Taiwan in transition

Hsinchu Science Park, where the Industrial Technology Research Institute is based, is an hour south of Taipei and is considered to be the Silicon Valley of Taiwan. This place is a giant machine that makes electronics such as motherboards, cell phones and monitors. Taiwan has 14 science parks, but this one, established in 1980, is the biggest.

Hsieh said his mission is to attract high-tech companies to the park. More than five per cent of Taiwan's gross domestic product comes from this park. There are two universities on this park with more than 20,000 students living and breathing high-tech innovation.

Some of the incentives offered at the park are five-year corporate tax breaks, no import duty and commodity tax, R&D grants and on-the-job training.

"This park is like a small city with a clinic, post office, recreational facility, two bilingual schools, banks and gas stations," Hsieh said.

The genesis of the parks came from the 1975 energy crisis, which seriously impacted manufacturing.

Park revenues come from the high-tech companies themselves such as Acer. Acer, for example, leases the land from the park to build offices or plants. Or they can lease a standard factory from the park.

One of the first products created from the science park was the electronic watch from RCA.

Today there are more than 40 companies waiting to move into these science parks.

The park is also developing its own intellectual property. These new ventures are put in startup incubation areas and then spun off. The park has created 130 new companies since its inception.

Taiwan's high profile computing vendors are taking the lead in this transitional period.

Earlier this year Jonny Shih, CEO of AsusTek Computer, put the wheels in motion to separate AsusTek into three independent business units. Asus will be the main brand, while Pegatron will be its OEM manufacturing arm along with producing motherboards and other computing components. The third business unit, Unihan, will handle non-PC manufacturing, such as cases and molding. The manufacturing of computing products has already shifted for the most part to China because of the high labor costs in Taiwan, Shih said as one of the reason for his moves.

In the past, manufacturing was a key strength, but over the years margins have gotten slimmer, and slimmer.

What some companies such as Acer, D-Link and AsusTek have done is focus on its brand, while leaving the manufacturing to the Chinese and Vietnamese.

Besides focusing on their own brand, these companies are also keeping important departments such as R&D, engineering and design in Taiwan. Kuo said Taiwan will keep its knowledge in the country and create many more high quality products.