What the Australian electronics industry can learn from Taiwan Electronics News
THE RISE of China as an electronics manufacturing powerhouse has forced Australia’s electronics sector to adopt a more design/IP centric model. But the migration of manufacturing has also affected Asian countries like Taiwan.
In June 2011, Electronics News visited Taiwan, courtesy of the Taiwan External Trade Development Council (TAITRA).
The Taiwanese government is making a concerted effort to build an information society, viewing technology as a key tool to improve the lives of its citizens. The Institute for Information Technology (III) was established in 1979 to push this agenda.
According to Sam Shen, Deputy Managing Director for the International Division of III, Taiwan remains a major procurement centre for the region, with its main strengths being its OEMs and ODMs. Its businesses are making products in China, but retain decision-making and other high-end activities within Taiwan.
“Taiwanese companies are no longer showing off their manufacturing capabilities, but have moved to global logistics,” Shen said.
And where 30 years ago, Taiwan specialised in copying products from other countries, like many other Asian countries (Japan and South Korea come to mind), it is now developing its own products in a bid to differentiate itself.
“As long as product functions and mobility keep growing, new opportunities will emerge for Taiwanese companies,” claimed Shen. “The real strength of Taiwan are the small companies supporting the strength of well-known brands.”
A large number of SMEs exist in Taiwan, providing niche services and parts which together enable the creation of devices. These specialist companies are retaining their operations in Taiwan, as opposed to moving elsewhere.
However, profit margins are shrinking for hardware devices, meaning Taiwanese device-makers are increasingly focused on value-adding with services and content.
HTC, for example, is employing software engineers, and there is always the chance that the smartphone operating system market (which thus far has been dominated by Google’s Android, Apple’s iOS and Microsoft’s Windows Phone) will further fragment as manufacturers develop their own software.
But this fragmentation will not be a negative move for consumers, claims Joseph Wu from TAITRA, since the diverse software experience offers choice, but will retain inter-compatibility through the cloud.
Here, shipping containers hold cloud servers, with 500 racks crammed into each. Companies like Wistron and Invensys have their servers here, with a multitude of technicians configuring, analysing and debugging the servers.
Since its founding in 1973, ITRI has been instrumental in founding companies that are now key players in the semiconductor industry, including UMC, TSMC, TMC and Vanguard International Semiconductor.
By partnering with over 50 research institutes, ITRI has come out with a number of next-generation technology solutions, including car tracking on roads, personal health devices, and a a flexible and paper-thin speaker made from nanomaterial which can be configured for different sizes and shapes, with the possibility of integration into walls and furniture.
FAVITE is the largest RFID manufacturer in Taiwan, with an entire production line in the country. It specialises in UHF products from inlays to readers, and provides OEM and ODM services to its clients, who are predominantly system integrators.
These system integrators often use UHF readers and tags to enable parts of the applications or projects.
According to FAVITE’s RFID sales specialist Wendy Chang, UHF is still at a emerging stage, and the company is aiming to work with system integrators to increase adoption around the world.
“UHF is not a very easy sector to be in. Systems integrators have the ability to write software and control conditions, so 50 percent of the contribution to a project has to come from the client. We need partners who are willing to work with us,” said Chang.
While keeping its base in Taiwan, FAVITE, like many other manufacturers, is expanding its production line to China.
“We know there is a market for our products in China, and this move will allow us to cater to it,” Chang said. “We have the IT teams and background knowledge on the products. China has a lot of production capabilities but not a lot of technical knowledge on their application and integration.”
Founded in 1975, it has more than 700 employees in total and a 2010 revenue of US$55 million. It has subsidiaries in California, Penang, Suzhou, Shanghai, Seoul and Tokyo, and distributors in more than 80 countries.
While GW Instek derives around 80 percent of its revenue from its own instruments, the company also provides ODM services for brands like Tektronix, Hitachi and Kenwood.
Helena Wang, manager of GW Instek’s overseas sales department, said the company is now working on strengthening its R&D capabilities.
“Our products started by targeting the low-end, but now we have very strong R&D and are positioned in the middle-higher range,” Wang told Electronics News.
Like other instrument manufacturers in Asia, GW Instek has yet to achieve brand recognition in the wider market, but hopes to compete in price, quality and product range.
When asked about the price competition from China, Wang pointed out that Chinese companies tend to manufacture duplicates at a low price, and generally lack R&D capabilities, quality control, and customer support.
“Most of the cost of our instruments is from the material and components. For example, we source the CRTs, the most costly component in the systems, from Toshiba/Matsushita in Japan. We differentiate by having higher quality components, and advanced functions,” said Wang.
On a tour of GW Instek’s facility, Wang also mentioned calibration accuracy as being a big source of problems with Chinese instruments, and emphasised the rigorous testing the company undertakes with its products, including EMI, temperature and humidity.
Established in 1985, Diptronics produces and develops dip switches, tactile switches and other precision switches. It has captured approximately 60 percent of the notebook market.
While the company has production facilities in China, it undertakes pre-production and the production of miniature tactile switches and high level products in Taiwan, having imported Sumitomo injection moulding machines, as well as Japanese punching machines, thickness checking systems, and digital microfocus X-ray systems, etc.
During a tour of the Diptronics production line, Vincent Chang, manager of the sales department, emphasised that the company self-designed the line and a number of the machines, having the parts manufactured in China to be shipped back and assembled.
The company has its finger on the pulse of the market through the relationship its sales team has built with customers, allowing it to predict demand in advance to keep up with its clients’ demands.
Diptronics is focused on developing new components to cater for the demand for smaller dimensions and LED integration into the switches. Demand for indicating switches with LED technology in particular, is on the rise, with Diptronics expanding its range in that area and projecting a big leap in LED switches within the next three years.
This R&D focus served it well, with the company actually gaining market share post-GFC, powering a very quick recovery from 2009.
“[During the GFC] we stabilised our production. After 2009, many switch makers could not offer new products, so we took market share from our competitors,” Chang told Electronics News.
Overall however, Chang said the company has benefited from a very stable industry.
“Over the last 26 years, we have phased out none of our products,” Chang said, while adding six or seven new products to its range annually.
Diptronics’ main competition are from big global companies like Alps and Panasonic. However, it has a strong market in Taiwan, which conveniently is home to a wide range of notebook manufacturers. It has mainly competed by offering a high degree of customisability and quick supply turnaround.
When asked about problems with IP protection in China, Chang maintained that Diptronics staff are very involved in auditing the quality control in China, with 100 percent control of the Chinese production processes.
However, Chang acknowledged challenges on the horizon.
“China wants to double its wages in the next five years, and it is a challenge for us, since our operations are labour-intensive,” he said. “We are expanding our automation line to reduce our dependence on labour, and to lower our costs.”
Organised by TAITRA and the Taiwan Electrical and Electronic Manufacturers' Association, the show will feature categories for a whole range of electronic components, meters and instruments, from passive components to consumer electronics and RFID.
Specifically angled at professionals, TAITRONICS will provide visitors with a window into the Taiwanese electronics supply chain, and an opportunity to discover and source electronics gear, components and equipment from a range of manufacturers.
What the Australian electronics industry can learn from Taiwan Electronics News
In June 2011, Electronics News visited Taiwan, courtesy of the Taiwan External Trade Development Council (TAITRA).
The Taiwanese government is making a concerted effort to build an information society, viewing technology as a key tool to improve the lives of its citizens. The Institute for Information Technology (III) was established in 1979 to push this agenda.
“Taiwanese companies are no longer showing off their manufacturing capabilities, but have moved to global logistics,” Shen said.
And where 30 years ago, Taiwan specialised in copying products from other countries, like many other Asian countries (Japan and South Korea come to mind), it is now developing its own products in a bid to differentiate itself.
Mobile as the future
SMEs and corporations in Taiwan are responsible for a large number of ICT-related products, with mobile handheld devices a large growth area, particularly on the back of HTC.“As long as product functions and mobility keep growing, new opportunities will emerge for Taiwanese companies,” claimed Shen. “The real strength of Taiwan are the small companies supporting the strength of well-known brands.”
A large number of SMEs exist in Taiwan, providing niche services and parts which together enable the creation of devices. These specialist companies are retaining their operations in Taiwan, as opposed to moving elsewhere.
However, profit margins are shrinking for hardware devices, meaning Taiwanese device-makers are increasingly focused on value-adding with services and content.
HTC, for example, is employing software engineers, and there is always the chance that the smartphone operating system market (which thus far has been dominated by Google’s Android, Apple’s iOS and Microsoft’s Windows Phone) will further fragment as manufacturers develop their own software.
But this fragmentation will not be a negative move for consumers, claims Joseph Wu from TAITRA, since the diverse software experience offers choice, but will retain inter-compatibility through the cloud.
Research and innovation
Nowhere is the upwards move to the cloud more evident than at the Industrial Technology Research Institute’s (ITRI) Cloud Computing Centre in the windy city of Hsinchu.Since its founding in 1973, ITRI has been instrumental in founding companies that are now key players in the semiconductor industry, including UMC, TSMC, TMC and Vanguard International Semiconductor.
By partnering with over 50 research institutes, ITRI has come out with a number of next-generation technology solutions, including car tracking on roads, personal health devices, and a a flexible and paper-thin speaker made from nanomaterial which can be configured for different sizes and shapes, with the possibility of integration into walls and furniture.
Manufacturers in Taiwan
As part of the visit to Taiwan, TAITRA organised site visits to a number of electronics firms. FAVITE, GW Instek, and Diptronics stood out for Electronics News.These system integrators often use UHF readers and tags to enable parts of the applications or projects.
According to FAVITE’s RFID sales specialist Wendy Chang, UHF is still at a emerging stage, and the company is aiming to work with system integrators to increase adoption around the world.
“UHF is not a very easy sector to be in. Systems integrators have the ability to write software and control conditions, so 50 percent of the contribution to a project has to come from the client. We need partners who are willing to work with us,” said Chang.
While keeping its base in Taiwan, FAVITE, like many other manufacturers, is expanding its production line to China.
“We know there is a market for our products in China, and this move will allow us to cater to it,” Chang said. “We have the IT teams and background knowledge on the products. China has a lot of production capabilities but not a lot of technical knowledge on their application and integration.”
GW Instek
GW Instek (or Good Will Instrument) designs and manufactures oscilloscopes, spectrum analysers, signal sources, power supplies and component safety analysers.While GW Instek derives around 80 percent of its revenue from its own instruments, the company also provides ODM services for brands like Tektronix, Hitachi and Kenwood.
Helena Wang, manager of GW Instek’s overseas sales department, said the company is now working on strengthening its R&D capabilities.
“Our products started by targeting the low-end, but now we have very strong R&D and are positioned in the middle-higher range,” Wang told Electronics News.
Like other instrument manufacturers in Asia, GW Instek has yet to achieve brand recognition in the wider market, but hopes to compete in price, quality and product range.
When asked about the price competition from China, Wang pointed out that Chinese companies tend to manufacture duplicates at a low price, and generally lack R&D capabilities, quality control, and customer support.
“Most of the cost of our instruments is from the material and components. For example, we source the CRTs, the most costly component in the systems, from Toshiba/Matsushita in Japan. We differentiate by having higher quality components, and advanced functions,” said Wang.
On a tour of GW Instek’s facility, Wang also mentioned calibration accuracy as being a big source of problems with Chinese instruments, and emphasised the rigorous testing the company undertakes with its products, including EMI, temperature and humidity.
Diptronics
It takes a visit to Diptronics to appreciate the market for seemingly simple components like the small switches and buttons found on the electronic boards of common devices like notebook computers.While the company has production facilities in China, it undertakes pre-production and the production of miniature tactile switches and high level products in Taiwan, having imported Sumitomo injection moulding machines, as well as Japanese punching machines, thickness checking systems, and digital microfocus X-ray systems, etc.
During a tour of the Diptronics production line, Vincent Chang, manager of the sales department, emphasised that the company self-designed the line and a number of the machines, having the parts manufactured in China to be shipped back and assembled.
The company has its finger on the pulse of the market through the relationship its sales team has built with customers, allowing it to predict demand in advance to keep up with its clients’ demands.
Diptronics is focused on developing new components to cater for the demand for smaller dimensions and LED integration into the switches. Demand for indicating switches with LED technology in particular, is on the rise, with Diptronics expanding its range in that area and projecting a big leap in LED switches within the next three years.
“[During the GFC] we stabilised our production. After 2009, many switch makers could not offer new products, so we took market share from our competitors,” Chang told Electronics News.
Overall however, Chang said the company has benefited from a very stable industry.
“Over the last 26 years, we have phased out none of our products,” Chang said, while adding six or seven new products to its range annually.
Diptronics’ main competition are from big global companies like Alps and Panasonic. However, it has a strong market in Taiwan, which conveniently is home to a wide range of notebook manufacturers. It has mainly competed by offering a high degree of customisability and quick supply turnaround.
When asked about problems with IP protection in China, Chang maintained that Diptronics staff are very involved in auditing the quality control in China, with 100 percent control of the Chinese production processes.
However, Chang acknowledged challenges on the horizon.
“China wants to double its wages in the next five years, and it is a challenge for us, since our operations are labour-intensive,” he said. “We are expanding our automation line to reduce our dependence on labour, and to lower our costs.”
On exhibition
FAVITE, GW Instek and Diptronics will be among the hundreds of exhibitors at TAITRONICS 2011, the 37th Taipei International Electronics Show, to be held from 10 to 13 October at the TWTC Nangang Exhibition Hall in Taipei.Organised by TAITRA and the Taiwan Electrical and Electronic Manufacturers' Association, the show will feature categories for a whole range of electronic components, meters and instruments, from passive components to consumer electronics and RFID.
Specifically angled at professionals, TAITRONICS will provide visitors with a window into the Taiwanese electronics supply chain, and an opportunity to discover and source electronics gear, components and equipment from a range of manufacturers.
What the Australian electronics industry can learn from Taiwan Electronics News
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