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Taiwanese tech companies are increasingly joining hands with Chinese manufacturers, forming a so-called "Chaiwan" economy in the global market.
¡ß Anything can be made in Chaiwan
The strength of Chaiwanese firms lies in manufacturing to order. Rather than building brand name goods of their own, Chaiwanese companies serve as original equipment or design manufacturers (OEM/ODM). Chaiwan gets more orders than any other OEMs in the world, recording several trillion won a year in sales with profits of five to six percent.
Chaiwanese production lines turn out almost every kind of electronic product. From Apple's iPod to Sony's PlayStation3 to Intel chips, many cutting-edge tech products are being put together in Chaiwan. Chaiwanese makers are unrivaled in producing main boards, laptops, LCD monitors, and personal digital assistants. Although they produce goods to order, they are less affected by fluctuations with particular orders since they receive mass orders from all over the world.
Chaiwan now stands just below Samsung Electronics and LG Electronics despite not having a recognizable brand. Taiwanese Hon Hai Precision or Compal ODM mobile phones -- marketed as Apple and Motorola devices -- are among Samsung's most powerful competitors.
Even in the LCD panel sector, Taiwanese businesses are close behind Samsung and LG. Taiwan's Acer is one of the "big four" in the global PC market along with HP, Dell, and Lenovo. TSMC and Hon Hai, the world's biggest semiconductor producer, are keeping a close eye on the LCD and the semiconductor markets, both of which are Samsung's turf.
¡ß Competitive costs and quality
Korea also outsources to newly emerging markets such as China, but the cost structure of Chaiwanese businesses has already evolved beyond Korea's reach. They have a unique sourcing network spreading all across Taiwan and China, through which Chaiwanese makers can secure parts and materials at satisfactory prices whenever they need.
A case in point is Apple's iPod. When Apple approached Korean companies to manufacture it, the Korean makers turned Apple down, calling the unit price too low. Taiwanese companies were different. Using their expertise, they knew they could still make a profit by working with their manufacturing partners in China.
Chaiwanese businesses are also known for their quality management. The clean finish of the iPhone was ensured by Taiwan's Hon Hai. This leading Chaiwanese business plans to invest US$1 billion in China's Qinhuangdao over three years and build its 16th industrial complex. "Investment in China will double Hon Hai's sales," promised Terry Gou, chairman of Hon Hai Group. Quanta, Acer, and other internationally renowned desktop and laptop makers have all built plants in China and transferred laptop assembly lines out of Taiwan.
¡ß Chaiwan looks to outperform Korea
Currently the competitiveness of Korean companies is about half a step ahead of Chaiwan in brand value and some key technologies. U.S. magazine BusinessWeek added 14 Taiwanese companies to its list of the world's top 100 IT businesses, which selected companies based on this year's growth rate. Hynix Semiconductor was the only Korean company on the list.
"The development of Taiwan's industry surpasses the revival in Japan in both profits and growth," said Na Jun-ho of the LG Economic Research Institute. Chaiwan, equipped with the most competitive costs and production technologies, is now aiming to outdo Korea. "Samsung and LG are great but we have our own way of doing business," said Billy Ho, president of MiTAC, at his company's headquarters in Neihu. "We'll show you we can succeed by focusing on core products with our low costs and high quality."
(englishnews@chosun.com )
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