Silver Lake, a global private investment firm specializing in high technology companies, says Taiwan is a “victim of its own success,” citing the country’s business concentration in saturation, matured markets such as desktop personal computers, motherboards, notebooks and disk drives.
“Taiwanese companies are losing their advantage because of widespread technology, cost pressure from China and South Korea, as well as internal competition, making these businesses extremely difficult to expand beyond their current dominance,” Ken Hao, managing director of Silver Lake, said of the Taiwan economic situation during a speech at the 2008 Taiwan Venture Forum conference in Taipei yesterday.
Citing a recent World Economic Forum’s report, Hao said, Taiwan had fallen from No. 14 down to No. 17 in rank of global competitiveness because of severe brain drain and lack of intellectual property protection.
Another presenter at this year’s Taiwan Venture Forum was Colley Huang, founder and president of DigiTimes Inc, who echoed Hao’s opinion that Taiwan is at a cross roads right now, with South Korea and China quickly catching up.
As the head of a local information and communication technology (ICT) publication, Huang witnessed decades of high tech evolution in Asia and he stressed the importance the government’s role in planning a country’s core strategy, citing South Korea’s consumer electronics success, which came with a lot of help and planning from the government.
“Taiwan needs to have a similar master plan of where it wants to go, espeically at a time when Dynamic random access memory [DRAM] and liquid crystal display [LCD] industries are in disarray,” Huang said.
With careful planning and execution, Huang sees the country’s ICT industry growing easily from US$330 billion this year to US$400 next year.
Despite Silver Lake’s pessimistic assessment of the nation’s economic situation, Hao is optimistic for Taiwan because he sees the country as a potential industrial hub in Asia and primary conduit to China.
Silver Lake’s investment plans for Taiwan are three-fold.
First, it believes Taiwan’s most important competitive advantage is not based on its industries or products but rather its business leaders and workforce.
Second, it views China as more of an opportunity for Taiwan than a risk.
Finally, Silver Lake is placing its bets on those economies and companies that choose to act boldly and intelligently during the crisis will achieve substantial gains.
Hao outlined his company’s five strategies for improving investment in Taiwan: Moving up the value chain, achieving greater scale and vertical integration, greater mergers and acquisition, watching emerging markets and improving a pro-business environment.
Hao said the local workforce and the importance of trade with China were central to these five strategies.
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