The Name Game

When Stan Shih founded computer maker Acer in 1976, he dreamed of creating a globally recognized brand. It was an ambitious vision for a start-up founded in a small Taipei apartment, but Shih, who’s known as the father of Taiwan’s formidable technology industry, eventually got his wish. Acer now ranks behind only industry giant Hewlett-Packard in the global notebook-PC market, with a 19% share, and is poised to overtake Dell as the second largest computer seller in the world.

(Read “New Netbooks Debut at Taiwan Computer Show.”)

Shih is hardly the only Taiwan businessman aspiring to make his company a household name. Capitalizing on technological shifts in mobile computing and consumer attitudes, several of the island’s electronics manufacturers are beginning to steal some of the thunder of their better-known Japanese, South Korean and American rivals. Chief among them are Asustek Computer, which practically invented a category of small, inexpensive notebook computers called netbooks, and HTC, which is making a surprisingly strong showing in smart phones, a fast-growing market currently led by the Apple iPhone.

(See the best inventions of 2008.)

Like scores of other Taiwan companies, HTC and Asustek have been laboring in obscurity for years as contract manufacturers, building and in some cases designing PCs, music players, cell phones, LCDs and video games on behalf of well-known brands such as Hewlett-Packard, Motorola and Apple. Taiwan’s heavy concentration of contract manufacturers makes the country a high-tech powerhouse — but the business model has its limits. Because they work for others, contract manufacturers have little pricing power and don’t reap the higher profit margins commanded by companies like Sony and Samsung. “There are very slim margins and you have to listen to your partner,” says Peter Chou, HTC’s CEO. “With your own brand, you own your own destiny.”

This is why Taiwan’s manufacturers, at the risk of alienating their heavyweight customers, are breaking out of the box by slapping their logos on innovative new products. Asustek was mainly a little-known maker of computer circuit boards and graphics cards until 2007, when it unveiled the Eee PC, a lightweight miniature laptop costing less than $300. These wi-fi-equipped netbooks were enthusiastically accepted by an increasingly bargain-conscious public. Sales are soaring this year even as overall PC sales decline during the recession; research firm DisplaySearch predicts 1 in 4 laptops sold this year will be a netbook. This resounding success vaulted Asustek’s Asus brand onto store shelves all over the world.

(Read “Little Wonders: Three Netbooks Worth Owning.”)

HTC is hoping for a similar hit in smart phones. The company has years of experience developing cell phones and handheld PDAs for Hewlett-Packard and other companies. In mid-2007, about the same time that Apple launched the iPhone, HTC started selling its own touchscreen phone. The HTC Touch became popular in Asia, partly because it was cheaper than the iPhone and could be used on a variety of cellular networks. Based on that success, HTC now ranks fourth in market share for smart phones globally, according to research firm IDC. The company, which is about to release a new smart phone, the Hero, hopes to ultimately become one of the top five handset makers in the world.

Getting to the top is tough — and holding market share can be even tougher. After setting the pace in netbooks, Asustek has since been losing sales as much larger rivals, including Acer, have muscled in. The company posted its first quarterly loss in the last three months of 2008 after misjudging demand during the recession. “That was a lesson learned,” says Asus chairman Jonney Shih, who is adjusting by shrinking the company’s product line. Says HTC’s Chou: “You’re competing with giants like Apple and Nokia. You must really have something special.”

Taiwan’s companies are increasingly showing that, after years in the shadows, they may have something special — and not just in electronics. Taichung-based Giant Bicycles is one of the top three bicycle brands in the U.S. and Europe. And Taiwan companies continue to show an ability to innovate. For example, Optoma, a leading maker of digital projectors, recently created the world’s smallest projector, the Pico PK101. Delta Electronics, a supplier of power adapters, is coming out next year with a full-color e-book reader that is thinner and lighter than Amazon’s Kindle and plays video.

Stan Shih would like nothing better than to see them succeed. Now retired from Acer, the 64-year-old runs a consulting firm, iD SoftCapital Group, that has raised $30 million to fund the branding efforts of Taiwan companies. “If Acer can do it,” he says, “so can others.” What’s in a name? Possibly the future of Taiwan manufacturing.

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