Jonney Shih, the chairman of Asus Computer, has epitomized the
Taiwanese electronics engineer for a generation: A slender figure in
rumpled, baggy trousers, he once helped Intel solve heat problems in its
Pentium 4 microprocessors.
So it has been a surprise during the
last several years to see Shih, now 60, reinvent himself with snug-cut
Italian suits, innovative designs for tablet and notebook computers and
scathing criticisms of Taiwan's test-obsessed, engineering-oriented
"I don't think the Taiwanese got very good
training to drive the mentality of innovation," he said during an
interview at Asus' headquarters on the outskirts of Taipei. (Shih also
demonstrated his flexibility in the interview, assuming the lotus
position while wearing a dark blue Armani suit with a sky-blue Armani
Fostering innovation has become a mantra among corporate
leaders and government officials alike in Taiwan this year because the
island's huge consumer electronics industry has run into serious
Worldwide sales of PCs, for which Taiwanese companies
control more than 90 percent of the final design and manufacturing, are
declining steadily. Sales of smartphones, for which Taiwanese companies
control less than a fifth of the market, are rising briskly. Tablets
based on the Android operating system, which most Taiwanese companies,
with the exception of Asus, have been slow to embrace, are also on the
same upward trajectory.
"Outside of Asus, all the others are struggling," said Helen Chiang, a Taiwan electronics specialist at the IDC research firm.
and Acer have each reported that sales in the first quarter dropped 19
percent from a year ago. HTC's sales plunged 37 percent, although that
was partly because the company began shipping the annually improved
version of its best-known smartphone in late March instead of February.
At Quanta, a 70,000-employee contract designer and manufacturer of
notebook computers, sales have shown double-digit percentage drops from
year-earlier levels for 14 consecutive months.
Foreign rivals have
proved more nimble. In South Korea, Samsung is expanding rapidly in
smartphones, tablet computers and other sectors. After embracing the
Android operating system early, the company has built on its huge
economies of scale in the mass production of components, like display
screens and microprocessors.
In China, Lenovo and many smaller
manufacturers are relying on labor that, while no longer cheap, is still
less expensive than in Taiwan. That helped make Lenovo the only one
among the top five PC makers worldwide to eke out a gain in shipments in
the first quarter - although by only a tenth of a percent.
the United States, Apple, Google and Amazon have shown themselves adept
at producing breakthrough consumer products, while pending legislation
would allow them to import more foreign engineers at a lower cost than
hiring and training domestic engineers
As notebooks and other
Windows-based PCs have lost ground, first to Apple tablets and now to
Android-based designs, even Microsoft has been indicating
dissatisfaction with the pace of PC innovation in Taiwan. Despite a
longtime aversion to hardware, Microsoft recently introduced its own
"The Surface tablet (Review I Pictures) is a pretty strong signal to
the whole Taiwan PC ecosystem that they're not innovating enough," said
Bill Whyman, a senior managing director at the ISI research firm.
exception to Taiwan's difficulties is Asus. Its many new Android-based
tablets, including one that it has branded with Google, allowed it to
surpass Amazon in the first quarter of this year to become the
third-largest player in the global tablet computer market, behind Apple
and Samsung, according to IDC.
And some of its designs are
downright clever. One new model, the PadFone, lets the user slide a
cellphone into the back, turning the tablet into an oversized cellphone.
Another tablet, the Transformer (Pictures), features a detachable keyboard with a
wireless connection and a two-sided display panel that can show a movie
on one side to entertain children or guests while the other side is a
regular computer display for the owner.
(Also see: Asus announces smartphone-tablet hybrid PadFone Infinity)
Those innovations have
helped keep Asus' sales growing, up 16 percent in the first quarter from
a year ago. That was even as worldwide PC shipments fell 11.2 percent,
according to Gartner, another research firm.
and weaknesses in pursuing broader innovation echo the challenges of
many countries that, for varying reasons, seek to foster the growth of
industries based on creativity.
The U.S. and Europe have long
worried that their businesses and universities come up with many new
ideas but then fail to commercialize them. Mainland China has fretted
that its businesses and universities are too slow to come up with
That Taiwan needs to look to 60-year-olds like
Shih for innovation is a concern for government officials As economic
growth has stalled in Taiwan and new factories have shifted to mainland
China, young people have become more interested in civil service jobs
and academia instead of industry, government and industry officials say.
worry is that people with new ideas at universities and government
laboratories are not commercializing them. "Our teams think the problem
here is those inventors didn't pursue it, to push their inventions into
the market," said C.Y. Cyrus Chu, the official who oversees the National
Science Council. "Youngsters here are afraid to fail - we are not ready
to face failure."
The government has started a program of grants
and advice for inventors to help them develop business plans and seek
Another big concern for industry and government
is that the ability of Taiwan's electronics business to innovate may be
hamstrung by the very quality that has brought the sector so far over
the last three decades: obsessive secrecy.
U.S. giants like Apple
have long treasured the ability of Taiwanese companies like Foxconn to
do the final engineering and then mass produce new consumer electronics
devices by the millions, with remarkably few leaks to competitors or to
the ravenous technology news media.
To win contracts to supply the
likes of Hewlett-Packard and Dell, Taiwanese companies routinely divide
their staffs and dedicate teams to each foreign customer. They even set
procedures for making sure that engineers and buyers from different
clients do not accidentally meet one another while having lunch at
But that secrecy makes it harder for the
Taiwanese industry to learn good ideas quickly from foreign and domestic
rivals. "They keep secrets and don't duplicate, so the customers are
happy to work with them," said Chan Wen-Hsin, a senior industrial
technology specialist at the ministry of economic affairs.
technology companies have decades of experience in accepting detailed
computer performance benchmarks from U.S. customers and then figuring
out the least expensive way to meet those benchmarks. But that may also
be an obstacle to innovation now.
The least expensive approach
often involves barely exceeding the benchmarks, and not coming up with
solutions that may cost more but dazzle consumers.
Chan cited a
decision by Steve Jobs, then Apple's chief executive, to choose glass
screens for the iPhone instead of plastic screens, which could be
In Taiwan, he said, "we do not pursue a perfect solution; we pursue a good enough solution."
another concern for Taiwan, much more than for the U.S., lies in a
brain drain of midcareer technology experts who speak fluent Mandarin
Chinese. A tripling in the number of mainland Chinese college students
over the last decade, to 30 million last year, has produced a severe
shortage of professors who speak Mandarin Chinese.
The result has
been a series of departures from Taiwan's universities and elite,
government-backed research institutes. Even the vaunted Industrial
Technology Research Institute, which gave birth to global semiconductor
powerhouses like the Taiwan Semiconductor Manufacturing Co. and the
United Microelectronics Corp., has been losing experienced researchers.
be sure, Taiwanese companies are now trying to increase the pace of
innovation. Acer says that it plans to double research and development
spending as a share of sales this year, by 1.2 to 1.5 percent. Gregory
Bryant, the general manager of Intel's Asia and Pacific operations,
said, "There is a resurgence of innovation and investment in Taiwan."
lingering cost advantage for Taiwanese companies is that pay for recent
college graduates in electronics engineering and computer sciences is
low and gradually declining. A rapid expansion of higher education over
the last decade has produced a flood of fresh job applicants. Recent
graduates typically earn $800 to $900 a month - more than in mainland
China, where the pay is more like $500 to $600 a month, but still much
less than in the U.S.
Japanese automakers opened design centers in
the United States as pay in their home market began catching up with
U.S. levels, like the Toyota center in Ann Arbor, Mich., and the Nissan
center in San Diego. But Taiwanese electronics companies have been wary
of following suit.
Asked why Asus does not open an engineering
center in the United States so as to tap U.S. innovation, Jonathan
Tseng, the company's vice chairman and president, gave a single-word
Asus, a 10,000-employee company, does have an
office of 300 employees in Fremont, Calif., which includes sales staff
and so-called program managers, who are responsible for pricing,
marketing and consumer research.
Analysts say that Asus'
innovations may not represent the same kind of big leaps forward as the
iPad or iPhone, but may be what other Taiwan manufacturers need to
retain their role in the global consumer electronics industry.
incremental, it's true," said Tracy Tsai, a Gartner analyst here. "But
compared to other device manufacturers, they are doing better."
© 2013, The New York Times News Service