Taipei Times: What were you doing for General Instrument Corp when you arrived in Taiwan in the 1960s?
Dick Adler: I first came to Taiwan in 1968. I worked for General Instrument, a US component maker, which came here in 1964 and opened a factory in Hsintien. That factory consisted of four different divisions and I was the general manager of the semiconductor division. Many years later, in 1976, I worked for General Instrument in Japan and I decided that it was time that I went off on my own. So I started a company in Japan, then one in Taiwan and one in Hong Kong.
TT: What was it like doing business in Taiwan back then?
PHOTO: GEORGE TSORNG, TAIPEI TIMES
Adler: It was very exciting and a lot of fun, but of course full of frustrations. There was no frame of reference as there was no industry here. General Instrument was the first foreign invested company that came here. Everything was brand new to everybody -- to General Instrument, to the government and to the people.
For example, at one point when we started a particular production line and we needed some industrial gases -- oxygen, nitrogen and hydrogen. When we looked around we found out that there were none in Taiwan. Taiwan was bereft of any industrial gas at all. So we were forced to take a year off, bring in equipment and install a cryogenic system to make our own gas which was a rather remarkable undertaking.
Also, in those days in Taiwan, there were periods during the year where the power failed every day. Every afternoon when there was a thunderstorm the power failed. So we had to take some more time off and bring in equipment for emergency power generation of our own as we couldn't depend on state-run Taiwan Power Co. That took another six months.
These were the sort of frustrations of trying to do an advanced technology manufacturing undertaking in a very primitive and a totally unsupported environment.
TT: What sort of cultural and linguistic barriers did you encounter when you first set up shop in Taiwan?
Adler: There was a big difference in thinking. One instance that sticks in my mind involved a production line that made television tuners, a complicated component. The last step in the manufacturing was testing, which took a trained operator 10 or 15 minutes to do. Most of the girls would be doing six or seven tuners an hour but one girl was doing only two an hour.
The general manager got angry with the foreman as this was happening day after day. He finally yelled at him and said, "I don't want to read that she's only doing two an hour again." So the next day the report was altered to indicate that she had completed seven. The general manager was amazed and asked the foreman how he did it, to which the foreman replied "I didn't do anything but you didn't want to read about it anymore."
Another example of cultural differences was back in the early 70s when we had 15,000 people working in this one location. We had to bring in girls and house them in a dormitory. Most of them were just young kids. After we did this we found that 25 percent quit each month and we would have to keep replacing them.
Headquarters back in New York were screaming at me saying "Why are they quitting? Why don't you do something?" I said that I didn't know what the problem was and they instructed me to do exit interviews. We had a Chinese personnel manager who did exit interviews on the kids and he found out the chief reason they were leaving was because of ghosts in the dormitory.
These were little kids who'd never been away from home before in a strange building late at night in the dark and they thought they saw ghosts. A lot of them were frightened and home they went. We had to report this back to New York and I asked the Chinese personnel manager to make the report as I didn't want to get fired. And sure enough, he got fired!
Another cultural problem for Americans at that time was that there was a predilection for corruption in Taiwan as the people were so poor and Americans were so rich by comparison. The difference was unbelievable. Taiwan was dirt-poor in those days, much poorer than the mainland is now.
Back then we payed a middle-school graduate US$15 a month and a high-school graduate US$20 a month. This difference in poverty encouraged an attitude that it was OK to steal if you were stealing from the Americans as they were so rich. One time I estimated that 90 percent of transactions in the factory involved kick-backs. But I was wrong, it was 99 percent.
From the language point of view, it wasn't too much of a problem. All of the managers that we hired spoke English, as they were college graduates. The thing that attracted us to Taiwan in the first place was the educational system. People were educated then, for example every foreman that we hired was an engineering graduate. There were plenty of engineers graduating here but there were no jobs for them.
TT: What was government red-tape like in the early days and how has the situation improved or changed during your time here?
Adler: There were definite frustrations with the government. In those days, the 60s and early 70s, it was not exactly a democratic government. The government was ruled by the KMT and they had a garrison command here. Everything was under the military. And there was a representative of such in our factory, "maintaining order," so to speak.
The government red-tape was really terrible. There are a couple of examples that spring to mind: the government had a phobia about gold and they wouldn't let any gold leave the island. In some of our technical processes we used gold wire and, using gold wire, of course we had some scrap.
We had to reclaim the scrap and take it back to the US to reuse as gold was very valuable -- but we couldn't take it off the island. So on my quarterly trips back to New York I would have to put all the gold scrap in my pocket, several pounds worth, and carry it. In those days there was no airport security. But each trip I had several thousand dollars worth of gold in my pockets.
We had another instance when we had developed a new process which required the use of a big platinum crucible. It was OK to import the platinum but the government wouldn't let us send it out for repair as the platinum was too valuable. So we had to quit using platinum and substitute quartz. You might say that this was a cultural barrier to industrial progress. I'm unaware of any government red-tape now. Compared to other nations, Taiwan is a very typical industrialized nation.
TT: What was it like out on the town in the 1960s in Taipei?
Adler: I've already told you there was a lot of poverty here. On several of the main east-west roads -- Minchuan for example -- down the center of the road there were tin and cardboard shacks. People lived there in the middle of the street. There was not enough housing for people so hundreds of people lived in the street.
Back in the 60s each morning the previous day's garbage would be spread out on the street corner as people would have picked through it. It was a very common sight to see water buffalo roaming the streets of Taipei. There was such poverty here that even a foreman from America was so rich it was like being king. It really was a remarkable situation.
In the 60s and early 70s, America was involved in Vietnam and Taiwan was an R&R (rest & relaxation) location for the American army. As a result there was a huge sex industry here of indescribable proportion. I used to say Taipei was like a sexual Disneyland in those days. The industry had been created under the Japanese, who colonized Taiwan for 50 years. So this was all in place when the Americans first arrived.
For the Americans it was great, whatever you couldn't get in the local economy we had places like the Officers' Club because the American military was here. So if you wanted to eat out you went to the Officer's Club and for US$1.50 you had a steak dinner. If you wanted to buy gasoline you went to the Navy compound and bought gasoline for US$0.20 a gallon.
Although the local economy lacked almost everything, Americans were immune from this because the American government, through the military, supplied everything you would ever need.
Around the military bases here the atmosphere was like a college campus. These were not combat guys as almost everything up in the northern part of the island was associated with intelligence. You hardly saw any guns. It was just a bunch of intelligence guys and the whole feeling was very relaxed. At that time the CIA had an operation, a very large factory, down in Tainan devoted to the repair of aircraft from Vietnam.
This was also a very valuable operation to the rest of the island. In Taiwan there were no machinists at that time as there was no industry. American CIA-trained machinists brought them up to Taipei to work for us.
This enabled us to build our own machine shop and to do things industrially that we had never dreamed of at costs that were beyond belief. Getting these machinists in house and learning how to do everything else ourselves was as responsible for the success of General Instrument as anything else that we did.
TT: What specific sector of the semiconductor industry are you in and how is that sector faring in the current chip sector slump?
Adler: Now I'm in diode transistors and linear ICs. Almost everything that we make is a commodity-type high volume, low cost semiconductor. This sector is lousy at the moment and has been for nearly two years. I think I'll be dead before it gets better. I don't see any pick-up coming.
TT: During your time in Taiwan you have witnessed the transformation of Taiwan from a low-tech labour intensive manufacturer to a global high-tech leader. To what do you attribute Taiwan's so-called economic miracle?
Adler: Firstly, their educational system. People have to be educated otherwise nothing can happen. Secondly, in those early years they had a very enlightened foreign investment policy that encouraged mainly American companies to come here. They encouraged General Instrument to come here in 1964.
This was a great coup, even if they didn't know it at the time as this encouraged a very significant fraction of the American electronics industry to come here between 1967 and 1971. There now exists a full-blown electronics industry mainly because General Instrument came here attracted chiefly by the educational system and foreign investment policies.
Our company had decided to go overseas, it was just a question of where we would go: Korea, Taiwan, Hong Kong or Singapore. We selected Taiwan due to their very, very strong educational system. The government had a good policy as they let a foreign investor own his own company.
In Korea you had to have a Korean partner with at least a 50 percent stake. Taiwan not only let you own the company but they also gave you a tax holiday and many other benefits to come here. The attraction of General Instrument to Taiwan ensured the success of Taiwan in the electronics industry for decades to come. General Instrument was a maker of components in the television industry such as television tuners, semiconductors and so forth.
A year after General Instrument came here, American TV manufacturers like Zenith, RCA and Sylvania started to come. They all brought new jobs and new technology. This was the start of the wave of American investment in Taiwan electronics and it was all due to the success of the government in attracting General Instrument in the first place. We were the foundation that everybody needed to come here to have components supplied to them.
Furthermore, the government itself has always been very clever about investing themselves in industries they thought critical to their future -- the greatest example being Taiwan Semiconductor Manufacturing Corp. (TSMC,
TT: What role has the Taiwanese entrepreneurial spirit played in this economic miracle?
Adler: A very important role. Sometimes I can't tell the difference between Taiwanese and Americans. If their eyes weren't any different, you wouldn't be able to tell them apart. They're as greedy as we are, as aggressive as we are. They take chances and do everything that American industry does. So many of them go to school in America, and they come back and it's like they've had an injection of aggressiveness. Many of the Taiwan companies are very successful, started by Taiwan guys with Taiwan money. It's terrific.
You do not see that plethora of small guys going into business in Hong Kong, Japan, Singapore or Korea. Often times in Korea, if they're not sponsored by the government, it doesn't happen. Taiwan, of all the countries in Asia, is by far and away unique in the success of the individual businessmen. I think this is mainly due to American influence. The American influence on Taiwan was very, very great for a lot of reasons. I think that the reflection of American influence is greater here in Taiwan than in any other Asian country.
TT: Taiwan officially fell into recession in August 2001 and is not yet fully recovered. What do you think are the reasons for these problems?
Adler: We've got a recession all over the world, so that's one reason. I think we're going through a transition where certain industries want to get over to China and do their manufacturing. And they are hollowing out certain industries here.
But there's plenty of new stuff coming up here in Taiwan to take its place. They're very clever people and really have a grasp of modern technology. Until the global downturn, I thought there would be this transition away from throngs of people working in a plant to a few people working on something new.
I think the downturn has accelerated the move to China and also hollowed out industry somewhat more than anybody thought so things have not been so great.
TT: What can Taiwan do to get the economy back on track?
Adler: I don't know the answer to that one. The people are what the people are: intelligent, educated, visionary. If there's any opportunity to jump in then they are going to do it. They do it by and large without the government now. Private industry here is very aggressive.
TT: There is much speculation over the impact of capital flight to China. What are your thoughts on this issue and do you attribute any of Taiwan's current economic woes to China?
Adler: I don't know how much of the problem has been blamed on this capital flight problem, but I don't like it. I think people are over-reacting. It's not so easy to make money operating in China. My observation is that more people lose than win. I think a lot of actions are too hasty, and a lot of people are moving too fast. Besides which, I don't trust the government over there at all. I'm afraid that if a Taiwan company gets too successful they'll grab it from them -- and there's nothing they can do about it. The rule of law has escaped them, and I speak from experience.
TT: Do you think Taiwan has focused too heavily on original equipment manufacturing (OEM) and not done enough to foster local creativity and innovation?
Adler: I think the Taiwanese are very creative and innovative. I think their educational system is as good as the Japanese -- basically everybody is educated. Some of the most interesting companies in the world today have been started by Taiwanese, so innovation is not their problem. Their problem has been how to get brand name recognition in the world. And there they have not succeeded. The only company that has made any impact is Acer with their computers and that's been quite marginal. As for the rest of Taiwan industry, their brand names are not recognised outside of their own industrial sector.
Formosa Plastics Corp (台塑) is known in the plastics industry, but ask a consumer in the United States and nobody knows any Taiwan companies. Whereas Japanese and Korean companies like Samsung, Hitachi and Sony are well known. But that brand name recognition was really prompted by their governments.
The cost of getting such brand name recognition is horrific and private companies just can't afford it. So unless the government finances the necessary promotional work, this brand recognition cannot be achieved. Taiwanese companies have the products, the skills and they're recognized within their industry. They just don't have brand recognition and probably never will.
TT: What do you forsee in the future for Taiwan's high-tech industry?
Adler: I definitely see Taiwan's future as being in high-tech, maybe in biotechnology as well as electronics. Taiwanese are coming back from college education in the US well-versed in whatever technology they are working in. They are returning with lots of American know-how after being exposed to American industry; how they make things, how they do their research and so forth.
There was a period of time in the 70s and 80s when they went to the US for college and stayed there because there were no jobs here, but now all that has changed. Nowadays it's a reverse brain drain. The employment prospects are better here than in the States, and for example, a third-tier engineer there could come back and be a first-tier engineer here -- they cut their teeth in the US. If you innoculate somebody with information they may become dangerous as a future competitor.
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