Taiwan At A Crossroads

I am at the annual Computex exhibit, and what a difference from two years ago. Back in 2003, the show was delayed until the fall due to the SARS outbreaks over the summer. Even with the delay, it still was a chaotic affair of mini-boothlets and thousands of people cramming the narrow aisles. This week was a relatively calm affair, and the buzz factor was way down. It was almost, dare I say, reminiscent of the old days of Comdex past.

The show is Taiwan’s centerpiece for its native computer sons and daughters, and most of the attendees are from Asian countries. But in various discussions with higher-level executives at the major supply and marketing vendors, I was getting worried. Taiwan used to be the engine that drove the PC habits of the world. Now I am not so sure, and as the world becomes a more complex place, the Taiwanese vendors are going to have to invest a lot more in marketing their wares and building the right channels to get them to the right places.

The trouble with Taiwan is China, mainland China. China holds all the cards in this relationship, and indeed continues to build missiles and aim them across the strait at the island in the name of self defense. That makes me uneasy, sitting here in my hotel room in Taipei, so I can’t image what the natives must feel as they address this everyday.

Second, China holds the current crown of low-cost producer and continues to build out its manufacturing base, at the same time as its consumer wealth increases ; creating more demand for electronics that can be satisfied locally. And China hasn’t stopped at being a cheap knock-off manufacturer either : it now has replicated the academic model of the developed world and produces more PhDs than we do in here in the US. All of the major global computer vendors have established research labs on the mainland, further drawing resources away from Taiwanese soil. Have we seen this pattern before ? The residents of the Ohio and Rhine valleys might have some sense of deja-vu.

But China isn’t the only issue. Taiwan Inc. also has the rest of the world to worry about, and has to develop a global marketing campaign that serves both the developed and developing countries. This is a very hard problem because you have to deal with different channels, different cultures, different purchasing patterns and different ways to reach your customers, not to mention different languages, currencies, tariffs, and so forth. This also puts pressure on the suppliers to manage their brands and assets in all these different situations. It isn’t so dissimilar from what we have here at Tom’s Hardware - with Web sites produced in ten languages by various business relationships that span both print and online media, it isn’t an easy task to be sure.

As PCs proliferate in these new markets that barely have the electricity, logistics, and Internet infrastructure to support them, the temptation to profit from these fast-growth areas is moving the attention away from the developed world’s needs. Only natural, you go where the business is. But would you rather put your resources in a market growing at 10, 20, 30 percent per year or try to squeeze you way into the more mature markets of Europe and America ? From what I have seen so far here at Computex, the mature markets are getting the short end of the Taiwanese stick.

That isn’t to say that the Taiwanese aren’t up to these tasks. The executives that I met with impressed me with their drive, intelligence, business savvy and can-do attitude. But I do think that in the years to come, we will see the best of these companies combine assets in Taiwan, mainland China, and North America. You have to balance the engine with the engineer. And the ones that will succeed will be the companies than can locate the right partners and quickly adapt to the emerging markets, while still understanding how to drive innovation in the US, Japan and Europe.