Matthew Miau was the first Taiwanese engineer working in Silicon Valley to come home to start up his own technology firm. Before the Hsinchu Science-based Industrial Park had even been established, Miau quit his career job at Intel in the United States to found the Mitac Group. But over the past three decades Miau has never lost contact with Silicon Valley. Miau believes that Taiwan plays a key role in the high-tech industry as an operational integrator.

For me, Silicon Valley is like an antenna –it allows us to sense frontline needs and product knowledge. That's why we've been keeping our product management and R&D in the United States up until today, so that we can think up future products in conjunction with the market side and the supply side. The Silicon Valley antenna has two functions. One is grasping market trends. The other is obtaining the latest information on components.

Aside from acting as an antenna, Silicon Valley also provides many opportunities for us to invest in the United States and to grow. But Taiwan itself is becoming more and more impressive. Nowadays, Taiwan is a little like Silicon Valley, and China plays the same role for Taiwan that Taiwan has played for Silicon Valley. Mediatek is a case in point.

Taiwan's Biggest Problem Is the Market

Today's Silicon Valley can't do without either Taiwan or China, but in the beginning Taiwan and China didn't have that kind of infrastructure, so Silicon Valley was forced to depend on itself. Taiwan now has ample capital, and in terms of technology and talent it doesn't lag far behind Silicon Valley. Our biggest problem is that our home market is not large enough.

Therefore, the rise of China is very important for Taiwan, because it has led to the formation of a new triangular relationship. Within this triangle Taiwan plays the role of operational integrator, be it at the customer end or the service end. Nowadays, many jobs need to be outsourced. Everything from manufacturing to design, procurement, logistics, and services needs to be outsourced.

In the past Taiwan was very dependent on Silicon Valley, but now Silicon Valley depends on Taiwan very much when it comes to using its newly released products and technologies.

Because interaction within the triangle is becoming closer, on the hardware front the high-tech industry has already come to be ruled by Taiwan and China. Silicon Valley is now switching its investments to software.

At the customer end, the whole world is presently outsourcing virtually everything to Taiwan (even if they outsource to China, they also entrust China-based Taiwanese businesses with these projects). So Taiwan has long played the role of operational integrator. This role is very important, and although China is very large, Taiwan still plays the leading part in all this.

At the service end, with the flourishing of the Internet, a lot of things are also being outsourced. From design to technical support, customer service centers and even U.S.-based logistics have all been relocated to Asia. Since global mobility has massively increased and because products are more and more software-oriented, a wider array of business operations can be controlled from remote locations.

Seizing the Opportunity to Buy Good Companies

I don't feel that Silicon Valley is on the demise. The private equity funds that many companies in Silicon Valley are bringing in now hold companies for a longer period, but the current financial crisis has still caused severe damage. From Taiwan's perspective this is a very good opportunity, because we can go buy some good companies. In economic downtimes, second-tier companies often become first-tier companies.

After the current major industry reshuffle, a lot of concepts will need to change. First, when a company's savings increase, its attitude toward borrowing money will change. In a healthy company the asset-to-liability ratio will change, and its price-to-earnings ratio will also not be that high. Second, Taiwan plays the role of an integrator. If things could flow as easily as in Silicon Valley, it would be very good. But right now we still face a lot of restrictions, for instance to investments and talent. All this needs to be reconsidered.

The era of rapid growth is over for the contract manufacturing industry, because we already have excess capacity. Actually, this is not only the case for contract manufacturing – we even have too many mobile phone brands. Contract manufacturing is a must. It is virtually impossible to do without it. If you want to do branding, you need contract manufacturing as a base. Without it you won't be able to build a brand. Contract manufacturing is here to stay – it's only that because of production overcapacities, many noncompetitive contract manufacturers will die.

Translated from the Chinese by Susanne Ganz

Matthew Miau

Chairman of the MiTAC-Synnex Group

Left his job at Intel in 1976 and returned to Taiwan where he joined MiTAC Inc. Today the MiTAC-Synnex Group comprises more than 40 companies worldwide with a combined annual turnover of more than NT$450 billion. The business group is active in many different fields ranging from conventional industries to high-tech. It is involved in flour milling, food processing, yacht making, petrochemicals, computer manufacturing, and the distribution and marketing of electronics products such as GPS devices. The group's core companies include Lienhwa Industrial Corp., Synnex Technology International, MiTAC International Corp., MiTAC Inc., Synnex Corp., UPC Technology Corp., and BOC Lienhwa Industrial Gases. Synnex and Synnex Technology International are the world's third and fourth largest IT distributors, respectively.

Chinese Version: 美中台矽三角　台灣是核心