So I was having lunch the other day with a group of newspaper editors in Taipei, and I asked them if I could take notes on my computer. As I opened up my laptop, I joked that I hoped they didn't mind that I was using a Dell Inspiron made in the US and not a Taiwanese-made Acer computer. Without missing a beat, the editor on my left said, "Oh, don't worry, your Dell was made here, too."
I couldn't resist turning my Dell over and looking at the bottom. It said: "Made in Taiwan."
If you think China would pay a huge price for war with Taiwan today, you can't imagine the price that Taiwan, and the rest of the world, would pay.
PCs and laptops are made in a global supply chain, and Taiwan, and Taiwanese-owned firms in China, are the key link in that chain. They make the most important parts that go into Dell, Compaq, Acer, Hewlett-Packard and IBM PCs, as well as into Cisco systems that keep the Internet flowing.
Most US computer firms have moved out of manufacturing. While they assemble computers in the US from parts made in Taiwan, they are increasingly focused on software and Internet technologies. This has left Taiwanese firms as the world's largest supplier of 13 critical computer components.
A war across the Taiwan Strait, coinciding with the Y2K virus -- when demand for replacement computers will be soaring -- would be a human and economic disaster. (Although it would make a great Hollywood movie plot.)
"The immediate impact would be a shortage of computer products and prices would go up instead of down," said Stan Shih, chairman of the Acer Group.
Taiwanese know that this limits how much they can unilaterally pull away from China. Electronic Business News quoted a Compaq spokesman in Taipei as saying, if China really does start to threaten Taiwan, "we will consider a plan to shift our orders from Taiwan to Korea or Japan."
This isn't the only reason Taiwan has to consider China's wishes.
Taiwan is great at taking other people's innovations, improving them and then manufacturing them cheaper. The problem is, cheaper labor markets around Asia are catching up to Taiwan in this game. Therefore, Taiwan has to move up the computer food chain and start doing its own software and Internet innovation.
But for now, Taiwan can't compete with US firms in this area, because they have access to a huge English-speaking market in North America, full of designers. Designing Internet and software products for that market has great risks but offers great rewards, so thousands of US firms are involved. Taiwan needs its own huge Chinese-speaking market that would offer the same rewards and talent pool for the next generation of software and Internet technologies. It needs China.
"Our democratic system gives us the ability to do anything we want [by way of innovation] -- the problem is that our market is too small," Shih told me. "So it doesn't encourage people to take innovative risks because the rewards are too small. We have to find a way to have a big market, so China is our hope. Many Taiwanese companies have software centers in China. We have hundreds now, but our plan is to have thousands. Our future technology development depends on leveraging the human resources in China. We need China for brains and we need it for the market -- to be able to justify the risks in developing Internet-enabling technologies and services."
Taiwan's role in the world computer market helps to explain both its self-confidence and its vulnerability. Because it is a democracy, it can attract the best Taiwanese to come home and give them a real culture of innovation. But because it is next to, dependent on and coveted by China, it has to restrain its independence drive.
Taiwan has the winds of history at its back. China has the winds of history in its face.
If Taiwan fails to understand that and rushes toward formal independence, its future will be "Made in China." But if it can be patient and play to its strength, China's future will be "Made in Taiwan."
NY Times News Service
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