Post-Computex: Taiwan’s ICT Industry in Crisis

25 Jun

The Computex 2015 concluded on June 6. Almost concurrently, CEA, the organizer of U.S. Consumer Electronics Show (CES), hosted the CES Asia in Shanghai, and a telecom products trade show in Singapore also took place in June. GSMA, the organizer of Mobile World Congress (MWC), will also formulate the MWC Asia in Shanghai next month. The arrival of such important information and communications technology (ICT) trade shows in Asia will undeniably negatively affect Computex, previously the largest ICT exhibition in Asia.

Criticisms and questions arose during this year’s Computex. Among those, CEOs of Intel and Microsoft were absent from the Computex to make time for Lenovo’s Tech World in Beijing. Those big shots’ absence might have led some people to wonder how the exhibition in Taipei would develop in the future.

There are generally two types of environment for international exhibitions. The first one focuses on the convention and exhibition industry, such as the industry in Germany. Event organizers including Messe Frankfurt and Messe Munich International benefit from the country’s convenient transportation systems, efficient immigration clearance procedure and large-sized exhibition centers. Such industry can generate great economic benefit and is welcomed in many countries and regions. Singapore and Hong Kong, for example, both hope to develop the industry based on its geographical locations, despite their relatively small physical sizes. Meanwhile, the other type relies heavily on the industry clusters in the country, such as the watch and jewelry show Baselworld in Switzerland and the international cycle show Taipei Cycle in Taiwan. Computex falls into the second type. To deal with the problems the exhibition is encountering, one must first understand the history of the ICT industry in Taiwan.

Jumping on the PC bandwagon

Since IBM’s launch of personal computers, Taiwan’s ICT industry has been pretty much surrounding the PC sector, particularly Intel’s processors and Microsoft operating systems. Many local companies improved their international visibility by providing PC and computer accessories, including motherboard, casings, passive components, and graphics cards. Many other industries have also heavily depended on the PC industry, such as memory technology, IC design, and foundry business.

At the beginning of the PC era, the industry in Taiwan grew with Intel and Microsoft. When Intel introduced new microprocessors and chipsets, the U.S. firm often licensed its designs to Taiwanese IC design and chipset manufacturers or worked with Taiwanese motherboard and laptop makers to bring new chip platforms to the market.

At a time when PC was almost the synonym for high tech and PC sales growth represented the overall growth in the ICT industry, Computex was a must-attend event for ICT professionals around the world and was always under the media spotlight. Via Technologies Inc. of Taiwan and Intel were involved in a patent infringement allegation regarding the PC 133 chipsets; the Taiwanese company also garnered global media attention regarding the Pentium 4 bus protocol patent right in Computex 2001.

Missing an industry leader

Since Apple introduced the first-gen iPhone in 2007, the whole ICT industry has shifted its focus from PC to mobile devices. Wintel — Windows and Intel — were relatively slow in catching up with that trend. Paul S. Otellini, then outgoing Intel CEO in 2013 said he regretted not trying harder to put Intel chips in iPhones. He also reportedly said he made the decision based on the price Apple offered to pay. Meanwhile, Microsoft, which rose to success based on its PC software, seems lagging behind in the development of search engines and social networking sites and software when it comes to the mobile Internet business. Facing the rapid development of wireless communication systems, many Taiwanese companies that used to focus on PC products scrambled to stay afloat.

Computex and the country’s ICT industry are faced with the same situation — the lack of an industry leader to take the lead and their unfamiliarity with the development of communication software and hardware. Wintel used to dominate the development in the PC industry. However, there currently is not an industry leader in mobile and wearable devices. Many local companies can barely stay on top of the development trends in the communications sector and also face great challenges in wearable technology and the Internet of Things business. It is no surprise that Computex, which relies on the industry cluster in the country, is also negatively affected.

How to help the industry continue to grow has become the lifeline of Computex. As other major ICT exhibitions enter Asia, Taiwanese companies will need to work on developing the key technologies, as the country lacks a strong domestic demand that’s large enough to support the industry and pricing strategy seems out of question. Industrial transformation will be the key. Companies need to think about how to create innovative applications using their experiences in PC manufacturing and to become the suppliers of key components. Taiwan’s Advanced Semiconductor Engineering (ASE) participated in Computex for the first time in 2015. The company’s system-in-Package (SiP) module showcased the company’s preparation to become an all-round supplier.

The need to develop a unique IC ecosystem

Due to its background in PC infrastructure, Taiwan has created an environment that makes it easy for innovators to realize their ideas. The country’s IC design industry is ranked No.2 in the world and places first in foundry and packaging and testing; its IC ecosystem can give innovators great support.

Moreover, different from MWC Asia and CES Asia, Computex enjoys the support from the supply chain. The industry and the exhibition can use Japan as an example in beefing up its supply chain for key components.

Japan may be losing ground in some consumer electronics products, but the industry started to learn that companies in Japan were actually in control of many key components in mobile devices. For instance, although Sony is lagging behind in smartphone sales, its high-margin contact image sensors (CIS) are fitted in iPhones and Galaxy phones and shipped around the world. Many Japanese companies are also dominant in exposure equipment, glass substrate and the components for flexible print circuits.

Aside from industry upgrade, the country also needs to work on improving the environment for conventions and exhibitions. When compared to MWC, Cebit and IFA, Taiwan has a serious shortage of exhibition locations, and the addition of the under-construction Taipei World Trade Center Exhibition Hall 2 still will not make up for it. Taipei Cycle and Taipei International Machine Tool Show are also facing a shortage in available exhibition space. Transportation is also equally important, including the transit between the airport and the city; but such issues will require strong support from the government.

Participation in major exhibitions is not the only way to introduce products to the market; Apple has been organizing its own product launches. However, it did unveil its earliest products at exhibitions and such events are undeniably important for medium- and small-sized enterprises to introduce their products. South Korea was reportedly trying to relocate the MWC from Barcelona to Korea to make up for its need for an exhibition. South Korea is believed to have made the move because in addition to serving as a platform for new products, large-sized exhibitions usually also host seminars that can lead the topics of discussions. As other exhibitions made advances in Asia and South Korea made its move, the future of Taiwan’s Computex and ICT industry are closely linked together.

(Photo courtesy of Computex; article authorized by author)