Made in Taiwan hardware is something associated with the Taiwanese Miracle that saw a country with a third-world economy in the 60s become one of the world leaders in high-tech hardware manufacturing in the 90s.

Much of that development was focussed on a patched network of SMEs dedicated to providing original components to international hardware corporations such as Apple and IBM, while putting innovation aside.

However, this made Taiwan vulnerable to world crises and increasing competition from cheaper production markets in China and Vietnam. Nevertheless, Taiwanese firms still account for more than 90 per cent of the world’s notebook and tablet production.

As the world technology market changes towards the age of interconnectivity, more value is given to the fusion of hardware and software services. In this game, Taiwan still possesses some aces up its sleeve due to the same factors that helped it grow its claws and become one the economic Asian Tigers, and set it apart from its biggest regional rival: China.

The Taiwan Miracle is still alive

Well-crafted government policies, a huge talent pool and individual initiative fostered the ground where hardware powerhouses such as Acer and TSMC evolved, and is now being used to boost the new generation of hardware startups.

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“In other markets, hardware startups are relatively rare. But in Taiwan, with its illustrious OEM (original equipment manufacturer) heritage of building for others, there is a new wave of young hardware companies drawing on a deep pool of talent,” says Web Summit Founder Paddy Cosgrave, after praising local hardware startup talents such as iLocky and Aidmics.

Hardware engineering still abounds in Taiwan, with many engineers choosing to start their own projects after years of working for bigger corporations.

Although, electronic and computer engineering still top the charts of the most popular degrees in the 100-plus Taiwanese universities, and eight Taiwan universities appear in the world’s top 400 for computer engineering, new graduates now see corporate jobs as a necessary step to gather experience for their own entrepreneur projects.

Innovation as a way out of recession

The Taiwanese government has started to see innovation as the right path out of recession, since Taiwan’s big dependence on original electronic parts manufacturing made it vulnerable to the world’s economic crisis, such as the 2008 subprime crisis.

In order to revert the situation, a National Development Council created the HeadStart Taiwan Project dedicated to creating a local Silicon Valley through relaxing regulations for registering startups, matching funds invested into projects and creating tech hubs.

Another important initiative is the Taiwan Startup Stadium (TSS) — a startup hub that plans to serve as the mothership to dozens of country-based startups with both Taiwanese and international founders working to grow their businesses globally. The building near Taipei’s city heart brims with young enthusiasm and interaction between local and foreign entrepreneurs.

Jerry Yang is General Partner at Hardware Club, a global initiative to help connect and scale hardware startups, with offices in Paris and Taipei. One of the main reasons he is based in Taiwan is the abundance of hardware manufacturers that the club can connect with young entrepreneurs looking to develop their products.

“We want to help develop startups from manufacture to retail, and Taiwan is very important as a supply chain. Once startups pass the first stages to succeed, they need experienced operations people, and Taiwan is the perfect place to hire engineers,” Yang says.

After attracting as much as US$438 million in funds last year, the HeadStart Taiwan Project has made many crucial changes such as the creation of an Entrepreneur Visa, providing 2,000 one-year visas starting this July for foreign entrepreneurs looking to create startups in Taiwan.

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“People here have been focussing on B2B for a long time, but this new generation of hardware startups are almost 90 per cent consumer-oriented and the hardest part is changing this mentality,” says Yang, who currently uses the TSS space to meet more hardware startups.

“It all aligns with the goals of the TSS to attract foreign startups and VCs to create an ecosystem where local and foreign startups interact with each other. Inside this ecosystem you can find anything you want, and if you want to develop a product your VP engineer should be in or from Taiwan,” he adds.

What’s so great about Taiwan?

One of the local hardware startups TSS has helped promote is GHOSTA helmet, which produces a smart bike helmet. Its CEO Fenix Hsu believes Taiwan has three distinct advantages. They are:

Better service: “Taiwan has always been a destination for hardware manufacture since 1990. We have set up all the ground rules and standard in each stage of manufacturing, such as the definition of engineering verification test (EVT) and design verification test (DVT).”

More experience: “Some designs, say antenna design, were built on all the mistakes rectified from history, hence the customer can always find the right partner in the right category, and more experienced in customised services too.”

IP awareness: “Taiwanese manufacturers are stricter on IP (intellectual property) protection. It results from better service and experiences. And there are indeed more stories of IP dispute in Chinese factories.”

Your neighbourhood tech factory

One lesser-known advantage is the proximity to highly equipped tech factories with quality personnel. After all, you can find the world’s biggest density of supply chain tech factories (small and big) in an island of only 36,000 sq km with a highly-effective transport network.

When Horace Luke, former Chief Innovation Officer of HTC, was looking for the perfect place to start producing his new ground-breaking Gogoro electric scooter, he looked no further than Taiwan. Using the local manufacturing base to produce many of the parts of its new Smartscooter, Gogoro is a perfect example of new talents trying to adapt the hardware-inclined Taiwan of the past with the new, interconnected future

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One of the residents at TSS is Jonas Lille, a Danish “coffee lover” and Founder of Aillio — a startup looking to create a smart coffee roaster. He ended up in Taiwan accidentally while shooting ads as a photographer, and decided the local manufacturing scene was “perfect” for his product idea when compared to China. And here is why:

Proximity to manufacturing: “One of the main reasons we chose to base our company in Taiwan is that we can be close to the manufacturers and can reach them within two hours. In China, you would have to get a plane there, drive two or three hours to the factory, inspect it and then come back.”

Less bureaucracy and corruption: “It’s relatively easy to register a company in Taiwan; it can take a long time but it’s not difficult. Also, I trust my staff much more than if they were Chinese. In China, there’s (sic) more chances that my staff would try to take some cutbacks and choose someone under the table to find a factory.”

More credit: “Some Taiwanese manufacturers give us one to three months’ credit which really helps when you’re trying to make a new product, while in China normally it’s 50 per cent pay up front for an order and the rest paid on delivery. There’s absolutely no credit.”

Lille believes Chinese manufacturers are just much better at advertising themselves to American or European companies looking for production for their companies. If Taiwan manufacturers manage to have better websites and marketing, it will be able to attract as many international attention from entrepreneurs.

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For now, Taiwan is a hardware-oriented island that is trying to find its innovation groove, opening its doors to foreign entrepreneurs and young ideas.

The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co

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