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Former piracy kingdom, gone legit, becomes computer giant

September 7, 1997

TAIPEI, Taiwan (AP) _ Twenty years ago, when Taiwan was an assembly base for Japanese and American electronic firms, many of its workers were quietly soaking up the technology.

At first, that knowledge was used for computer piracy. But now, Taiwan has gone legit, transforming itself into a techno-power that produces one-third of the world’s notebook computers and one-quarter of its desktops.

It’s also the world’s largest maker of monitors, keyboards, motherboards and image scanners.

The transformation is exemplified in the southern town of Tainan, where a sugar cane field is to become a high-tech park.

Taiwan Semiconductor Manufacturing Co., the island’s largest chip maker, plans to spend a staggering $14.5 billion over the next decade to build six chip plants there.

Last year, Taiwanese information technology generated $16.4 billion in revenues, $7.7 billion from overseas investment. By 2002, domestic output is expected to reach $32 billion.

The secret of success on this island of 21 million people seems to lie in smallness _ hundreds of entrepreneurs rather than a few industry giants. The same philosophy that could churn out toys, bicycles and tennis shoes applies to delivering computer technology: be fast, be adaptable, and keep the price down.

``A maker here has easy access to hundreds of spare parts suppliers, all near Taipei, an advantage American makers are denied,″ says Stanley Huang, marketing director of American chip-maker Intel’s Asian operations.

``As small firms, they have the flexibility needed for an industry where products are replaced every three months,″ he says.

Taiwan is Intel’s largest Asian customer for central processing units, the brain of the computer.

The island’s industry had long been synonymous with computer clones rather than original technology. But that is no longer the case. Last year Taiwanese obtained 2,400 patents in the United States, the seventh highest in the world.

Until five years ago, the United States still listed Taiwan as the top computer pirate. The Taiwanese government cracked down, and this year Taiwan was finally removed from the list.

At Hsinchu Science-based Industrial Park, Taiwan’s Silicon Valley 90 minutes south of Taipei, D-Link Corp. presents a typical success story. Set up by seven young engineers 10 years ago, it is now the world’s fifth-largest networking company, making the hubs that link groups of computers together.

In the old days, recalls D-Link general manager Helios Liu, a user whose computer crashed wouldn’t even bother to check the manual. It was taken for granted that the computer was faulty, simply because it was Taiwanese-made.

``We now offer our brand with a lifetime warranty, something I can’t even offer my wife,″ Liu says.

Taiwan’s prosperity, and its transformation from dictatorship to democracy, have attracted back topnotch islanders who emigrated and learned their computer skills abroad.

For instance, Wu Tao-yuan came back in 1991 after 17 years with IBM in the United States to join Umax Data Systems Inc., set up by five engineers from a Taiwanese scanner maker.

His story is a success. Last year, the Umax Group recorded revenues of $230 million from sales of scanners, PCs and other equipment.

Economics Minister Wang Chih-kang says dozens, or sometimes hundreds, of highly trained applicants are available for many jobs. He envisions Taiwan becoming a ``technology island″ early in the next century, specializing in information, biotechnology and aerospace.

Already, Taiwan makes 65 percent of the world’s scanners, gobbling up a market once dominated by the big U.S. and Japanese firms.

``We come up with similar products but at much lower costs,″ Wu explains. The markdown is as big as 40 percent, he says.

The Acer Group, the world’s seventh largest computer firm, turned out 5 million PCs last year.

In a bold move in 1989, Acer entered the costly field of memory chips in a joint venture with Texas Instruments. The venture has gone from a money-loser to Acer’s biggest profit-maker over the past three years.

Acer chairman Stan Shih says Taiwan’s challenge now lies in software, and has pledged to lead the effort by setting up 100 software houses worldwide in the next 15 years.

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