With its offices sporting wood flooring, a roof painted bright orange and conference rooms named after target markets in Southeast Asia, AppWorks (之初創投), one of Taiwan’s few startup accelerators, has the look and feel of the American counterparts it is modeled on.
However, its founder Jamie Lin (林之晨), 37, does not sound much like the optimistic entrepreneurs in Silicon Valley. Instead, he is glum about the future for Taiwan’s tech industry.
“It is like you are riding on the Titanic, and you know it is going to hit an iceberg, and you are trying to turn the rudder, but you know it is not turning fast enough,” he said in a recent interview.
Five years ago, Taiwan’s tech industry was riding high. The device maker HTC Corp (宏達電) had surpassed Apple Inc to become the largest smartphone vendor in the US, while the computer company Acer Inc (宏碁) had leapfrogged Dell Inc to become the world’s second-largest personal computer maker.
Such successes helped lift Taiwan’s economy, building on the nation’s longtime work on computer chips and moving the nation into its next phase as a tech power.
That trajectory has turned.
Last year, share prices of the computer makers Acer and Asustek Computer Inc (華碩) plummeted 43 percent and 22 percent as the PC market sagged, while HTC plunged 45 percent. Taiwan electronics exports have been falling since February last year, and in the third quarter the nation’s GDP contracted partly because of weakness in the tech sector.
As voters went to the polls and elected a new president over on Saturday, a rare point of agreement between Taiwan’s fractious political parties was that the tech industry needs help. Just days before the election four years ago, major Taiwan tech figures took to television to argue that the policies of the incumbent president, Ma Ying-jeou (馬英九), of improving relations with China would lift the industry.
Yet, rising competition from Chinese manufacturers and slowing growth there have had a mixed impact on Taiwan’s technology sector since. With Democratic Progressive Party president-elect Tsai Ing-wen (蔡英文) vowing to renew Taiwanese innovation and build out a new tech hub, a crucial part of Taiwan’s immediate political future depends on whether it can be turned around.
Taiwan’s tech problem, as Lin sees it, is the result of a culture and government that have failed to generate the talent and flexibility to move beyond the manufacturing prowess that made the nation a tech hub in the 1980s and 1990s and forward to the software and Internet industries driving Silicon Valley’s current boom. The dilemma became apparent to him in 2009 when he saw a commercial for Apple’s iPhone.
“The commercial said whatever you want to do, there’s an app for that,” Lin said. “Immediately, I realized that was the end of Taiwan. We are so good at making cheap computers and phones, but we are so bad at making an app for anything.”
Taiwan’s tech industry is rooted in a conservative business culture built around a now-aging first generation of high-tech industrialists, critics said. Unlike Silicon Valley, which has 31-year-old Mark Zuckerberg of Facebook, and China, which has the 44-year-old founder of Tencent (騰訊), Pony Ma (馬化騰), Taiwan’s tech leadership includes Morris Chang (張忠謀), 84, of the chipmaker Taiwan Semiconductor Manufacturing Corp (台積電), and Terry Gou (郭台銘), 65, the founder of Foxconn (富士康), the Taiwan-based contract manufacturer.
That has solidified a “survival mentality” unsuited to innovation, with tech executives unwilling to spend on the marketing and design that could set their firms apart from competitors, said Harvard Business School professor Willy Shih (史兆威), who studies Taiwan’s tech companies.
One example of that philosophy was on display recently at Silicon Power (廣潁), which produces branded portable hard drives and USB drives. When the company, based in New Taipei City’s Neihu District (內湖), received a flood of orders ahead of Christmas last year, it sent employees responsible for marketing, design and sales — all key to building a brand — to the factory floor, one employee said, who declined to be named because he was not authorized to speak about the policy.
Silicon Power spokeswoman Yvonne Chang said the move was meant to improve communication between office workers and the factory, not to cut costs. However, an internal e-mail announcing the plan called for an “emergency mobilization” of employees to help on the manufacturing “front lines.”
Some of Taiwan’s larger tech companies have suffered from a similar philosophy. HTC did not put enough emphasis on branding, Shih said, adding that Acer failed to adequately transfer to mobile devices as the personal computer market sagged. Many Taiwanese companies are now beholden to bigger-branded companies, mostly in the US, for computers, servers and smartphones.
Acer and HTC did not respond to requests for comment.
Asustek chief financial officer Nick Wu (吳長榮) said the company anticipated the shifts in the industry and was working to expand into robotics, as well as computing devices for the home and car.
“Transition is not something that can be completed overnight,” Wu said. “It takes strategic planning and solid execution, especially when our industry is undergoing a massive paradigm shift.”
Some organizations are working to jump-start the tech industry. Taiwan’s Industrial Technology Research Institute, a government-sponsored group that supports and builds out new tech companies, recently began spinning off more companies early, whereas before it had been doing more to aid extant firms, general-director Stephen Su (蘇孟宗) said.
The institute is also spearheading an initiative to link Taiwanese companies and offer their services to hardware startups in places like Silicon Valley that are in need of quick prototyping and manufacturing, with the aim of bringing in new business from the US. And the organization has created a research group to work on regulatory problems.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to