By Michael Gold
TAIPEI, Nov 5 (Reuters) – Taiwan’s success at designing and
mass producing must-have gadgets for branded rivals such as
Apple Inc makes it tougher for its companies trying to
launch aspirational consumer brands of their own.
Ben Ho, marketing chief at smartphone maker HTC Corp
, says his firm’s shift from original design
manufacturer (ODM) to branded company has been a challenge for
marketing and messaging.
“For an ODM player, things are much simpler – you ship to
the operators and your job’s done,” he said in an interview. “As
a company, we decided to become a brand … it opened up a whole
new area of engagement.”
With ruthless efficiency and technical prowess, most large
Taiwanese manufacturers were founded a generation ago by
engineers or business people for whom cost control was king.
Products were faster, lighter, more compact and feature-packed,
but lacked a coherent brand image to attract consumer loyalty –
even after these ODMs decided to become brands.
Now that the electronics and technology goods that Taiwan
manufactures have become increasingly commoditized, the
country’s lack of an innovative breakthrough is more apparent.
Not so long ago, the likes of Acer Inc and Asustek
Computer Inc (Asus) looked set to lead Taiwan’s
economy down a path similar to Japan and South Korea, moving
from assemblers of gear exported westwards to globally admired
brand champions.
In 2010, Acer was the world’s second-largest notebook
manufacturer. In 2011, HTC controlled a fifth of the United
States market for smartphones – second only to Apple. Today,
both are fending off talk of buyouts as sales have slumped and
their stock prices have followed.
Acer is expected to announce later on Tuesday a
third-quarter net loss of around T$113 million ($3.84 million) –
according to Thomson Reuters SmartEstimates, which places
greater emphasis on top-rated analysts’ forecasts – versus a
year-earlier T$68 million profit. Acer shares closed on Monday
at their lowest in 12 years.
Last month, HTC posted its first ever quarterly net loss
and could lose more than T$1.62 billion this
year, according to SmartEstimates. Shares in HTC, which is due
to give earnings guidance on a call on Tuesday, have climbed by
more than a quarter from their 2013 low 9 weeks ago, but the
stock has still lost half its market value this year.
LACKING EMOTION
Many view these companies’ past triumphs as incremental at
best, and coincidental at worst.
The popularity of smaller, web-friendly notebooks in the
late-2000s, pioneered by Asus, was a stepping stone to the
tablet wave later unleashed by Apple. Similarly, HTC’s early
dominance in the market for Android, Google’s mobile
operating system, is viewed as mere good timing: it was first to
offer a genuine iPhone alternative.
Now, Taiwan’s progression up the innovation ladder has
stalled, with potential economic fallout as contract design and
manufacturing shifts to mainland China and elsewhere, where
costs are lower and talent plentiful.
The irony is that Taiwan has played its back-end role to
great success for decades.
According to Mark Stocker, a Taipei-based branding
consultant who has worked alongside local firms for two decades,
Taiwan’s economic miracle was built on a simple formula of
“finding a product, making it cheaper, getting those orders –
then finding the next product and doing it all over again.”
Stocker and others believe this process has become dogma to
Taiwanese technology firms – so much so that they fail to
understand that customers now want more than just low prices and
a long list of features.
“Taiwanese bosses don’t really have an idea how to make a
more appealing product based on emotional value,” said Albert
Chen, a former industrial designer for Acer and a design
consultant for HTC. He compared Taiwan’s product creation
process to Samsung’s, where consumer lifestyle is a key
consideration.
“When I go to different exhibitions, whether it’s
electronics or design shows or consumer shows, I rarely see
Taiwanese designers or developers or product planners. I just
see people in execution level, top management,” Chen said.
“They’re good at business strategy, but this is not the way
to create a good product.”
DESIGNERS VS ENGINEERS
In putting technological muscle ahead of consumer taste,
Taiwanese designers are forced to work around what engineers
want – the opposite of how Apple operates. Conflict is common in
an environment where designers strive to think ‘outside the box’
and managers are still fixated on cost-performance ratios.
“What’s odd is that when we have discussions with project
managers at Asus or Acer, they say ‘don’t worry about our
product image’,” said a senior designer at a large ODM, who
didn’t want to be named.
“The project managers, most of whom have engineering or R&D;
backgrounds, don’t trust their own in-house designers.”
Benjamin Chia, Taiwan-born chief creative officer at
elemental8, a Silicon Valley-based design consultancy whose
client list includes Samsung Electronics, Microsoft
and Motorola, says Taiwanese designers struggle to gain
respect in the corporate hierarchy.
“Upper management knows nothing about design, so they have
designers over-explain and over-simplify,” he said. “The product
loses its design purity.”
A manager at Asus said the company invests little in product
design or consumer interaction, placing most emphasis on price
and gadget spec. “Our strategy basically boils down to copying
our competitors’ products and adding one more feature or making
it cheaper,” said the manager, who was not authorized to speak
for the company, so didn’t want to be named.
INVESTMENT, CONTROL
For many, the only way for Taiwan to break from being a
brand-free zone is to make the sort of deep, years-long
investment in product innovation that Apple, under its
design-obsessed founder Steve Jobs, did for decades.
Especially crucial, say industry experts, is gaining control
over the entire user experience of a product, from hardware to
software to advertising to sales outlets.
Apple, for example, designs its own chips and operating
system, and has a commanding retail presence. And Samsung boasts
a strong grip over its supply chain, and has a tradition of
end-user products that has built a reputation among consumers.
For Taiwanese companies to succeed at talking to the average
customer, price, spec and tech need to take a backseat to image,
design and message, the experts say.
“What they haven’t realized is that they’re still using a
cost-performance mentality to build brand,” Stocker said.
“That’s just not working anymore.”
