this year in the IPC industry. Earlier in the year Adlink bought out Ampro. The number of companies in the sector are getting smaller for sure and IPC companies are, out of neccessity, becoming more and more vertically integrated.

Article: Advantech to Merge With BCM Embedded Computer by June End

The Growth of Solar

The dramatic increase in oil prices over the past few years have made people increasingly aware of the need to develop alternative energy sources. As alternative energy has become more popular more and more companies have invested time and money into developing solar cells. Now iSuppli estimates solar cell production will be at the same level as semiconductor production in the next few years. According to iSuppli:

Worldwide investments in the production of Photovoltaic (PV) cells will rise to the same level as those for semiconductor manufacturing by 2010, due to booming demand for solar energy, according to iSuppli Corp.

Global production of PV cells is expected to rise to as much as 12 Gigawatts (GW) by 2010, up from 3.5GW in 2007. By 2010, as many as 400 production lines in the world that can produce at least 1 Megawatt (MW) of PV cells per year will be in place, representing a four-fold increase from about 90 to 100 production lines in 2007. Factories capable of 1GW of annual PV production also will be established in the future to ensure continued strong delivery of PV cells to the market.

“The market for PV cells is estimated to grow by 40 percent annually until 2010, and 20 percent beyond,” said Dr. Henning Wicht, senior director and principal analyst, MEMS and photovoltaics, for iSuppli. “Nearly all market participants plan to increase their sales by a Compound Annual Growth Rate (CAGR) of 40 to 50 percent during the next few years.” Wicht noted that heavy investments will be required to finance the expansion of PV cell production. Each PV factory will require an investment of $500 million and more, will employ as many as 1,000 workers per site, and will generate annual revenue of $1 billion per year or more, putting them into the size, cost and employment range of semiconductor fabs.

The prohibitive cost of solar cells is the polysilicon neccessary for the production of the cells themselves. There is a shortage of polysilicon and many companies are apparently scrambling to develop their own material production facilities or place long term orders with current suppliers to ensure availability. In April Digitimes observed "Current 6-inch solar wafer spot pricing has reached NT$10-10.5, but demand still surpasses supply due to strong demand from the end market, noted the sources." Earlier in May iSuppli outlined some of the polysilicon problems:

Booming global demand for solar energy has spurred a critical shortage of polysilicon used to make Photovoltaic (PV) cells, causing PV suppliers to realign their business structures and strategies and to seek alternative raw materials. Global revenue for PV cells is projected to increase to as much as $22.1 billion in 2012, up from $9.6 billion in 2007, according to a preliminary forecast from iSuppli Corp.

The polysilicon shortage is, according to iSuppli, forcing companies to integrate vertically and bring polysilicon production under their direct control, reduce the thickness of the cells themselves and to cut costs and become more efficient in their production processes.

The rise in the solar cell market has provided many of Taiwans tech companies with tremendous opportunities and even provided a lifeline to others. The development of this industry will be interesting to watch as will the implementation of solar cells in consumer electronics devices.

iSuppli: Solar Cell Investments to Reach Parity with Semiconductor Industry by 2010
Digitimes: Solar 6-inch wafer spot pricing expected to stay at around US$10
iSuppli: Silicon Shortage Prompts Strategy Changes for Photovoltaic Industry

Hong Kong Competition Law

A great editorial by Next Magazine's Yueng Wai-Hong appears on the Wall Street Journal opinion page. It starts:

Hong Kong is at the threshold of enacting a competition law. This is ironic, given that Hong Kong probably has won more accolades as either the freest or the most dynamic economy in the world than any place else. A free and dynamic economy presumes fierce competition, doesn't it? So why the need for government prodding to compete?

This drive for a new law certainly isn't prompted by a sudden slackening in competitive vibrancy. Just last year, Hong Kong gave birth to more companies than babies: 100,761 vs. 70,394. This bent on commercial rather than familial pursuit has been in keeping with a long-established trend. You can therefore be excused for thinking that Hong Kong can do without a competition law.

These laws are important for Taiwanese companies. Many Taiwanese companies are listed on the HK exchange and will be subject to these laws. As Mr. Yeung rightly notes, these laws will also increase the cost of doing business in HK.

However, Mr. Yeung does seem opposed to their implementation. Last semester in an economics class we did a case study on anti-competitive practices in the Hong Kong supermarket industry. New players were apparently driven out by hostile pricing strategies from Wellcome and Park n Shop. Once the new entrants were pushed out the prices were elevated to normal levels ensuring there were no long term consumer benefits. I assume the law hopes to discourage this type of behaviour from firms.

When I first read the article I also thought perhaps this type of legislation would not be beneficial to Mr. Yeung. Mr. Yeung is the publisher of Next Magazine which according to a Nielson report quoted on Wikipedia is the second most widely distributed weekly magazine in Hong Kong. Wikipedia says:

According to the March 2003 ACNielsen RARD Report, Next Magazine had the second highest readership among weekly magazines in Hong Kong after Sudden Weekly, its sister entertainment news magazine under the same company.

I am not an economics expert but it seems Next magazine would benefit greatly from NOT having a competition law. After all, any moves by them to prevent new entrants into the (already very crowded) media market in Hong Kong may be scrutinized by the government and may cause litigation against the company.

I personally do not think this law will disourage businesses from opening in Hong Kong and it may even give these businesses a better chance of survival. It is OK to say that over 100,000 companies are opened in Hong Kong every year, but how many of those companies survive and how many of those new companies die as a direct result of anti-competitive behaviour? Also, how many of those companies actually do business in Hong Kong? In the past many foreigners were forced to open companies in Hong Kong and then open branch offices in China. The law in China prevented them from opening their own, fully owned foreign companies. Now these would be interesting stats. Only then can one decide whether or not a competition law is neccessary in Hong Kong.

Article: Hong Kong's Noncompete Clause
Wikipedia: Next Magazine

Foxconn Struggling

From the Taipei Times:

Foxconn International Holdings Ltd (富士康控股), the world’s largest contract maker of mobile phones, said it expects profitability to come under pressure this year because of rising competition and increased development costs.

“It’s a tough operating environment,” Foxconn chairman Samuel Chin (陳偉良) said after a shareholders’ meeting in Hong Kong yesterday. “We’re not immune — it definitely impacts us.”

Foxconn, the worst-performing stock in Hong Kong’s benchmark Hang Seng Index this year, is seeking more business from customers including Nokia Oyj and Samsung Electronics Co, the world’s two biggest handset companies, to compensate for lower sales to Motorola Inc.

Yeah, many Motorola suppliers are suffering. I know Wintek is still reeling from the loss of orders with a significant decline in their stock price. The impact of low-performing brands on suppliers can be significant. So, what should companies do when demand from their main customers decline? Diversify!

Wintek diversified their client base and their product portfolio. Spreading the risk is sensible and it seems the only thing a company can do. Many smaller companies build capacity in anticipation of the projected sales forecasts from their main customers. When these orders do not materialize the company naturally suffers from having excess capacity and reduced revenues.

According to the Taipei Times:

Motorola, Foxconn’s biggest customer (Motorola) in 2006, is still “having difficulties” and will “continue to impact” the Hong Kong-listed company, Chin said.

Foxconn got higher orders from “all other customers” to help offset lower sales to the US company last year, Chin said.

Well Foxconn, who are not a small company, have increased sales to their other clients. For a huge company like Foconn to find new customers is very difficult. They already are the dominant company in the industry and they probably (at a speculative guess) do a lot of work for most mobile phone brands.

Article: Foxconn expects further difficulties

ASUSTek Changes the Game

From a 5 June article on Business Week:

While computer makers have pushed to build faster, more powerful laptops in recent years, the executives at Taiwan's Asustek Computer decided to try something different. They thought some people wanted a simpler computer. And they were right. Since its introduction last October, Asustek's Eee PC—a mini-laptop that retails for as little as $300—has become a huge hit around the world. The company expects to sell 5 million units this year. "We changed the concept," says Chief Executive Officer Jerry Shen.

Yes, AUSTek have changed the perception of what a computer can and should be. Low cost PCs are useful devices to those of us who do not require the full power of a PC. Gamers and other high-end consumers need powerful processors and huge storage capacity to play games and store videos and photos. But what about those of us who don't care about games? Why pay for processing power and capacity we will never use?

I guess ASUSTek wisely realized many people only want to be able to type docs, access the net and answer emails. Not all computer users are tech-junkies with a desperate need to over-clock.

Business Week does highlight that ASUSTek is not an international brand like HP, Dell or Lenovo but they do acknowledge the Eee PC has helped to establish their brand. The article also focuses on some of the things ASUSTek has done to become more profitable and competitive including focusing on design and spinning off their manufacturing plants.

Of course standard economics dictates when a product is as successful as the Eee PC, other players will also jump into the market and, according to Business Week,

Asustek still faces some big challenges before it can join the tech industry's elite. Some caution that the mini-laptop's success could erode profitability at Asustek, which made $910 million last year on sales of $24.9billion. Daiwa Institute of Research analyst Calvin Huang estimates the Eee PC's margins are 10% to 15%, compared with gross margins of 21.5% for the whole company. With Hewlett-Packard, Acer, and Dell gearing up to start selling similar machines, margin pressure is likely to grow. "The Eee PC is a significant innovation in the PC industry," Huang wrote in a report last month, but "its success is unlikely to be sustained."

ASUSTek is used to operating in a competitive environment. They may lose some market share in the low cost PC sector but they should be able to hold their own. I think they are doing a great job and should be complemented on their innovation and foresight.

Article: The Mini-Laptop Changing the Game

TSMC Official Blog

TSMC seems to have launched an official blog. I am not sure who is writing the material but it seems to be a collaborative effort. Right now the blog seems to be about experiences of the individual people who work at TSMC. The blog is reader friendly and the first two posts are interesting, if not a little self serving (as they rightly should be).

Take a look @ http://blog.tsmc.com/

China + 1 Strategy: The Pitfalls and the Promise

The International Herald Tribune (IHT) has an excellent article on the new foreign direct investment (FDI) strategies being employed by large multinational corporations (MNC). Many of these corporations, in all manufacturing intensive industries and at all points in the value chain are exposed to the same country risk inherent with FDI.

Here we have blogged occassionally about Taiwnese investments in China and the alternative destination, Vietnam. The IHT article highlights how other MNC from other countries are also doing this and outlines some of the dangers to the MNC and the global economy as a whole. The article is long, but here is a teaser:

China remains the most attractive destination for industrial investment in the world, drawing almost $83 billion last year. But, in a strategy that companies are calling "China plus one," multinationals - worried about soaring costs in China and about becoming overly dependent on factories in one country - are increasingly establishing or expanding bases elsewhere on the continent, particularly in Vietnam.

The long list of worries about China includes inflation, rapidly rising labor costs, shortages of workers and energy, a strengthening currency, dwindling tax breaks for foreign investors and the possibility of civil unrest. With wages in China now rising close to 25 percent a year in dollar terms in many industries, the vaunted "China price" for a growing list of goods, particularly low-tech products, is no longer such a bargain.

Multinationals "should be thinking about all the world and keeping a balance," and they are doing so by encouraging suppliers to diversify out of China, said Edward Kang, the chief executive of Ever-Glory International, a sportswear manufacturer in Nanjing, China. Ever-Glory sells to Wal-Mart and Kohl's in the United States, and it is building a factory in Vietnam to supplement its three factories in China.

There is one troubling issue about the article. Towards the end we get this quote:

Vietnam's biggest selling point for many companies is its political stability. Like China, it has a nominally Communist, one-party system that crushes any hint of political opposition, keeps the military under control and changes government policies and leaders slowly.

"Communism means more stability," Shu, the chief financial officer of Texhong, said, voicing a common view among Asian executives who make investment decisions.

Democracies like those in Thailand and the Philippines have proved more vulnerable to military coups and other instability that has scared foreign investors.

Last I checked Taiwan is a democracy (has been for a decade), Japan is a democracy, Korea is a democracy and India is a democracy. While true India is not as stable as one thinks, the economy is expanding quickly and they do seem to have a relatively stable political structure. India aside, it seems ridiculous to assert that communism is a neccessity for stability. One could argue North Korea is communist and Zimbabwe is not prone to political coups, but both countries are certainly not havens for investments for obvious reasons. Actually, one could argue a case for ethical investments and investing only in countries that have a basic respect for human rights and freedoms. Ask the Montagnaards and the Tibetan's about human rights and how the enjoy the political stability and the fruits of investments. I am sure the story will be very different.

Enough said. This is not meant to be a political blog.

Article: As Chinese costs soar, manufacturers expand elsewhere in Asia

LinkedIn Worth One Billion Dollars

I remember when I started using LinkedIn wayback in early 2005. Then it was a small startup. One of my friends in South China raved about it and said it was an excellent opportunity to establish a global network. My profile is @ http://www.linkedin.com/in/paulsharpe. I just saw today that LinkedIn is valued at more than one billion US dollars. From BusinessWeek.

LinkedIn is joining the Web 2.0 high rollers' club. The professional networking site, home to some 23 million affluent users who sign up to find jobs, hire talent, and connect on projects, is about to become one of the select few social-media companies to attain a valuation of more than $1 billion.

On June 17, LinkedIn announced a $53 million round of funding led by Boston's Bain Capital Ventures. LinkedIn's previous investors, Bessemer Venture Partners, Sequoia Capital, and Greylock Partners, were also part of the latest round. The companies are acquiring a 5% stake that values LinkedIn at $1.015 billion.

There are somethings that I like on LinkedIn. They used to have a great job board but now they never have any posts in Taiwan. The addition of the Q&A section was interesting but I don't spend enough time on it to really benefit. To argue however the 23 million users are affluent would be pushing it a bit. Also, like most social networking sites I guess, many members don't stay active. I know some people I invited to LinkedIn two years ago have not built a network.

However, the site is good. It has its purposes and I have enjoyed playing around with it. Good luck to them.

Article: LinkedIn Joins the Billionaires' Club

Taiwan Firms Warned About Vietnam

Early in the year we blogged about the exodus of Taiwanese firms from South China to Vietnam. Rising rents, increased minimum wages and the dropping of tax incentives made investing in China increasingly expensive. Many companies, including some tech companies, decided to move to Vietnam where the property and wages are both cheaper.

Recently, the Taiwan government warned against investing in Vietnam because of the devaluation in the Dong, the Vietnamese currency. China Economic News (CENS) reports:

Due to the sharp depreciation of Vietnamese dong, Taiwan firms in that nation are warned to be cautious, said P.C. Chiu, director of the Industrial Development and Investment Center of the Ministry of Economic Affairs.

The MOEA worries that the sharp depreciation of the Vietnamese currency might drive Taiwan firms to shut down as the devaluation could spark an Asian financial crisis like that in 1997.

C.Y. Chen, director of the Taipei Economic and Cultural Office in Ho Chi Minh City, said the Vietnamese government recently chose to raise interest rates and devalue its currency to check its overheated economy, which has sparked serious inflation. The Vietnamese consumer price index grew over 20% in May. Chen said, however, he believes Vietnamese economy would soon get back to the normal track.

MOEA statistics show that Taiwan is Vietnam`s second-largest foreign investor, only behind South Korea, with the number of Taiwan firms in Vietnam totaling 1,800 and overall investments reaching US$10.3 billion.

Digitimes reported however that both Compal and Mitac will remain in Vietnam. The report says:

Despite the sharp drop of the Vietnam economy recently and exchange rate fluctuations, Taiwan-based notebook makers Compal Electronics and Mitac Technology have both said they will continue their investment in the country, according to a Chinese-language Economic Daily News (EDN) report.

Compal pointed out that although the value of Vietnam's currency has dropped, from a investor's perspective, this means costs will be lower, noted the paper.

Mitac stated that since its plants in Vietnam will mostly produce products for export it will not see any major impact due to exchange rate fluctuations, added the paper.

Article 1: MOEA Warns Taiwan Firms in Vietnam Due to Devaluing Dong
Article 2: Compal and Mitac continue investment in Vietnam despite falling economy, says paper

Tech Jargon: I am not Alone!

Anyone who has worked with me in the industry or knows me knows one of my pet hates are the pointless and meaningless words marketing people use to describe technology in Taiwan. Instead of calling an "industrial computer" an "industrial computer" they will call it a "ruggerdized industrial solution."

And the word "SOLUTION". Everything is a solution, nothing is a PC or a screen or a digital signage player: They are all solutions! Solutions to what? Nobody ever knows! These phrases drive me nuts. NUTS!

I was really glad to see I am not ALONE! From the Wall Street Journal Business Technology Blog:

One of this blog’s pet peeves is tech jargon. Terms like "solutions," "robust," and "leverage" aren’t just meaningless, they’re harmful. They intimidate people who aren’t familiar with information-technology, at best causing them to stay quiet when they should be asking questions, and at worst, preventing them from taking an interest in IT.

Agreed! Enough said. And please feel free to comment.

Article: Where Does Tech Jargon Come From

Solar: The New Frontier

Solar panels have been around for a long time. How long I am not exactly sure but certainly for as long as I can remember. Many Taiwanese companies have jumped on the solar panel bandwagon. Yesterday the news from accross the Pacific was that Intel are jumping into the production of photovoltaic cells. They will do this through a spin-off with an initial investment of US$50 milllion. The Wall Street Journal says:

Intel's move is the latest in a scramble among Silicon Valley companies to jump on the clean-energy bandwagon. Applied Materials Inc., for example, is branching beyond machines for making chips to sell equipment for use in making photovoltaic cells. Chip maker Cypress Semiconductor Corp., by contrast, spun off a maker of solar cells called SunPower Corp. that now boasts a market capitalization of about $7 billion.

Intel jumping into this industry will change the landscape. They have the engineering expertise, the manufacturing expertise and the money. Taiwan's solar companies will battle to keep up.

Article: Intel Spins Off Solar-Technology Startup

Semiconductors to Generate NT$2 trillion in 2010

China Economic News (CENS) reports:

Chairman Frank Huang of the Taiwan Semiconductor Industrial Association (TSIA) recently estimated Taiwan`s semiconductor industry to see revenue cross the NT$2 trillion (US$66.6 billion at US$1:NT$30) mark in 2010.

Huang noted that the Taiwan industry saw its revenue grow past NT$1 trillion (US$33.3 billion) in 2004 and reach NT$1.4 trillion (US$46.6 billion) in 2007.

Interesting, and to think this has been done over 40 years since the inception of the semiconductor industry in Taiwan when the first packaging plants were developed in Taiwan.

Article: Taiwan`s Semiconductor Revenue to Cross NT$2Trillion in 2010

Branding Taiwan

I just saw an article on China Economic News (CENS) on how Taiwan companies are trying to develop their own international brands. Many/most successful companies in Taiwan are successful OEM/ODM/EMS/Contract manufacturers (take your pick). Two outstanding examples are Hon-Hai and Quanta. However, there are also some very successful and increasingly ubiquitous brands including ACER, ASUS, TrendMicro and Giant.

Apparently some manufacturers are now looking to develop their own brands. As one of my MBA professors said to me a few years ago, there is very little money on the manufacturing side of the value chain. Many companies in Taiwan have developed strong foreign customers who have their own brands and make enormous profits through their own brand equity. The Taiwanese manufacturers on the other hand only reap small profits. They are now looking to redress this imbalance.

However, CENS observes:

Brand development requires the devotion of more effort to the cultivation of talent, and to the encouragement of talented personnel to explore their creativity and innovation in the development of unique products. Such efforts are often seen in high-tech industries, and some domestic high-tech firms have been well rewarded for the development of their own brands. Among these success stories are Asus, TrendMicro, D-Link, and BenQ, all of which made the list of Taiwan`s top 10 brands in 2007.

And here is the problem! Many Taiwan companies are run, in a fellow writer's words "like giant Mom 'n Pop stores." Very little attention is given to external communications. Websites are usually an absolute mess with very little consistency in terminology and very little thought as to what the value-proposition of the company and the product is.

Many companies also resort to phrases like the one above, "Brand development requires the devotion of more effort to the cultivation of talent, and to the encouragement of talented personnel...," which actually says very little about what actually needs to be done. Company CEOs are also very strong minded about how they perceive the marketing material should be and even if the company slogan is grammatically incorrect in English, they will not change it because they like it.

Many Taiwanese companies think the product is good enough to establish the brand of the company. I beg to differ! I would even argue they should know better. Most companies have grown up through manufacturing and should surely realize by now how easy it is to make stuff.

Communications is the key! Yet they place so little emphasis on communicating what their company is about and, when they do communicate, many of the press releases are a grammatical mess which are really difficult to read. This is true even for some companies on Interbrand's Top Taiwan Brand list.

If Taiwanese companies are truly interested in developing strong brands, they really need to pay attention to their communications at all levels. Productivity is good and innovation critical but communicating clearly and concisely (although this post is certainly not concise) is also important.

(Article: Taiwan Brands Make Inroads in Global Market)

Forbes' Inaugural Taiwan's Top 40 Richest List

I stumbled on this yesterday, slightly outside the purview of a tech blog, but still relates to Taiwan and Taiwan business. The net worth of the Top 40 is impressive. According to Forbes.

For decades after the end of World War II, Taiwan's relationship with China was strained because of politics. Today, changes on both sides of the Taiwan Strait are leading to hopes for better relations between the two, a trend that is already boosting wealth in Taiwan.

That is the main theme from our inaugural list of Taiwan's 40 richest. Taiwan's main stock index and property prices have gained this year on hopes that the island, under newly elected President Ma Ying-jeou, will seek closer ties with the mainland. To that end, Taiwan is prepared to open itself to goods and money from the mainland in ways that it hasn't in more than a half a century.

"There is a lot of room to increase business between both sides," says Stephen Liao, vice president and head of research at Grand Securities. Among the industries that would particularly benefit from closer ties are retail, tourism and property, he says.

The combined net worth of the island's 40 richest is $77 billion, more than their counterparts in South Korea or any Southeast Asian nation. They lag Hong Kong's top 40 by $102 billion and China's by $43 billion, but considering Taiwan's political isolation and relative size, the group holds its own.

Yeah, maybe these guys can get richer when more money flows into Taiwan from the Mainland but at what cost? According to the article property prices are already on the rise. Average property prices around my neighborhood start at around USD500,000 and I have seen two apartments recently for more than USD1,000,000. We even saw one for USD3,000,000. Average Taiwanese people earn a little over USD1,000 per month. They cannot afford these apartments and that is why the companies can remain competitive. A very cheap highly-educated work force. (Most of the people in my company have Master's degrees from overseas).

While I have a lot of respect for Taiwan's entrepreneurship (hence a blog focusing on Taiwan's businesses), I don't think opening more links with China will improve the lives and wealth of the average Taiwanese person, and their relative financial position may even deteriorate. I will give credit to Ma though, I saw an article (cannot find the link) where he said he wanted to increase the average Taiwanese salary to NTD900,000 (USD30,000) per year. Even so, they will still not be able to afford apartments and houses in Taipei. Its just too expensive.

Anyway, for what its worth, Taiwan's richest list is below with links to their short Forbe's biographies:

1. Tsai Hong-tu & family
2. Y.C. Wang
3. Terry Gou
4. Tsai Wan-tsai
5. Cher Wang & Wen Chi Chen
6. Jeffrey Koo Sr.
7. Lin Rong San
8. Wei Ing-Chou & family
9. Tsai Eng Meng
10. Lin Yu-Lin
11. Eugene Wu & family
12. Barry Lam
13. Chao Teng-Hsiung
14. Douglas Hsu
15. Shi Wen Long
16. Luo Jye & family
17. Chang Yung-fa
18. Tsai Ming-Kai
19. Leslie Koo
20. Jason Chang
21. Lin Ming-cheng
22. Tsai Chi Jui & family
23. Long-Shing Liao
24. Suhon Lin
25. Tseng Shin-yi
26. Rudy Ma & family
27. Kenneth Yen & family
28. Paul Liao & family
29. Chen Ching-Chih & family
30. Samuel Yin
31. Wu Chung-Yi
32. Lin Yu-chia & family
33. Hou Bo-ming & family
34. Chen Yung-tai
35. Show Chung Ho
36. Wu Ping-Chih & family
37. Allen Horng & family
38. Bruce Cheng
39. Steven Pan & family
40. Ting Piao Chiao & family

(Forbes' Article: Taiwan's 40 Richest)

World's Top 100 IT Companies

I missed this. Not sure when it came out though but BusinessWeek recently announced their 2008 top 100 IT companies. So how did Taiwan do? According to BusinessWeek:

Despite regular predictions that an ever more confident China will eclipse Taiwan, the island remains Asia's clear technology leader. This year's version of the BusinessWeek IT 100 has 37 Asian names, up from 35 a year ago, and once again, Taiwan dominates the list. With 16 companies (including Foxconn International, listed in Hong Kong but controlled by Taiwan's Hon Hai Precision), the island is behind only the U.S., which has 36.

Yep, out more than 30,000 tech companies surveyed around the world, 16% of the top 100 are Taiwanese. Taiwan's tech super-highway is still going strong and continues to astound the world. So which Taiwanese companies were the winners and losers: See the list below:

2008	2007	Company
9	29	ASUSTek
10	43	High Tech Computers
17	4	Hon Hai Precision Industries
31	63	Compal Electronics
40	28	Wistron
50	59	Taiwan Semiconductor Manufacturing Corporation (TSMC)
52	85	Quanta Computers
53	--	AU Opto Electronics
62	--	Transcend
71	92	Acer
73	--	Chicony Electronics
76	67	PowerChip Semiconductors
82	77	Inventec
83	--	Foxconn Technology
86	--	Delta Electronics
88	96	Advanced Semiconductor Engineering
92	--	Nan Ya PCB
93	42	Nanya Technology

And who lost out?

Well, Siliconware Precision Industries (ranked 53 in 2007) and D-Link (ranked 99 in 2007) dropped out from the list. But some other companies snuck themselves in.

BusinessWeek does comment on their methodology and their concerns that US tech companies are becoming increasingly less dominant.

How do you pick the best-performing tech companies in the world? At BusinessWeek, we sort through the financial results of 30,500 publicly traded companies and rank the tech players on four criteria: shareholder return, return on equity, total revenues, and revenue growth. The companies leading the list are those with the lowest aggregate ranking.

Amazon.com and Apple took the top two spots this year. Still, the dominance of U.S. companies is in decline: The country has 33 companies among the IT 100 this year, down from 43 in 2007. When we first started compiling the list in 1998 to rank tech's top performers, 75 of the winners were U.S. companies.

What is interesting from this list is five of the Taiwanese companies listed above (Compal, Hon Hai, Inventec, Wistron and Quanta) are all contract manufacturers. And of course, TSMC is a pure-play foundry. Many of the top-tech companies do not have brands but rather just do ODM/EMS/Contract manufacturing for more established brands.

It still amazes me that this little Island we call home (390 km long x 140 km wide with approximately 23 million people) can continue to produce the elite organizations in technology. This is a significant motivation to continue this blog!

I wonder how many people in the western world know about these companies? Probably hardly any! Is it important for them to know? Probably not! But in the context of the geopolitics of the region, and the realization that Taiwan is essential to the Global economy may give people pause for thought when thinking about cross-strait relations with China. Enough said!

BusinessWeek 1: Asia's Top 10 IT Companies
BusinessWeek 2: The InfoTech 100

Wireless Taiwan

As we have noted on this blog before, WiMAX is becoming big in Taiwan. Intel have invested significantly in WiMAX in Taiwan and yesterday Digitimes notes Motorola has made a significant investment in Taiwan's WiMAX industry:

Motorola will soon set up its first WiMAX IOT (interoperability testing) center worldwide in Taiwan, fulfilling the commitment of an MOU it signed with Taiwan's Ministry of Economic Affairs (MOEA) in October 2007 aimed at helping foster the development of the WiMAX industry in Taiwan

Monday also saw the opening of the first annual WiMAX show in Taiwan with a significant number of international and local companies putting up displays. Perhaps the most notable comments on WiMAX came from President Ma himself who has vowed to develop WiMAX in Taiwan as a way to bridge the digital divide.

However, does anybody remember Wi-Fly, the wireless Wi-Fi network developed in Taipei city when he was Mayor. Yes, Wi-Fly are still struggling along and still advertising aggressively on buses etc. but it seems hardly anyone uses it. The New York Times reported on the difficulty of the Wi-Fly system way back in 2006:

Despite WiFly's ubiquity — with 4,100 hot spot access points reaching 90 percent of the population — just 40,000 of Taipei's 2.6 million residents have agreed to pay for the service since January. Q-Ware, the local Internet provider that built and runs the network, once expected to have 250,000 subscribers by the end of the year, but it has lowered that target to 200,000.

On Tuesday President Ma said:

We did not develop WiMAX infrastructure then because it was only in the making at that time.

So what was the cost of Wi-Fly? According to the New York Times article around US$30 million. Who footed the bill? Apparently it was Q-Ware, the company that runs the 7-11. Of course they have tried to bundle other things together with Wi-Fly but with so many competing technologies it is just very difficult.

OK. Before we bash Wi-Fly too much the New York Times does acknowledge that Wi-Fly has led to some savings:

The brainchild of Taipei's mayor, Ma Ying-jeou, the CyberCity project was first conceived in 1998 as a way to catapult past Seoul, Hong Kong and other Asian capitals that were recasting themselves as cities of the future. Many government agencies now communicate almost exclusively online, saving millions of dollars, and citizens have been given hundreds of thousands of free e-mail accounts and computer lessons.

WiFly plays a role, too, by allowing policemen to submit traffic tickets wirelessly, for instance. But making it appeal to the average citizen is another story.

Getting enthusiastic about technology is great and to be honest it is good to see some governments trying to be progressive. But I do feel sorry for those who invest in systems that become redundant in a few years. WiMAX now is the next big thing and is sure to provide many benefits to Taiwan. However, project managers in more conservative computer industries here are not that excited. For them it is just a bridge to the next wireless standard and they are cautious about investing to much into developing WiMAX compatible systems.

Digitimes: Motorola to set up first global WiMAX IOT in Taiwan
NY Times: What if They Built an Urban Wireless Network and Hardly Anyone Used It?

Low Cost Processors: The Competion Heats Up

On Monday Nvidia launch what they are calling the "world’s first single-chip computer." From their press release:

Today, NVIDIA Corporation (Nasdaq: NVDA) introduced the Tegra family of processors, the world’s first single-chip computer capable of the rich high definition and internet experiences we’ve come to expect from our PCs, but on small pocket type devices. NVIDIA Tegra is a tiny computer-on-a-chip, smaller than a US dime (10-cent piece), designed from the ground up to enable the “visual PC experience” on a new generation of mobile computing devices while consuming the smallest amount of power.

As many commentators have mentioned, this chip is meant to take on Intel's Atom processor. Atom is a fairly new processor launched a few months ago. Both the Tegra and Atom are aimed at Mobile Internet Devices (MID) e.g. smart phones and PDAs. However, Jack Schofield notes on the Guardian some of the problems associated with the Tegra.

The obvious drawback with the Tegra approach is that it runs Windows CE (or Windows Mobile) not Windows XP, which was written for x86-compatible chips. And if you want to run real Windows software, Tegra doesn't do the job.

More than a decade ago, Microsoft wrote Windows CE as a whole new operating system precisely because it thought x86 chips cost too much for casual buyers, and consumed too much power to offer long battery life. It thought there was a market for Mobile Companions, webpads and other devices among people who didn't actually need the laptop/desktop version of Windows, or its vast library of programs.

Microsoft turned out to be wrong, at the time. It will be interesting to see if times have changed enough to make it right.

Intel's Atom takes the opposite approach of trying to reduce the overhead of the x86 code from the past (smaller, cheaper, lower power consumption). And from Computex, it looks as though the Intel Atom is the one that has pulled in the PC manufacturers.

But this might be the first step by NVIDIA to move towards competing more directly with Intel. A few month's ago at the Intel Developer Forum in Shanghai Intel said they were trying to move the graphics core into the processor. This generated an interesting response from the NVIDIA CEO. Eflux Media notes:

NVIDIA CEO and co-founder Jen-Hsun Huang went on an Intel-related rant on Thursday at a meeting with financial analysts. The context is that Intel is trying to move the graphics processing unit (GPU) from the motherboard's chipset into the CPU, merging the two processing units on a single die for increased performance.

Last week at the Intel Developer Forum in Shanghai, Intel representatives boldly stated that discrete graphics cards will eventually become "unnecessary" for the regular consumer in the future."

Claim after claim after claim. They're just false. They cross the line of fair play," Huang said. "Here's another one. nVIDIA's gonna be dead. Because we're (Intel) sticking the graphics in the CPU and (nVIDIA) will have no place to stick it," nVIDIA's CEO said.

It certainly seems battle lines are being drawn between these companies. According to Computer World:

"There's a battle emerging here," said Nathan Brookwood, an analyst at research firm Insight 64. "This is going to be a very exciting area. It's perceived to be one with huge growth over the next few years. Everyone is going to want an in if they can pull it off."

Both NVIDIA and Intel make great products. No doubt! However, NVIDIA would be wise to think twice before enaging in a war with Intel. AMD did it over the past three years and although Intel's margins suffered significantly, they were the ones left standing. AMD are now doubting their future and are looking at becoming fabless.

However, with all the current noise being made surrounding NVIDIA and Intel, spare a thought for VIA. VIA were the first ones as I recall to see the potential for low cost processors and have had them in their catalog for quite some time. It just seems people are preferring the Intel Atom processors. To better establish their competitive position VIA have recently launched their own VIA Nano processor which many observers says will also compete with the Atom as well as some of Intel's other low power processors.

This market is heating up and competition seems to be growing. I guess we will know within a year or two who the real winners and losers are. But always remember the words of the VIA CEO who said a few years ago:

The Internet will be the biggest driving force. For Internet applications, the processor is not the main requirement -- the pipe is more important than the engine. It's like the auto industry: It used to be that people build bigger and bigger engines. But the road was only so wide, and car drivers were more limited by the road than by the engine. So people started looking at efficiency of the engine and went to smaller engines.

NVIDIA Press Release: NVIDIA Tegra: Tiny Computer Packs Massive Punch!
Guardian Article: Tegra's ARM-based chip to take on Intel for mobile market
Eflux Media: nVIDIA Boss Goes on Intel Rant
Computer World: Nvidia takes swing at Intel with new Tegra chips
VIA Press Release: VIA Nano™ Processor
Interview: Wen-chi Chen: Taiwan's Answer to Andy Grove? [PDF File]

Computex 2008: The Show Starts

Today Computex 2008 opened its doors. Computex is running parallel to a WiMAX show in the new World Trade Center exhibition center. Digitimes reports the Taipei Computer Association (TCA) predicts this years show will generate US$20 billion in business from overseas buyers.

We will be visiting the show on Thursday afternoon and between all the show girls we hope to see a few interesting products. We will take a peek at the WiMAX products but mostly focuse on computer products and the like.

Yesterday Taiwan's president spoke about a wireless Taiwan. This also deserves a separate blog but here is what President Ma Ying Jeou said at the opening ceremony:

"Let's together build a home of beauty imbued with the wireless broadband service of WiMAX."

He continued saying:

"We can especially help rural areas and the children there by donating advanced computers with broader, better Internet access."

Yes. He is hoping this technology will be able to bridge the so called digital-divide between rural Taiwan and urban Taiwan. We will see.

Yesterday we also read Nvidia launched a low cost processor dubbed the Tegra to compete against Intel's Atom processor. Intel apparently also released a low power Atom chip that will compete with low power VIA and AMD processors for positioning in low cost notebooks. Once again this deserves a separate blog.

I expect Computex will be a roaring success. Our company is certainly pulling out all the stops with two fairly large stands. I look forward to seeing what they have done. I also look forward to seeing and playing with some of the new computer products on the market.

Article 1: Computex likely to draw in up to US$20 billion in overseas business

Funny Comment in Taiwan News

Sometimes when non-technologists write carelessly about technology the results can be amusing. I generally don't nitpick knowing that I too have probably made many comical errors in my writing career. However, this one was particularly funny. From the Taiwan news:

"WiMAX is a relatively new telecommunications technology that can transit wireless data over long distances for computers or mobile phone users traveling at high speed."

What about stationary or slow moving computers and mobile phone users? Also, good luck keeping up with your high speed computer. Typing when the computer travels at high speeds is always a pain.

Article: President vows to develop WiMAX technology