Sun, Oct 09, 2011 page8

• EDITORIAL: The Apple effect in Taiwan

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  There are those who are great fans of Apple Inc and appreciate its creativity in product design. There are also those who are critical of the company, complaining about its products’ closed architecture and their not-so-cheap price tags.

  However, the sad news of the death of Apple co-founder Steve Jobs on Wednesday has prompted many of his fans and critics, as well as partners and rivals, to reflect on his legacy as an innovator, a trendsetter and a successful entrepreneur.

  Regardless of whether one is a critic or a fan, Jobs’ contribution to the world is remarkable. The impact he has had on the rise in popularity of information and communications technology (ICT) products, from personal computers and music players to smartphones and tablet devices, has helped to shape the world.

  While paying tribute to this high-tech visionary, we in Taiwan should also reflect on the impact the late Apple founder has had on this country and Asia as a whole, given that the Apple supply chain has had growing social and economic implications in recent years.

  Acer Inc founder Stan Shih (施振榮) said in a statement on Thursday that under Jobs’ leadership, Apple created new business opportunities for Taiwan’s ICT industry. Like it or not, the Apple business model has seen more relevant parties share a common interest in an ever-expanding array of ICT products and applications, Shih said.

  Shih was correct. In more than a decade, Apple has established a formidable supply chain in Taiwan through which it can manufacture its products, with its local contract manufacturers and component suppliers hiring tens of thousands of workers to help make Apple the most valuable company in the US.

  Taiwan’s Hon Hai Precision Industry Co, for instance, is one of the best-known Apple contractors in Asia and also one of the largest employers in China. Some previously little-known companies such as touch-screen maker TPK Holding Co have also seen their fortunes expand quickly as they became key players in the sector through partnerships with Apple.

  However, what Shih and other mourners did not say is that while many of those contract manufacturers and component suppliers may be good at doing business with Apple, they have become increasingly dependent on the US company for continued orders and are likely to encounter margin pressure in the face of Apple’s demand for lower prices.

  The challenge for many companies working in the Apple supply chain is that while they may have achieved efficient manufacturing in line with their scale, their profit margin is relatively small compared with Apple’s sales of its own branded products. At a time when companies in Taiwan are expressing their condolences over Jobs’ passing, they may also have to think: If their ties with Apple grow stronger, will they be able to escape this perennial low-margin fate?

  In a country where we enjoy the benefits of a democratic political system and free-market environment, and where people respect a pluralistic culture and technological innovation, Taiwan should encourage more companies to move up the global corporate ladder. Brand building is the name of the game — smartphone maker HTC Corp last week jumped into the list of the world’s top 100 brands at No. 98, the first time a Taiwanese company has made it onto the list.

  Taiwan needs to grow more companies like Apple. Perhaps the greatest legacy Jobs has left us is inspiration to move up the production ladder.
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