Friday, September 4, 2009

Silicon Valley still leads, as Taiwan keeps pace

Earlier this year, the Taipe-based Commonwealth monthly had a cover story that implied that Taiwan would emerge as the new Silicon Valley of the world. It caused a great deal of buzz. However, a much different story emerged – one which indicated that the Valley is a hard act to copy.

Dr. Joseph Yang’s background resembles much of the people he works with - a mix of academia, private business, government and think tanks. As the director of the Science Division of the Taipei Economic and Cultural Office in San Francisco for the last six years, he has taken inventory of the South Bay and stressed that it is hard for any country to overshadow Silicon Valley (SV).

“In the six years that I have been here, I’ve found it is impossible for anyone to copy Silicon Valley. It has everything to do with the genes of Silicon Valley.” Yang thinks it cannot be rivaled in 20, 30, even 50 years. “You can never find a place that can attract the top science and hi-tech people, converging to work in such harmony and for it to blend in so smoothly.”

What Yang finds amazing is that people are attracted to SV not just because of jobs, but because of the mix of the Chinese, Indians, Iranians and so forth who are invested here as well. “Once you live in Silicon Valley, it becomes home.” There are a lot of places that go out of their way to attract top talent, but it is not home. SV has been successful in creating innovation, partly because it “comes from all the innovative elements of different cultures… If you go to any large company, you will see a United Nations, a pick of the top minds in any country.”

Silicon Valley hard to duplicate

Robert Parker, founder of Parker Price Venture Capital in San Francisco concurs. “Innovation is Silicon Valley’s forte,” Parker said. Although he does not discount that Taiwan and China are becoming more innovative all the time, neither are a match for the Valley as yet. “Silicon Valley’s great universities, Stanford and UC-Berkeley, draw top young minds from all over the world, and many of them stay to add their ideas to new companies in Silicon Valley.” As an international lawyer and businessman, he has been on hand to witness the extensive changes in Taiwan, working on the formulation and implementation of the Taiwan Relations Act along with starting two law firms in Taiwan. He understands Taiwan’s business world, but also its social and political landscapes.

C.K. Cheng likened the Valley’s biggest assets to “bio-diversity.” “The more diversity you have - the better chance you have of cross-pollinating and success.” Cheng, a general partner of Harbinger Venture Capital in the United States, arrived here more than 25 years ago to work in the MiTAC-Synnex Group, now one of the world's leading conglomerates.

While at Harbinger, Cheng invested in many tech companies and successfully saw many go public. In his opinion, what makes the Valley unique is “not necessarily the semi-conductor. The building strength is not the industry, but the mentality….The Valley attracts people who are not afraid to fail. Not afraid to give up. They dare to try different things.” Parker also mentioned failure as a component of success and a big part of the Valley culture. “We celebrate successes in high tech, but failures are valuable, too. Silicon Valley’s culture recognizes that innovation is risky, and failing with a bold idea doesn’t hold back a good entrepreneur for long,” he noted.

On occasion, people might write the Valley off thinking that its heyday has passed. The Commonwealth article did so with headers such as “Can Silicon Valley win back its magic?” implying SV might have lost its magic. And just this year, SV became “siliconless” when Intel’s Santa Clara factory closed. Might SV be like Detroit, which saw its rise and fall tethered to the automobile industry? Cheng thinks otherwise. “Silicon Valley has the ability to reinvent itself - into a Soft-Valley, Bio-Valley, Solar-Valley. That’s what makes it unique. The mentality. The Spirit.”

Science Council nurtures Valley networks

In as much as SV is hard to duplicate, Taiwan does an exceptional job of keeping pace with much of the Valley’s innovation, and a good deal of the credit goes to the Science Division in Santa Clara, California. The division acts as a direct conduit, tapping into SV’s innovation. No organization goes as far in building a bridge between SV and Taiwan’s hi-tech sectors.

As its director, Yang promotes the work of Taiwan’s National Science Council (NSC), which is very similar to the National Science Foundation (NSF) in the United States. The NSC is Taiwan’s cabinet-level agency responsible for national science and technology development. The Council supports academic research and develops Taiwan’s Science Parks.

Locally, the Science Division nurtures new talent by linking US-Taiwan collaborators, and directing them to the appropriate people to help them bring their ideas to the marketplace. Yang’s special skill is his spider-like talent for weaving a network of collaborative webs. First by knowing what projects people are working on and then connecting them to others with similar interests and complimentary needs. Through his wide network, he can simply point someone in the right direction to get funding or, as in a recent case, to assist someone find the appropriate land to build a new manufacturing facility in Taiwan. The office serves as a catalyst.

And with the Science Division keeping a finger on the pulse of SV, Taiwan is able to remain at the forefront of new developments, steering emerging technologies towards the island’s exceptional production and management infra-structure.

Taiwan’s strengths and weaknesses

According to Parker, “Nobody, including Silicon Valley, beats Taiwan’s smaller companies at agility and flexibility. Engineering management is a great strength in Taiwan’s larger companies. Taiwan’s forte is in using technology to make things the world wants.”

Although Taiwan cannot rival China’s domestic market and cheaper workforce, the island’s stability is its strength. As a civil society, it has a certain order which is reassuring. According to Cheng, “You are not afraid of doing something wrong, whereas in some Chinese cities, there are still certain fears.”

Moreover, Yang sees tremendous advantages in Taiwan’s talented management pool hence you have many of China’s top companies hiring CEO, CFO and other top tier management personnel from Taiwan. “The pool is highly trained. They are disciplined.”

China is as yet a young market economy, with little resources dedicated towards building a corporate culture. It is very different from the big American companies. In US corporations, no matter which overseas office you visit, they have built a system that is uniform and the dissemination of the company’s culture also remains so. In China, the mentality is to “get rich quick” and there is still a lack of order. However, both Yang and Cheng believe it is only a matter of time before this changes.

Whereas innovation is heavily connected with SV, it is not something Taiwan excels at given its educational system and society. Taiwan’s culture emphasizes discipline, which makes for great manufacturing managers, but it does not foster Silicon Valley-styled innovation.

Taiwan has become export reliant, focusing on industries in semi-conductors and electronics. As a consequence, the recent global downtown has hit the island especially hard. According to Commonwealth, Taiwan’s semi-conductor business will drop 20 percent as a result of the slowdown in the Valley. Yang cited South Korea as a good example of a country that has diversified and therefore has a better cushion against the worldwide economic slowdown.

What’s next?

China, Taiwan and the United States still form the Silicon Triangle. It would be difficult to replace the innovative minds at work in Silicon Valley. And Taiwan’s strength remains as a contractor, designer and financier, turning an idea into an end product. Meanwhile, no one can top China as a manufacturer and the world’s largest consumer of materials. In the Silicon Triangle, each has a place in the research, development and production chain.

The Commonwealth article seems to indicate that venture capitalists are taking their money out of semiconductor and information technology in favor of bio- and clean-technology. However, this does not mean they are not investing in SV. Take Tesla Motors as an example. The electric car company will be relocating its headquarters and research facilities to Stanford Research Park in Palo Alto, California with US$465 million in low-interest loans from the government. Some might regard a car company outside of Detroit or other manufacturing strongholds as counter-intuitive, but the best engineers are still in SV and innovation follows the talent.

So don't worry; despite the death knell people have been sounding for Silicon Valley, some of the world's best minds are there right now pioneering the next revolutionary technology.

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About Me

The Press Division of the Taipei Economic and Cultural Office (TECO) in San Francisco represents the Government Information Office (GIO), Executive Yuan, Republic of China (Taiwan). GIO maintains nine Press Divisions in the United States, including the San Francisco office. The Press Divisions are in charge of promoting Taiwan's public relations and cultural exchanges. This blog is updated by the Press Division, TECO in San Francisco.