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Tag: Taiwan

Trip to Taiwan

In late March, I had a chance to take a one week trip with my parents to Taiwan. I’ve posted some of the pictures I took on Google+ (I’ll get around to properly captioning them at some point), but the trip was very meaningful for me as it was my first trip back to “the motherland” in over twenty years.

830DD97C-8BDE-4594-BBB8-48741A40EEC9Being able to see relatives I hadn’t seen in many years (some, like my grandparents, who probably don’t have much time left in this world), hear their stories about me as a baby, see sights that I have only the faintest memory of (now from a completely different vantage point), be able to actually visit the graves of my relatives/ancestors and participate in traditional ancestor worship rituals, and visit places that I had only seen in photos was very moving. And, while it was a tiring trip (I think I got way less sleep during this “vacation” than I would have in a normal week), its one that I enjoyed greatly (see picture left :-)).

Word of advice to those who want to visit Taiwan: March is a great time – warm and humid, but not excessively so :-).

As for why you should visit Taiwan sometime? Here’s a quick bullet list:

  • Huge swaths of the island are virtually untouched by people – this is one of the few places where you can have a pure tropical environment
  • Delicious (and cheap) fruit and gorgeous butterflies (consequence of the tropical thing)
  • Excellent (and cheap) food  — especially in the night street markets
  • Very easy to get around – they borrowed Japan’s penchant for labeling everything and also Japan’s pretty effective and ubiquitous public transit
  • The National Palace Museum houses some of the finest Chinese art you’ll ever see
  • There are some very gorgeous locations to see: Taroko National Park, Alishan Mountain, temples galore, etc

So go: support the tourism industry of the place I came from :-).

Also, it wouldn’t be my blog if I didn’t make some overarching generalized takeaway, so here it is: Taiwan’s culture is a very interesting amalgamation of China and Japan. first reaction after clearing customs in Taiwan was how Japanese everything looked. Its hard to describe to someone who hasn’t been to Japan, but the way that the text/fonts look, the way the graphical icons and signage looked – looked very Japanese. The sophisticated subway system and high speed rail: also very Japanese. But, the rural areas surrounding the airport and the urban buildings (and the fact that Chinese characters rather than Japanese katekana are on them) reminded me a lot more of China. Throughout my trip, I was quite taken back by the unique Taiwanese combination of the two – a little bit of one and a little bit of the other – and it certainly helps that many of the natives can speak some degree of both 🙂 and that Japanese and Chinese tourists were everywhere!

In any event, great trip and I hope to repeat it with greater frequency than once every two decades :-).

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A Visit to 1800s London and, Oddly Enough, Taiwan

Those who follow my Twitter/Google Plus saw that I attended the Dickens Fair this past weekend (thanks to my lovely and talented friend Felicia for telling me about it and getting my girlfriend and I comped tickets!)

What is the Dickens Fair, you ask? Apparently, it’s a Bay Area tradition dating to the 1970s where a group of performers, businesses, and cooks set up an imitation of the London which famous author Charles Dickens (1812-1870) wrote about and lived in.

And, like with Comicon, costumes and cosplaying are not only tolerated, but encouraged!

The entire experience was very fun. The shops were all period – selling period crafts and clothing and food. It was fun to just walk around and check out what people were dressed as, what they were doing, the accents they were assuming, and the various performances by singers/dancers. Feeling a little out of place, I decided to buy a hat to better blend in:

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Another thing which turned out to be a fascinating experience was the antique book shop. While I didn’t buy anything, my girlfriend dug up a guide to the Japanese Empire written in 1914. At the time, the island of Taiwan was a part of the Japanese Empire so the book dedicates an entire chapter to describing it. While it was nice to hear good things about the island (about its beauty and nice climate), I was a little amused/shocked to hear the enormous amount of time the writer spent covering the “savage” aboriginal tribes and their practice of decapitation, and the extents to which the Japanese colonizers kept those practices at bay. Not really believing the writer, I turned to Wikipedia – and lo and behold, there apparently was widespread practice of headhunting amongst the aborigines!

That must explain why I’m so fierce and aggressive 🙂

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Replicating Taiwan’s Success

I’m always a fan of stories/articles highlighting the importance of Taiwan in the technology industry, so I was especially pleased that one of my favorite publications recently put out an article highlighting the very key Computex industry conference, the role of the Taiwanese government’s ITRI R&D organization in cultivating Taiwan’s technology sector, and the rise of Taiwan’s technology company stars (Acer, HTC, Mediatek, and TSMC).

Some of the more interesting insights are around two of the causes the article attributes to Taiwan’s disproportionate prominence in the global technology supply chain:

Much of the credit for the growth of Taiwan’s information technology (IT) industry goes to the state, notably the Industrial Technology Research Institute (ITRI). Founded in 1973, ITRI did not just import technology and invest in R&D, but also trained engineers and spawned start-ups: thus Taiwan Semiconductor Manufacturing Company (TSMC), now the world’s biggest chip “foundry”, was born. ITRI also developed prototypes of computers and handed the blueprints to private firms.

Taiwan’s history also helps make it the “best place in the world to turn ideas into physical form,” says Derek Lidow of iSuppli, a market-research firm. Japan colonised the island for half a century, leaving a good education system. Amid the turmoil of the Kuomintang’s retreat to Taiwan from mainland China, engineering was encouraged as a useful and politically uncontroversial discipline. Meanwhile, strong geopolitical ties with America helped foster educational and commercial links too. Western tech firms set up shop in Taiwan in the 1960s, increasing the pool of skilled workers and suppliers.

It also provides some interesting lessons for countries like Russia who are struggling to gain their own foothold in the lucrative technology industry:

  • image Facilitate the building of industrial parks with strong ties to R&D centers of excellence. Taiwan’s ITRI helped build the technical expertise Taiwan needed early on to gain ground in the highly competitive and sophisticated technology market by seeding it with resources and equipment. The government’s cooperation in the creation of Hsinchu Science and Industrial Park near ITRI headquarters and two major universities helped erect the community of technologists, engineers, and businessmen that’s needed to achieve a self-sustaining Silicon Valley.
  • Make strategic bets on critical industries and segments of the value chain. Early on, ITRI recognized the strategic importance of the semiconductor industry and went out of its way to seed the creation of Taiwan’s foundries. This was uniquely far-sighted, as it not only allowed Taiwan to participate in a vital industry but it also helped create the “support network” that Taiwan needed for its own technology industry to flourish. While semiconductor giants like Intel and Samsung can afford the factories to build their own chips, small local companies are hard-pressed to (see my discussion of the foundry industry as a disruptive business model). Having foundries like TSMC nearby lets smaller local companies compete on a more even footing with larger companies, and these local companies in turn will not only grow but also provide the support basis for still other companies.
  • Build a culture which encourages talent (domestic and foreign) to participate in strategic industries. This is one example where it’d be best not to imitate Taiwan. But, as the Economist points out, the political turmoil in Taiwan until the mid-80s made politically neutral careers such as engineering more attractive. In the same way that “culture” drove a big boom in technology in Taiwan, the environment which fostered smart and entrepreneurial engineers helped bring about the rise of the Silicon Valley as a global technology center (with the defense industry playing a similar role as Taiwan’s ITRI). Countries wishing to replicate this will need to go beyond just throwing money at speculative industries, but find their own way to encourage workers to develop the right set of skills and talents and to openly make use of them in simultaneously collaborative and entrepreneurial/business-like ventures. No amount of government subsidies or industrial park development could replace that.
  • image Learn as you go. To stay relevant, you need to be an old dog who learns new tricks. The Taiwanese technology industry, for example, is in a state of transition. Like Japan before it, it is learning to adapt to a world in which its cost position is not supreme and where its historical lack of focus on branding and intellectual property-backed R&D is a detriment rather than a cost-saving/customer-enticing play. But, the industry is not standing still. In conjunction with ITRI, the industry is learning to focus on design and IP and branding. ITRI itself has (rightfully) taken a less heavy-handed approach in shepherding its large and flourishing industry, now encouraging investment in the new strategic areas of wireless communications and LEDs.

Jury’s still out on lesson #5 (which is why I didn’t mention it) – have some sort of relation to me – after all, I was born in Taiwan and currently live in the Silicon Valley… 🙂

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Russia dreams of Silicon Valley sheep

image The Economist has an interesting article on the Kremlin’s latest push to modernize Russia’s economy and kick-start a wave of innovation which would supposedly lead to a “Russia with nuclear-powered spaceships and supercomputers.”

Far-fetched as this premise sounded, the article raised many thought-provoking questions on whether or not (and how) Russia could hope to build an innovation hub similar to the US’s Silicon Valley. One tidbit I found very interesting was that this isn’t the first time the Kremlin has tried something like this. Apparently, the Soviet Union, had attempted something similar in the past with very interesting political ramifications:

In the 1930s leading Soviet engineers arrested by Stalin laboured in special prison laboratories within the gulag. After the war, when Stalin required an atomic bomb, a special secret town was established where nuclear physicists lived in relative comfort, but still surrounded by barbed wire. Subsequently hundreds of secret construction bureaus, research institutes and scientific towns were set up across the Soviet Union to serve the military-industrial complex. They also spawned a technical intelligentsia. In the 1980s it was this class of educated people—permitted more freedom and better food than the rest of the country, but still poorly paid and not allowed to go abroad—that became the support base of perestroika [former Soviet Leader Mikhail Gorbachev’s attempt to liberalize/open up the Soviet Union which ultimately resulted in its collapse].

Russia’s rulers, however, seem keen on breaking this link between political openness/democracy and innovation:

Yet the experience of Mr. Gorbachev’s perestroika—which started with talk of technological renewal but ended in the collapse of the Soviet system—has persuaded the Kremlin to define modernisation strictly within technological boundaries. Hence Mr Medvedev’s warning not to rush political reforms. His supporters argue that only authoritarian government is capable of bringing the country into the 21st century. “Consolidated state power is the only instrument of modernisation in Russia. And, let me assure you, it is the only one possible,” said Vladislav Surkov [the Kremlin’s “chief ideologist” who put forth the current plan]

Is Surkov right about the lack of importance of democracy and political freedom? It’s hard to say for sure, but the success of the Asian tigers (esp. Korea, Taiwan, Singapore, and China) in this arena suggests that, at first glance, Surkov is right. Innovation and rapid economic growth do not require democracy so much as:

  1. effective and (relatively) un-corrupt governments
  2. free market systems which allow for consumer/business choice and property rights protection
  3. government investment in “innovation hubs” (e.g., Silicon Valley) where companies/universities/individuals readily share insights and collaborate

Of course, the flip side of the argument, is that its pretty rare for (1) and (2) to exist without democracy and at least basic political systems in place around due process and the respect for individual rights.

imageA successful attempt on (3) is difficult, regardless of the type of government authority (think of the countless failed attempts by cities, states, and countries to replicate Silicon Valley), but is especially difficult for “command regimes” in attempting to encourage innovation. It’s much simpler for an authoritarian government to find ways to double steel production (a la the Soviet Union’s Five-Year Plans) than it is for an authoritarian regime to encourage the trial & error, open exchange of ideas, and “disorganized” development which is necessary to drive innovative technology disruptions (which by definition can’t be “commanded”).

I’ve even heard it theorized that one reason the Soviet military elite allowed the perestroika which helped lead to its eventual collapse was their recognition that authoritarian regimes were not effective at encouraging the sort of innovation needed to build the computer technology which was giving (and still gives) the US its military advantage over the rest of the world.

But the harshest (and snarkiest) indictment of Russia’s short-sighted strategy here comes at the end of the Economist piece:

Mr Surkov is quite right when he argues that democracy would not stimulate technical innovation. The reason for this, however, is that under democracy a country with a declining population, a frighteningly high rate of birth defects, crumbling infrastructure and deteriorating schools might find a better use for taxpayers’ money than pouring it into Mr. Surkov’s Silicon Valley dreams.

Russia’s economy will likely grow quickly, regardless of the success of the Kremlin’s latest plans, by virtue of its resourceful population and economic convergence, but I suspect its future in terms of quality of life and innovation depends on whether it ever gets around to its much-needed political reforms.

(Image credit) (Image credit)

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Innovator’s Business Model

image A few weeks back, I wrote a quick overview of Clayton Christensen’s explanation for how new technologies/products can “disrupt” existing products and technologies. In a nutshell, Christensen explains that new “disruptive innovations” succeed not because they win in a head-to-head comparison with existing products (i.e. laptops versus desktops), but because they have three things:

  1. Good enough performance in one area for a certain segment of users (i.e. laptops were generally good enough to run simple productivity applications)
  2. Very strong performance on an unrelated feature which eventually will become very important for more than one small niche (i.e. laptops were portable, desktops were not, and that became very important as consumers everywhere started demanding laptops)
  3. Have the potential to improve by leveraging their industry learning curve to the point where they can compete head-to-head with an existing product (i.e. laptops now can be as fast if not faster than most desktops)

But, while most people think of Christensen’s findings as applied to product and technology shifts, this model of how innovations overtake one another can be just as easily applied to business models.

A great example of this lies in the semiconductor industry. For years, the dominant business model for semiconductor companies was the Integrated Device Manufacturer (IDM) model – a business model whereby semiconductor companies both designed and manufactured their own product. The primary benefit of this was tighter integration of design and manufacturing. Semiconductor manufacturing is highly sophisticated, requiring all sorts of specialized processes and chemicals and equipment, and there are a great deal of intricacies between one’s designs and one’s manufacturing process. Having both design and manufacturing under one roof allowed IDMs to create better products more quickly as they were able to exploit the interplays between design and manufacturing and more readily correct problems as they arose. IDMs were also able to tweak their manufacturing processes to push specific features, letting IDMs differentiate their products from their peers.

image But, a new semiconductor model emerged in the early 1990s – the fabless model. Unlike the IDM model, fabless companies don’t own their own semiconductor factories (called fabs – hence the name “fabless”) and outsource their manufacturing to either IDMs with spare manufacturing capacity or dedicated contract manufacturers called foundries (the two largest of which are based in Taiwan).

At first, the industry scoffed at the fabless model. After all, these companies could not tightly link their designs to manufacturing, had to rely on the spare capacity of IDMs (who would readily take it away if they needed it) or on foundries in Taiwan, China, and Singapore which lagged the leading IDMs in manufacturing capability by several years.

But, the key to Christensen’s disruptive innovation model is not that the “new” is necessarily better than the “old,” but that it is good enough on one dimension and great on other, more important dimensions. So, while fabless companies were at first unable to keep up in terms of bleeding edge manufacturing technology with the dominant IDMs, the fabless model had a significant cost advantage (due to fabless companies not needing to build and operate expensive fabs) and strategic advantage, as their management could focus their resources and attention on building the best designs rather than also worrying about running a smooth manufacturing setup.

The result? Fabless companies like Xilinx, NVIDIA, Qualcomm, and Broadcom took the semiconductor industry by storm, growing rapidly and bringing their allies, the foundries, along with them to achieve technological parity with the leading IDMs. This model has been so successful that, today, much of the semiconductor space is either fabless or pursuing a fab-lite model (where they outsource significant volumes to foundries, while holding on to a few fabs only for certain products), and TSMC, the world’s largest foundry, is considered to be on par in manufacturing technology with the last few leading IDMs (i.e. Intel and Samsung). This gap has been closed so impressively, in fact, that former IDM-technology leaders like Texas Instruments and Fujitsu have now decided to rely on TSMC for their most advanced manufacturing technology.

To use Christensen’s logic: the fabless model was “good enough” on manufacturing technology for a niche of semiconductor companies, but great in terms of cost. This cost advantage helped the fabless companies and their allies, the foundries, to quickly move up the learning curve and advance in technological capability to the point where they disrupted the old IDM business model.

This type of disruptive business model innovation is not limited to imagethe semiconductor industry. A couple of weeks ago The Economist ran a great series of articles on the mobile phone “ecosystem” in emerging markets. The entire time while I was reading it, I was struck by the numerous ways in which the rise of the mobile phone in emerging markets was creating disruptive business models. One in particular caught my eye as something which was very similar to the fabless semiconductor model story: the so-called “Indian model” of managing a mobile phone network.

Traditional Western/Japanese mobile phone carriers like AT&T and Verizon set up very expensive networks using equipment that they purchase from telecommunications equipment providers like Nokia-Siemens, Alcatel-Lucent, and Ericsson. (In theory,) the carriers are able to invest heavily in their own networks to roll out new services and new coverage because they own their own networks and because they are able to charge customers, on average, ~$50/month. These investments (in theory) produce better networks and services which reinforce their ability to charge premium dollar on a per customer basis.

In emerging markets, this is much harder to pull off since customers don’t have enough money to pay $50/month. The “Indian model”, which began in emerging countries like India, is a way for carriers in  low-cost countries to adapt to the cost constraints imposed by the inability of customers to pay high $50/month bills, and is generally thought to consist of two pieces. The first involves having multiple carriers share large swaths of network infrastructure, something which many Western carriers shied away from due to intellectual property fears and questions of who would pay for maintenance/traffic/etc. Another plank of the “Indian model” is to outsource network management to equipment providers (Ericsson helped to pioneer this model, in much the same way that the foundries helped the first fabless companies take off) — again, something traditional carrier shied away from given the lack of control a firm would have over its own infrastructure and services.

Just as in the fabless semiconductor company case, this low-cost network management business model has many risks, but it has enabled carriers in India, Africa, and Latin America to focus on getting and retaining customers, rather than building expensive networks. The result? We’re starting to see some Western carriers adopt “Indian model” style innovations. One of the most prominent examples of this is Sprint’s deal to outsource its day-to-day network operations to Ericsson! Is this a sign that the “Indian model” might disrupt the traditional carrier model? Only time will tell, but I wouldn’t be surprised.

(Image credit) (Image credit – Foundry market share) (Image credit – mobile users via Economist)

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More Made in Taiwan

image It’s been a while since I visited the topic of Taiwan’s pivotal role in the global technology supply chain. So, it’s long overdue for some not-so-shameless plugging of news involving my favorite island country’s technology industry and the impact they’ve had on the technology space:

Hopefully a small taste of the reason why so many tech analysts watch the Taiwanese industry so carefully.

(Image Credit)

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Foxmosa

I’m a big fan of Firefox and I’m all for Taiwan’s prominent position in the tech industry.

So, of course, I had to post about the adorable mascot of the Taiwanese Firefox/Mozilla community, Foxmosa (HT: Mozilla Links):

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From Mozilla Links:

The design of Foxmosa was done by Taiwanese illustrator, Tatit, who is an avid Firefox user as well, and its name is a pun on Formosa. Its writing in Chinese , 狐耳摩莎, is also a pun on Formosa in Chinese 福爾摩莎, where 狐耳 means fox ears.

For more adventures of this cute pup, check out the Foxmosa tours Taiwan blog!

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Taiwan and Japan

It is no surprise that many Asian countries are wary of Japan. After all Japan, until 1945, exerted strong military control over much of Eastern Asia. In light of this, what is very surprising is how Taiwan does not share in this negative opinion despite being a colony of Japan for 50 years.

Instead, as this video (complete with cute animations summarizing the Nationalist-Communist rivalry) shows, Taiwan almost seems to embrace the Japanese influence which helped shape its cultural and economic heritage. The video starts with an elderly Taiwanese woman speaking fluently in Japanese about her admiration of Japan to a group of Japanese students and later cuts to clips of various Taiwanese using Japanese sayings and sentences:

Why does Taiwan’s view of Japan clash so much with the views of other Asian countries? The video describes some of it, but in a nutshell, the historical context:

  • Japan built Taiwan’s economic infrastructure (roads, hospitals, buildings, etc.)
  • Japan imposed mandatory education on all Taiwanese citizens — boosting literacy and education in Taiwan and making it such that, even today, there are some Taiwanese who are better able to speak Japanese than they are able to speak Mandarin (my late Grandmother on my father’s side is one example — who actually tried to teach herself English using Japanese syllables as a guide)
  • The Japanese, through a policy called “Three Bad Practices”, helped to reduce Opium addiction, foot binding, and the wearing of the queue (a symbol of Manchu dominance over the “Han Chinese”)
  • Although limited, Japan opened Taiwan up to foreign art forms such as Western painting and cinema
  • Japan did not practice as heavy-handed a rule over the Taiwanese as they did to other Asian countries and were, instead, hoping to integrate Taiwan and its people into the Japanese empire (my Grandmother on my mother’s side once noted that Japanese soldiers in Taiwan were viewed by many to be effective and reliable deterrents to crime)

The results?

  1. Japan’s investments in Taiwan allowed it to become one of the fastest growing economies in the post-War period (a product of the high literacy rate, high quality education, excellent economic infrastructure, in-place banking system, etc.).
  2. Japanese influence has produced a Taiwanese culture that is very distinct from that of Mainland China’s in its inclusion of many Japanese and Western influences.
  3. The result is that Taiwanese lack the enmity and suspicion towards Japan which is much more characteristic of the Korean and Mainland Chinese people.

The video ends with the narrator noting that it is a shame that, despite the affinity that Taiwan seems to show for Japan, the two countries currently do not have official diplomatic relations. I think it’s a shame too.

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Made in Taiwan

I’ve been on my current case for about 3 months. As I’ve mentioned before, it is a high level strategy case for a technology client. As a result, I’ve been able to do a great deal of fairly interesting work researching various technology markets and trends, ranging from the typical (Internet search) to the more esoteric (grid computing), as I help the client scope out successful strategies by other technology players and possible expansion opportunities.

image During the course of this research, I have been surprised by many things, but what I found most surprising on a personal level was how important Taiwan is to the global technology market.

This is a particular point of pride for me, for despite Taiwan’s pre-eminence as an economic power and it’s fascinating fusion of Western, Japanese, and Chinese influences, the island is not given the same respect or attention as Hong Kong or Singapore. Despite a vibrant political system, it has no seat on the United Nations, no diplomatic recognition by any major country, and even to the United States which guards the island as if it were its own, it is the black sheep of the US’s circle of friends.

And yet, the world as you or I know it would not be able to get along without it:

  1. Taiwan is the center of the world’s semiconductor foundry business. Because cutting-edge semiconductor factories (called fabs) are so expensive to manufacture, only the largest semiconductor firms (such as Samsung and Intel) have the annual sales numbers to justify building their own factories. Smaller players are better off outsourcing their production capacity to dedicated semiconductor factories, called foundries. Today, almost all semiconductor manufacturers use the services of a foundry to build most if not all of their semiconductors. The world’s two largest foundries, TSMC (Taiwan Semiconductor) and UMC (United Microelectronics) are located in Taiwan, and together control approximately 60% of the world foundry business (the next largest foundry is only half the size of UMC, which is itself only about one third the size of TSMC!) and exert significant influence in the global semiconductor industry.
  2. Taiwan is the center of the world’s electronics manufacturing services. What many people don’t realize is that companies like Apple and Dell tend to only specialize in marketing and some design, but not in manufacturing (which would involve building a factory, gaining manufacturing expertise and skill, and other expensive and difficult things for a firm trying to stay lean and on the cutting edge). These firms thus outsource their manufacturing to specialized firms called Electronic Manufacturing Services (EMS) firms. The world’s largest EMS company by far is the Foxconn/Hon Hai conglomerate which is responsible for about 20% of the world’s outsourced electronics manufacturing, almost double that of the second largest firm. Never heard of them? You’ve certainly heard of its products: the MacBook Pro, the iPhone, the iPod, the Playstation 3, the Wii, the Xbox 360, graphics cards for AMD/ATI and NVIDIA, … the list goes on.
  3. Taiwan is the world’s original design manufacturing capital. Original design manufacturers (ODMs) go a step further than EMS firms — they actually do provide some of their own design services (which begs the question of what we’re paying Dell and HP and Apple for when they’re outsourcing design to ODMs). This is one reason that many ODMs are also original electronics manufacturers (OEMs) — companies which attach brands to the electronics themselves (think Apple, Lenovo, Dell, etc.) Of the top 10 ODMs in the world in 2006, at least 9 are Taiwanese companies (and that’s because I was too lazy to look up the last one — TPV technology) — those firms alone control nearly 70% of the global ODM market — and they include Windows Mobile phone manufacturer and Open Handset Alliance member HTC and the rapidly growing computer OEM ASUS.
  4. Taiwan is also home to D-Link and Acer. The latter of which recently is trying to resurrect dying brands of eMachines and Gateway.

Long story short — Taiwan matters, and I hope this will be the first in a series of posts that explains a bit more about the country that I come from.

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