Two of Taiwan’s most prominent high-tech brands, computer vendor Acer Inc. and smartphone-maker HTC Corp., are feeling the pinch. Both have come off the competitive battlefield worse for wear, reported Commonwealth monthly. With Apple’s growth slowing and Microsoft’s acquisition of Nokia after unsuccessful forays into mobile devices, this winter will definitely bring a reshuffling among these high-tech giants.
Acer, founded 37 years ago, is Taiwan’s standard-bearer of brands, but has suffered two consecutive years of heavy losses and is not showing any signs of recovery.
Sixteen-year-old HTC has lost NT$900 billion (US$10 billion) in market value in just two years and this downward trend has continued in the third quarter of this year. HTC is forecasted to ship about 20 million smartphones this year, barely half the total it shipped at its 2011 peak. And now, it is in danger of being overtaken by Chinese smartphone brand Xiaomi, launched just three years ago.
However, if HTC chairwoman Cher Wang is worried, there were no signs of this during an interview with Commonwealth. “I think smartphones are still in their infancy, with still plenty of opportunities, such as smart cities. There are inevitably ups and downs when building a brand.”
Taiwan’s small home market a disadvantage
Without a big home market, Taiwanese high-tech companies are naturally at a disadvantage in the crucial area of defining standards, such as source codes and basic communications patents. Taiwan is also not interested in adopting the Korean model of pouring the entire country’s resources into forging one big brand, like Samsung.
“A small country has to consolidate its resources. To some extent, it has to have the capitalist spirit,” said Chiu Yi-chia, the dean of National Chengchi University’s Graduate Institute of Technology, Innovation and Intellectual Property Management. Taiwan’s high-tech policies, Chiu said, put too much emphasis on fairness and diversity, making the industry akin to being a sheep (socialism), with a skin of wolf (capitalism). As a consequence, Taiwanese tech brands are inherently at a disadvantaged without a concentration and not enough sustaining strength to take on the global market.
Internationalization is not the only key for growth
From Acer, AsusTek to HTC, everyone is up against the same fundamental challenge. If you want to fight a global battle, you need international talent. “Taiwan does not have a national image or market development advantages to sell, so Taiwanese companies must rely on above average salaries when hiring top international talent,” observed Bei Lien-ti, a professor at National Chengchi University’s Department of Business Administration.
Commonwealth reported that Acer and HTC have paid top salaries to attract an internationalized sales force, but it has not translated into improved results. “Can we really call using a bunch of foreign executives to make a bunch of cross-border acquisitions internationalization?” asked a resentful former HTC manager.
So why are Taiwanese tech companies unable to work with an internationalized team over the long term? “Because Taiwanese do not have boards of directors with strong functions and sound operations,” said Chiu. He notes that the management of Taiwanese tech brands generally depends too much on an all-powerful CEO. “Only if the board mechanism is sound can the company build the strength of its management step by step,” Chiu said.
Understanding the market to cultivate niche
Commonwealth noted another key to brand marketing is in finding an appropriate price point based on the product’s positioning in the market. But because HTC’s customers have largely been telecom operators and Acer’s customers have been distributors, neither has been able to get a firm grasp of the end user, making it more challenging for them to develop insight into consumer needs.
HTC relied on its edge in technology, including producing the first Android smartphone, to become the preferred supplier of telecom operators around the world. But after rising to the height of the industry, HTC neglected the rapid shift in the smartphone market to mid-range and low-cost models.
“Small countries can still outwit bigger rivals, as long as they understand how to focus,” said Liu Shuen-zen, a professor at National Taiwan University. Taiwan can open a new battlefield and cultivate B2B brands, he suggested, pointing to the Swiss model as one worth emulating.
“Switzerland emphasizes precision and focus. Through its sharp concentration and technical proficiency, Switzerland commands 80 percent of the global market for currency ink, and its watches generate high margins,” said Liu, who believes Taiwan could also become a global “hidden champion” in several niche markets.
Acer and HTC both posted losses for the third quarter, and their short-term prospects remain uncertain. But considered over the long haul, the hard road traveled by Taiwan’s high-tech brands remains worth pursuing. After all, success is built on the pillars of failure, noted Commonwealth.