Taiwan brands step away from the workshop

The focus now is on domestic innovation and the creation of strong brands that can be sold overseas. With that in mind, it might be worth looking across the Strait to Taiwan, where some technology brands have made the jump from equipment manufacturers to bona fide brands.

These include computing brands Asus and Acer, and mobile phone manufacturer HTC. Acer is the world's number two PC maker and HTC makes half its revenues in the US. All started out as original equipment manufacturers (OEM) for global brands and, as Robert Hsieh, CEO of ZenithOptimedia Taiwan, points out, they faced formidable challenges. They were latecomers to the global marketplace, they lacked marketing talent with global experience, and they had limited trading flexibility, because Taiwan is not a member of the WTO.

The key reason these companies rethought their strategies was pressure on margins. Being an equipment manufacturer was always a low-margin business, and with competition from China and other emerging nations increasing, those margins were not about to get any fatter.

However, the transition was not speedy. According to Thomas Chen, executive strategy director at Interbrand, Acer began brand-building in the early 1990's. Joseph Baladi, CEO of BrandAsian, points out: that B2B manufacture provides a mind set and management philosophy that "thwarts effective transition to doing business directly with customers who prefer brand names."

One challenge is balancing the development of a consumer-facing brand with ongoing equipment manufacture for what become competitor brands. A way around this has been to park the manufacturing operations in a separate business. In 2001 Acer created Wistron to handle its manufacturing operations and it set up BenQ to produces its own range of electronics. HTC, meanwhile, purchased fellow Taiwanese manufacturer Dopod in 2006 to act as manufacturer of its PDA phones.

"This is very much like other conglomerates like L'Oreal and Procter & Gamble," says Martin Roll, CEO of VentureRepublic. "It is a question of a dedicated strategy for each business line."
But the key to the global breakthrough is a commitment to innovation. Asus, for example, transformed the computing industry with the Eee PC, the first in what would become the fast-growing netbook category. Acer, which had focused on laptop computers from an early stage, followed suit. Both were able to use their engineering experience to manufacture high-quality branded products and sell them cheaply.

HTC produced the world's first touch-screen phone and phone built around Google's Android platform. Indeed, HTC has gained a degree of global prominence because its name is on the back of each device.

The third prerequisite of building an international brand is corporate culture. Here HTC is remarkable in its attempts to build a culture that accepts failure and takes a long-term view. The company's founders, including chairwoman Cher Wang, have spent time in the US, and try to recreate a Silicon Valley-style culture at their Taiwan sites.

For all their success, these companies are only at the start of their global expansion. Taiwan's technology brands are not yet household names in the way some Asian brands are. However, for equipment manufacturers eager to break out of the cycle of ever-decreasing margins, they provide a worthy template.