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<span class="mainarttitle"><span class="mainarttitle">Made in Taiwan</span>
<br>
</span><span class="mainartauthor">Andrew Tanzer,<span class="mainartdate"> 04.02.01</span></span>
<br>
<br>
<span class="mainarttxt"><b>Where was your laptop manufactured? More
likely than not, somewhere close to Taipei. One billionaire has a big
chunk of the market.</b></span>
<br>
<br>
<span class="mainarttxt">Recession? I don't know why people say there's
a recession," says Barry Lam, the world's little-known king of notebook
computers. "We've been working overtime for many weeks. We have a huge
backlog, and customers are pushing us for earlier delivery." </span>
<br>
<br>
<span class="mainarttxt">Lam is the billionaire founder and chairman of
Taiwan's Quanta Computer. He'll be disappointed if he doesn't ship 4
million notebook units this year—one seventh of all those sold on earth
and up 50% from last year. Quanta makes more notebooks than anyone
else, but you've probably never heard of it. You <i>do</i> know its customers: Dell, Compaq, Gateway, Apple, HP, IBM, Sony, Sharp, Fujitsu, Siemens. </span>
<br>
<br>
<span class="mainarttxt">Quanta is one of the beneficiaries of the
trend among the brand holders in the electronics industry to have ghost
manufacturers do most of their work. By doing so, they reduce fixed
costs, inventories and risk. Last year, Compaq, Dell and IBM all
outsourced at least 65% of their notebook needs to Taiwan.</span>
<br>
<br>
<span class="mainarttxt">Think Quanta, which will take in an estimated
$3.8 billion in revenues this year, is akin to those anonymous
sweatshops that crank out toys or sneakers for famous U.S. brand
owners? It's more than a drone manufacturer; it is a designer, too, and
puts a lot of engineering talent into its contracts. This world of
ghost designer-manufacturers is peculiar to Taiwan, the world's
dominant maker of notebook computers (a global 55% market share) and a
whole spectrum of pc components and peripherals.</span>
<br>
<br>
<span class="mainarttxt">Taiwan's electronics factories started out at
the drone end of the business. But there wasn't enough money in that.
In the past decade they have evolved from lowly con-tract manufacturers
into designer-manufacturers. They differ from the well-known contract
electronics manufacturers in the U.S.—namely, Solectron and
Flextronics—in typically having a few specialties, as opposed to making
a wide variety of products. In Quanta's case the list includes laptops,
and now cell phones and servers. </span>
<br>
<br>
<span class="mainarttxt">Craig Barrett, president of Intel, has
observed the progression. "Taiwan made its mark in low-cost
manufacturing," he recalls. "Now it's moving up to design and creation
of products, while outsourcing the low-end manufacturing to China."
This ability to move steadily into higher-value information-technology
products underpins the prosperity of Taiwan's export-led economy. </span>
<br>
<br>
<span class="mainarttxt">How did Taiwan emerge as an electronics
workshop to the world? The island has an abundance of relatively
low-cost engineers, many of them returnees from the U.S., and strong
connections to Silicon Valley. The Taiwan government stimulated the
high-tech industry with tax and venture capital incentives. The country
has a deeper technical and industrial base than its Southeast Asian
neighbors. Taiwan's entrepreneurs have been much more adaptable than
its competitors in Japan and Korea to the rapid change and short
product cycles in the computer industry. </span>
<br>
<br>
<span class="mainarttxt">Taiwan has not been notably successful in
branding and marketing its own products. Where it has succeeded is in
partnering with the U.S. (and, increasingly, Japanese) computer
industry. While being careful not to advertise what they are doing, the
U.S. name-brand owners have delegated a lot to the Taiwanese. The brand
holder may give a road map, such as product specifications and
performance. Or the Taiwan side may generate the ideas and bring them
to the customer. Taiwan has a particular strength in the time-consuming
design of the printed circuit board, a customized system that is
crucial to the overall speed and reliability of the finished computer.
A joint development process between the two sides can come up with a
new model in six to nine months. </span>
<br>
<br>
<span class="mainarttxt">Lam says that Quanta, which has 500 design
engineers in Taiwan, did about half of the design work for Apple
Computer's G4 notebook. For Dell, Quanta's biggest single customer, Lam
says, his army of engineers does about 60% to 70% of the design work on
Latitude models; Dell does the remaining 30% to 40%. He asserts that HP
was a marginal player in notebooks before Quanta helped to design its
products. Compaq, which last year sourced an astounding $9.6 billion of
electronics from Taiwan, looks to become Quanta's No. 2 account. </span>
<br>
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