Interview With Quanta CTO Ted Chang

20 Jun

Thousands of startups have emerged as technological development continues to pick up speed and product life cycles become shorter and shorter. Being the world’s largest notebook PC contract manufacturer, Quanta Computer has established comprehensive R&D capabilities and built a vertically integrated supply chain. What do they think about the relationship between startups and the supply chain and the influence startups have on the entire technology industry? We interviewed Dr. Ted Chang, CTO and VP/GM of Quanta Computer and the head of Quanta Research Institute. Dr. Chang interacts with hundreds of startups every year and has served as a judge for many innovation competitions.

1. Taiwan’s startup environment has already seen significant changes. Please share with us your experience and opinions.

Every time I go to a startup event, I always say Quanta is a 31-year-old startup. Even big companies like Quanta need to innovate constantly. Why? They need to evolve and adapt to the changing market. Every time technological evolution takes place, from notebook manufacturing to cloud computing and AI applications, well-established companies have to go through the startup cycle again. To achieve sustainable development, technology companies need to keep innovating. Therefore, Quanta is actually no different from a startup.

To achieve sustainable development, companies have to continue to advance technologically. That means translating ideas into innovations and then creating a viable business model around them. A sustainable business model based on innovations can continuously create new products with complete life cycles. Seen from this perspective, all companies are essentially doing the same as startups.

The influence of the macro environment on startups can be dated back to 2018 when MIT established the Schwarzman College of Computing. This independent and cross-subject college brings together people of various backgrounds to create platforms for the application of data science and AI in different research areas. The aim behind this is to transform the world from the “computer era” to the “computing era.” Quanta and its partners were able to meet clients’ needs with respect to hardware devices during the computer era. With the development focus shifting to machine learning and data services, however, the value chain that we were familiar with has changed. Companies in the supply chain must adapt to this change. This is also what Taiwanese startups have been doing in recent years.

Taiwan’s capital market is changing as well. Investors’ interest has transitioned from physical devices to software or data- driven application services provided by startups. Adapting to the changing environment, government and schools are now proactively helping people acquire CS, data analyzing, and coding skills so that companies can readily recruit talents in these areas.

2. Taiwan has been known for its complete supply chain. What do you think about the changes in the industrial value chain driven by startups?

Unlike other places in the world, Taiwan has built a complete supply chain. Any innovative ideas, whether from large enterprises or startups, can be transformed into products in Taiwan. When products are realized, the market becomes more active and will start to scale up, leading to a growing demand for new products, higher quality, and affordable pricing. This is another competitive advantage of Taiwan’s supply chain: providing affordable and reasonable manufacturing supply chain management for leading brands worldwide. Taiwanese suppliers are able to provide support at every stage of the product life- cycle management process. In some respects, startups are ODM vendors’ future customers.

Many startups seeking partnerships with Quanta often ask us what we think about them and why we work with them. My reply is “I think you’re Apple in its early days because they also started small.” When working with startups, we focus on incubating future business opportunities, rather than searching for a one-time business opportunity. If we treat startups as one- time business partners, there is no chance that we will work with them because their orders are small and the risk is high. When we decide to take a risk, we always aim for long-term gains.

Akamai, for example, was founded in 1999 as one of the few providers of network solutions for content delivery. At that time, Taiwanese were unaware of the changes in networking technologies. However, Akamai saw potential opportunities and is now one of the largest players in its market. If you started manufacturing hardware for the company 20 years ago, you might now be in the same profitable business.

Another unique aspect of Taiwan is that all large Taiwanese companies have their eye on the global market. These companies have worked with Google, Apple, Amazon, Facebook, and other international companies in different ways. They know how to create a win-win partnership and respect their partners’ copyrights. These are some of the critical factors in creating a new value chain.

3. Many people equate startups with branding. What do you think from the perspective of the supply chain?

First, you need to know that startups could be your customers or suppliers. Quanta’s lobby is constantly packed with people from startups. Some of them are our customers who want us to manufacture a complete product for them, while others have value-added solutions that they want to insert into the supply chain. So each startup plays a different role in our partnerships.

We all want to secure a place in the industrial value chain. As long as we are recognized in the value chain, our existence will be meaningful and profitable. In the supply chain, some products have high profit margins while others don’t. Also, some  products are more readily realized than others. Not every startup is engaged in branding activities. Some startups might just be a key component supplier, which will grow as their technological competences advance over time.

For example, when speaking of Rolls-Royce, the first thought that comes to mind is cars. Not many people know that aircraft engines manufactured by Rolls-Royce account for a large share of the aircraft engine market. Rolls-Royce is a brand for cars, while its aircraft engines are installed in other brands’ aircraft. Is making engines profitable? Very profitable! So startups are not necessarily on the branding side of the supply chain. While brands usually take most of the spotlight, they might not be the biggest profit makers.

In a world where branding is highly encouraged, people tend to ignore the importance of the supply chain. Without backend support, the industry will not be the way it is now. Quanta is the world’s largest system provider. Many companies in the supply chain know they can be a part of the global supply chain if their products are accepted and certificated by Quanta. They will then be able to sail around the world with Quanta. Taiwanese startups should expand their vision to encompass the whole value chain instead of focusing on places where the spotlight shines.

4. How do you define the “cool factor” of a startup? What do you think about the “cool factors” of Taiwanese startups? What makes a startup cool?

My answer is being bold, just like what Lester C. Thurow said in his book Fortune Favors the Bold: “be adventurous, willing to learn everything, and daring to venture into the unknown.” To be cool means overturning conventions, a concept similar to disruptive innovations. In contrast, Taiwanese companies generally focus on evolutionary innovations that come about gradually.

Invention and innovation are two cornerstones for tech startups. However, being innovative doesn’t mean you are cool. How many people thought the iPod was cool when it was first released? However, it slowly changed the music industry and created new user experience related to the purchasing, downloading, and listening of music. The product gradually won people’s hearts and positioned itself as being cool.

User experience is a cool factor because it helps people adapt to new usage scenarios. This phenomenon is more common in other countries. Taiwanese manufacturers, by contrast, are too focus on functionality and sometimes ignore the human element. Therefore, we hardly see products with a special twist. This happens to 80-90% of the teams we have seen.

I think this may also be attributed to the traditional business model in the industry. Taiwanese industries understand their customers well, but customers are not always the end users. For example, I know what Apple wants when selling them computers. However, I know little about the needs of Apple’s customers, or the end users of the computers. If we can understand what purpose a product serves to the society, we can design it to meet the end-users’ expectations. This is why considering the human element is so important.

5. Do you think we will see unicorn firms in Taiwan in any possible way? If the answer is yes, what kind of companies will they be?

I believe we will see unicorn companies in Taiwan. Don’t forget Taiwan’s achievements in hardware development. Taiwan has the world’s best hardware manufacturing capabilities and that’s why Google has increased its investments in Taiwanese talents.

While the value of software increases rapidly, the value must be brought out through hardware. Therefore, unicorn companies will be those capable of integrating hardware and software. The biotechnology industry will probably see major breakthroughs because this sector has the highest concentration of the best local talents next to the computer industry. However, the development of startups in the biotechnology industry may be different from what we have seen in other sectors. Personally, I place high value on sustainability. Startups must be built on a sturdy foundation. They also must be irreplaceable in the global value chain.

One unicorn company cannot make up an industry, nor can it prop up Taiwan’s GDP because GDP must be sustained by a group of companies. Furthermore, a unicorn company must have a long-term vision. Taiwan’s industries have low entry barriers that allow local startups to easily enter the list of unicorn companies. However, these startups haven’t thought about how to stay in business on their own for as long as possible without outside support. They need to plan for a journey of a thousand miles, if not ten thousand.

Taiwan’s young people are very talented and capable of making their ways into the world. The institutions on this island already fostered many successful industry leaders in the past. As for young leaders at newly founded startups, their view on future competition will differ from that of the old guards. We don’t need to measure of the success of new startups based on our past experiences and benchmarks.

6. How should Taiwanese startups enhance their engagement and exposure in the global market?

Startups can consider relocating their seed accelerators overseas. They need to constantly interact with other companies so they are not confined to a homogeneous group. Every startup must set its sights on the global market from the onset in order to compete with international companies and succeed. Ultimately, Taiwan’s startups should not confine themselves within the island. They ought to recruit from both the local talent pool and the overseas labor markets.

Local startups are now actively attending events such as InnoVEX that is held from late May to early June. This type of events are effective in helping startups move in the right direction and understand their international competitors. I also hope that these events will promote a greater appreciation of Taiwan’s values as they become larger and better organized.

Facebook Comments