Transition, transform, transcend

Colley Hwang, DIGITIMES Asia 0

Credit: Pixabay

Taiwan excels in manufacturing, particularly in the realm of "hidden champions" within this sector. These companies often lack their own brands but instead specialize in specific technologies and market niches. According to the book Hidden Champions: Ascent and Transformation, Taiwan stands out among non-German-speaking countries for having one of the highest proportions of hidden champions. Many of these hidden champions are family-owned businesses, resulting in extended CEO tenures, typically exceeding 20 years—significantly longer than the average corporate CEO tenure of six years.

Given the similarities between Taiwan's hidden champions and those in German-speaking countries, we can anticipate that "the manufacturing sector's added value will be concentrated in specific companies." This scenario's consequences may resemble those witnessed in Silicon Valley and San Francisco. Prosperous industries and families continue to invest in real estate and consumption, while the general population grapples with rising living costs. This, in turn, leads to reluctance among young people to invest in homes and start families. In 2023, Taiwan's total newborns may drop below 130,000. If the issue lies in industry imbalance and Taiwan cannot forsake its electronics industry, is there a viable path for transitioning into the service sector?

We categorize manufacturing as the secondary sector, with services belonging to the tertiary sector. Presently, manufacturing constitutes an uncommonly high 37.7% of Taiwan's economy among developed countries, while services account for a mere 60.7%. This disparity is partly due to lower-tier service industries absorbing a significant portion of the population. Furthermore, nearly half of Taiwan's research and development investment originates from the electronics industry, with traditional service sectors having comparatively few successful instances of research and development and startups. In the future, companies worldwide will compete using digital assets.

Numerous industry cases grapple with issues related to definition and positioning. I frequently assert that Amazon is akin to an online service company for retail channels, while DIGITIMES resembles a knowledge service provider masquerading as a newspaper. Therefore, it's worth exploring whether airlines like China Airlines and EVA Air can collaborate with entities up and down the supply chain, including passengers, to transcend the traditional concept of aviation vehicles and cultivate alternative service industries.

I've often heard seasoned individuals in the electronics industry claim that Taiwan's past successes were primarily due to its technical talents. Such assertions are biased and have steered our focus excessively toward technology, efficiency, and cost, while neglecting the human element. Can we reimagine our industrial business models, discover new roles for our industries, and depart from the "profit-seeking" mindset of merely fulfilling OEM orders as contract manufacturers?

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.