When Asustek Computer Inc chairman Jonney Shih (施崇棠) on Friday told reporters after the firm’s annual general meeting that the company had informally discussed acquiring HTC Corp, he did more than take advantage of someone, or something, in difficulty.
Shih sent a message to the public and the government about the importance of a brand name and the value it could add to a company and the nation as a whole. However, the idea of HTC being bought also raises fundamental questions as to how and why such a once-prominent Taiwanese brand is losing value so quickly.
HTC was a top Android-based smartphone maker in the global market a few years ago, but dropped out of the world’s top 10 brands in 2013 and has been unable to return to top-10 popularity ever since. HTC’s decline is a result of its late response to market fluxes, its lack of more innovative products and its lack of progress in emerging markets.
Asustek is, of course, much bigger and more diverse than HTC in terms of market value and product portfolio, and the acquisition of HTC would provide Asustek with a wealth of valuable patents as it moves ahead in the global smartphone business.
As of Friday, Asustek had a market value of NT$216.89 billion (US$6.95 billion), compared with HTC’s NT$62.93 billion. Asustek’s products include desktop PCs, notebook computers, tablet devices, smartphones and motherboard products, while HTC focuses mainly on smartphones and had a patent portfolio worth NT$5.96 billion as of the end of March.
However, in mulling the acquisition of HTC, Shih and his colleagues are facing a company whose major shareholders, led by company chairwoman and chief executive Cher Wang (王雪紅), might not want to sell — just like their investment in chip designer VIA Technologies, which has been losing money for years.
Moreover, such a purchase also raises the question of whether there is a need for Taiwan to consolidate ailing domestic industries, from LCD to DRAM and from PC to smartphone sectors, to help them better compete with foreign rivals. However, such a strategy might prove difficult to execute because of differences in management models and corporate culture.
Taiwanese companies face many challenges, but beneath the idea of HTC being bought is a problem rooted in the fast-declining global competitiveness of local information and computer technology brands and the emerging strength of Chinese companies. Some have attributed the problem to the government’s lack of workable industrial policies over the past few years, as well as its failure to provide effective assistance — including land, capital, labor and tax incentives — to companies to help them withstand harsh and unrelenting industry cycles.
It has become ever clearer that the nation’s weakening export performance is the result of increasing competition from China and the information technology orientation of the nation’s industrial structure, which is more prone to market volatility than at any other time in recent years.
So, what is the government’s long-term blueprint for local industries? Is it supportive of meaningful market consolidation and business transformation to help give Taiwanese firms an advantage against their regional rivals?
Nothing has been heard from the government regarding the issue so far, but both the public and corporate executives are keen to know what plans it is preparing to help the high-tech industry and the labor market.
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