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!