INDUSTRY F
CUS
A Report on the Tech Sector
Taiwan, and train them to become proficient and professional managers. Sher describes the investment in TMILabs as in keeping with ITRI’s larger mission. “We believe [internet] content and applications will define the future macro trends,” and that many opportunities remain in this field, he says. He cites location-based services and virtual healthcare as two such opportunities. Already, TMI-Labs is having an impact on local internet startups. Huiting Chuang says Richi was offered bandwidth by TMI-Labs, in conjunction with a local telecom operator, at a fraction of the usual cost, for example. That TMI-Labs will offer mentoring from both Taiwanese and Chinese e-entrepreneurs points to a stark difference between Israel and Taiwan. While both countries have large neighbors that deny their political legitimacies, Taiwan is able to collaborate extensively with China – and is in fact China’s largest source of FDI. Israel, on the other hand, is still embroiled in longstanding conflict with most of its Moslem neighbors. Golan
notes that “Israel adjusts to its security needs by developing advanced weapons in order to defend its borders.” Yet military-sponsored research has also been responsible for many of Israel’s most acclaimed technological advances, including voice recognition and online messaging systems (ICQ was developed in Israel). The military connection has been a boon to Israel’s tech industry for other, less obvious reasons as well. Many have noted the “band of brothers” effect of serving together in an active conflict zone. “The personal relations developed on the battlefield are strong and contribute to future cooperation in the business sector,” notes Golan.” Several of Israel’s most famous technology companies were founded by partners who had served together in combat. Further, Golan and others observe that Israel’s military is unusual in that it encourages ordinary soldiers to speak up on issues of strategy and tactics, a practice that nurtures innovative thinking. This is perhaps a manifestation of the oft-acclaimed chutzpah characteristic of
Jewish culture, which Golan describes as meaning forthright, bold, and assertive. Chutzpah, according to many, is the secret ingredient behind Israel’s success in technology, giving its people the confidence to start – and often fail with – new companies. Since around 70% of startups end in failure, would-be entrepreneurs need resilience and the courage to try again. “You need to have a culture that doesn’t punish failure,” observes Golan. In Israel, she notes, failing with one startup and then opening another shows you are someone with the initiative and guts to go for your dreams. Taiwanese investor Jamie Lin agrees, saying that risk-aversion is “exactly the thing in our culture that’s stopping people from starting companies.” He notes that “our entire education system is built on the need to be right all the time. It’s a meritocracy-based culture, and you’re either a winner or a loser.” “You’re not encouraged to go off the beaten path that the teacher is taking you down,” says Lin, himself a product of the Taiwanese educational system. “Our entire training is based on repetition –
A Slowdown in Startups BY ALAN PATTERSON
T
he environment for startup companies in Taiwan is not as good as it was in the 80s and 90s when the information technology business was booming, says Kenneth Lin, chairman of the Taiwan Private Equity & Venture Capital Association (TVCA). “Taiwan’s information and communications technology (ICT) industry has developed successfully and reached maturity,” he notes. “Now business is tough, and that affects the venture capital (VC) business.” TVCA has nearly 300 VC members, who together have the equivalent of about US$8.3 billion under management. “It’s not very much,” says Lin, adding that the amount of money under management has not grown significantly in the last four years. Still, Lin sees opportunities for Taiwanese startups and VCs in areas such as key materials related to the IT industry. In the past, Taiwan relied heavily on Japanese suppliers for such key materials as polysilicon, the material used to grow monocrystalline ingots that are then sliced into wafers for chip manufacturing. Now Taiwanese startups are starting to supply polysilicon and ingots to local companies such as Taiwan Semi-
40
conductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker. Lin points to Taiwan’s TPK Holdings, the company that makes most of the touchscreens used in Apple’s iPad, as an example of a successful recent startup. “They created their own technology,” he notes. Now that Taiwan’s IT industry is dominated by so many large players such as TSMC and Quanta Computer, the world’s largest notebook computer maker, those big companies can afford to fund in-house startups and have no need to go to VCs to raise money. That is part of the reason why it is so difficult for independent startups to succeed, says Lin. TSMC early this year announced two startups, TSMC Solar Ltd. and TSMC Solid State Lighting Ltd. TSMC Solar will make solar cells used to generate energy from sunlight, while TSMC Solid State Lighting will make energy-saving LED lighting. “It is almost essential for a successful company like us to form new companies,” said TSMC Chairman Morris Chang. “The new businesses indeed must stand on their own and must be
taiwan business topics • july 2011
7_2011_IF.indd 40
2011/7/28 6:59:29 PM