Last week in Trip Down Memory Lane.... we took you back to 1994. Today we take you back to 1996 when Taiwan just after the first democratic election in Taiwan and shortly after China decided to lob missiles into the South China Sea (a mere two years before I crossed the ocean). At that time the only significant Taiwanese player was Acer. The foundry industry was still uncertain and scanners were still a big deal. Business Week described the state of the tech industry in Taiwan in 1996 saying:
Calm has returned to Taiwan. From the bustling convention floors and overbooked hotels that are teeming with foreign executives, it is hard to imagine that just one month ago it seemed to the outside world that Taiwan was at the brink of war with China.
But inside the labs and corner offices in Hsinchu, the site of Taiwan's version of Silicon Valley, a sober reassessment of the island's industrial future is under way. To many business leaders and government officials, China's menacing war games underscored vulnerabilities of Taiwan's $21.3 billion information-technology industry. For the past five years, Taiwan has been going gangbusters exporting computers, peripherals, and chips to the West and Japan (chart, page 26). Its industry is now as large as France's and Germany's combined.
Taiwan's success rests on its role as a low-cost contract manufacturer to foreign companies. The whiff of military conflict, says Shintay Shih, president of the Industrial Technology Research Institute (ITRI), may cause foreigners to "question their confidence in Taiwan as a supplier." The crisis also raised doubts about whether it is wise for Taiwan manufacturers to locate operations on the mainland to take advantage of its immense lower-cost labor pool. At the same time, it's increasingly clear that the Chinese are challenging Taiwan's manufacturing prowess for many commodity-type electronics products such as motherboards, certain peripherals, and for personal-computer assembly.
Add it all up, and the message to Taiwan Inc. is now clear: To guarantee the island's economic relevance to the world, it must move toward the top of the technology food chain. Instead of merely supplying commodity items such as computer hardware and printed-circuit boards, Taiwan must rely more on its innovation. And rather than simply catching up to Japanese, American, and European rivals, Taiwanese want to be on technology's cutting edge. Says Vincent Siew, a key adviser to President Lee Teng-hui: "The more we operate the economy on a high-tech basis, the less we rely on China."
Lets reiterate: To guarantee the island's economic relevance to the world, it must move toward the top of the technology food chain.. Twelve years later and Taiwan has done just that. We have continued to share reports with you about the strength of the tech industry in Taiwan. In the Business Week InfoTech 100 18 Taiwanese companies were listed in the top 100 tech companies in the world. They were second only to the states. The tremendous growth of this industry over the past decade is a tribute to the far-sighted planning of the government in the 1970s. Although the PC and peripherals industry developed independently, the semiconductor industry was selected as the strategic industry in Taiwan and has grown into a dominant force.
A little further on in the article we read:
Taiwan's importance won't diminish with by the Internet revolution, either. Design teams at Acer are looking into making an Internet terminal for $500, while dozens of other Taiwanese companies are tinkering with prototypes of cheap Internet PCs, TVs, and personal digital assistants. Oracle's Lawrence J. Ellison and Sun Microsystems' Scott G. McNealy made the rounds of Taiwanese manufacturers in recent months to whip up interest in budget Net appliances. Says Douglas Farber, Oracle's director of Asia online services: "The Taiwanese have the critical mass to speed up the development of the Internet and help it take off."
Well, it took them another 12 years to develop the netbook (low cost PC), of which the first was the Eee PC, and it came from ASUSTek, not Acer. Everyone else is following. I guess some ideas just get shelved and others are grown. Well, the netbook has recently found a huge market sector and is expanding very rapidly. I am surprised to see though it took 12 years to do.
Later in the article Business Week notes the marketing challenges and hurdles these companies face:
One of the greatest challenges the Taiwanese face is marketing. With a few exceptions, Taiwanese companies have yet to demonstrate that they can make it globally with their own brands and product designs, much less establish new industry standards. Despite its success in serving some of America's most innovative chipmakers, for example, Taiwan has produced few important design houses of its own. Even though Taiwan-made scanners account for two thirds of the world market, most Taiwanese brand names have failed to impress U.S. consumers, says William Krause, chairman of Mountain View (Calif.)-based photo imaging company Storm Software Inc. "They design things too quickly," he says. "So when they try selling directly to the consumer, they fall on their face."
It seems not much has changed, right! We have mentioned the lack of branding in the past and it seems this little monster has been lurking around for a long time. To be honest though, I think the branding and marketing has improved over the last 12 years although I think the pace of brand development has lagged behind what Taiwan needs. So, although branding and marketing experience has improved, there is still a lot of room to improve and many more international brands to grow and develop.
The final paragraph of the article was spot-on:
Other Asian manufacturing havens such as Malaysia, Singapore, and Thailand lack enough skilled engineers. South Korea and Japan aren't as flexible. And China's coastal cities seem years away from matching Taiwan's high-tech infrastructure. So even though Taiwan's electronics mavens are feeling jitters, the odds are that they will continue sprinting toward the top of the technology heap.
Taiwan is indeed at the top of the technology heap and have already climbed ahead of everyone apart from the United States. Taiwan branded products have continued to increase and ever more powerful companies have come into existence and the product lines have expanded dramatically in telecommunications (High Tech Computers), in fabless chipset design (MediaTek, ITE Tech, RealTek) and other niche sectors such as RAID (Infortrend) and industrial PCs (IEI Technology). Taiwanese entrepreneurs have poured a lot of money into the tech sector and I would bet on them continuing to dominate for a while yet.
The article is a good, insightful read. If you are interested in the development of the tech industry in Taiwan I recommend reading it.
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