Pages

Saturday, May 29, 2010

Economist on Taiwan/China IT supply chains

Economist's latest on Taiwan. Aside from the pro-China propaganda references on "becoming Chinese," it's an interesting look at what Taiwan's IT industry actually is, a nifty counterpart to the piece I posted a couple of days ago on Taiwan's labor costs and branding problems:
Computex includes stands where Acer and Asustek, another local computer-maker, display their latest wares. But it is not so much an IT exhibition as a mall for computer parts. Memory chips, motherboards, disk drives, fans, connectors, casings: each component has its own neighbourhood of booths. The heart of the Taiwanese IT industry is a network of hundreds of small specialised firms that make these things, overnight if need be.

This strength, however, is also Taiwan’s weakness. Most firms are junior partners in the world’s IT supply chains, making things others have developed. They are good at incremental innovation, mostly related to manufacturing (firms from only three other countries have filed more patents in America than Taiwanese ones over the past decade). But many of them are stuck in a “commodity trap”, cautions Dieter Ernst of the East-West Centre, a think-tank in Honolulu. Profit margins, he says, are razor-thin and do not allow adequate investment in R&D and branding. The Taiwanese industry is particularly weak where the most valuable intellectual property is created these days: in software, services and systems. As a result, Taiwan has a huge deficit in technological trade. Its firms are often sued by Western ones for patent infringements. In March, for instance, Apple filed a complaint against HTC.

What is more, under pressure from their customers, Taiwanese computer-makers have moved most of their production to cheaper countries, mainly China. Yet China is becoming a force in its own right in high-tech innovation and is itself fostering IT giants, such as the Semiconductor Manufacturing International Corporation (SMIC), another foundry.
The piece goes on to discuss how Taiwan is attempting to handle those issues, at least in IT, with ITRI taking the lead in fostering design, software, and services upgrades. But it does represent another look at how Taiwan's current business model is reaching its limits in many areas.
____________
Daily Links:
_______________________
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

4 comments:

  1. Rather they are entering the testing phase.

    ReplyDelete
  2. By the way, I don't know if you read about the US' recent scramjet test over the Pacific.

    And last month was the first test of the X-37B, which many people are now guessing is actually installing a spy satellite at the moment, but which could have a military use.

    The interesting thing is that both technologies seem to be viable and both seem to be affordable in the long term. They just both need to be perfected. And of course, any weapons based on these systems are not going to be ready for many years.

    But it seems that the new generation of arms, the ones that could overcome BJ's focus on missiles snd the US' reliance on carrier strike groups are beginning to enter the design phase.

    ReplyDelete
  3. SMIC is a complete joke of a company. Since its inception, it's done nothing but lose money. It's 10 year return is like a 60% decrease in stock price. It was successfully sued by TSMC for intellectual property infringement, basically saying that they couldn't make money even while stealing technology from Taiwan. Using SMIC as an example shows how clueless the Economist is when it comes to Taiwan and China.

    ReplyDelete
  4. Godammit! Thanks! SMIC rang a bell for me and I should have looked.

    ReplyDelete

Note: Only a member of this blog may post a comment.