Taiwan became a manufacturing powerhouse and the center of the world's laptop production. But it's a challenging place to launch successful start-ups. Can it rise to the challenge?
Taiwan has a population half the size of Spain's, packed into a land area one-fiftieth the size of Mexico. Yet, it still produces nine out of ten of the world's laptops. So, its economic future should be promising, right?
However, profits in the island's tech sector are declining, competition is increasing, and consumers are looking for devices made elsewhere. Taiwan urgently needs to reinvent itself. With a tradition of manufacturing for foreign companies and a hierarchical corporate culture, a new generation of start-up innovators is facing a tough challenge.
“It’s very much about innovation,” says Huang Deray, former director of Hsinchu Science Park, which is home to 400 high-tech companies and a world leader in semiconductor manufacturing. “To continue succeeding, you must think about the next product you should create to earn money three to four years from now, even if you have a product that’s doing well right now.”
Taiwan first transformed itself from a labor-intensive economy to a high-tech powerhouse during the 1980s. You may not have heard of companies like Quanta Computer, Compal Electronics, Pegatron, Wistron, and Inventec, but together they make more than 90% of the laptops sold worldwide, including those from top brands like Apple and Dell. However, making devices at low cost for others has become less profitable than before, and neighboring manufacturing centers like China and Vietnam are increasingly competitive. Profit margins for these five companies have halved compared to a decade ago. Revenues for Taiwan’s high-tech sector overall are mostly flat, compared to double-digit growth a decade ago, according to Helen Chiang, a Taipei-based market researcher at tech consultancy IDC. “It’s a real crisis situation,” she says.
PC shipments worldwide fell from 363 million in 2011 to 352 million last year, with further declines in the first half of this year. Taiwanese PC makers have shifted their focus to tablets; however, they do not have the same dominance in this market as they do with laptops.