The Taiwanese Brains behind Google
The Nexus 7 is selling like hotcakes. Now Google’s a contender in the global tablet wars, but it could not have got out the gate without its Taiwanese partner, Asus.
The Taiwanese Brains behind GoogleBy Elaine Huang
From CommonWealth Magazine (vol. 520 )
The Google headquarters in Mountain View, Silicon Valley, are unusually quiet.
Clad in a dress shirt, an engineer with ruffled hair ignores the passing visitors. Wearing huge headphones, he is engrossed in finishing a half-complete software program.
Google is the world’s most successful web company ever. Relying exclusively on the sale of intangible products – online advertisements – Google stunned the world by doubling its market value in five years.
Google began to venture into the hardware sector with mobile devices. When putting together a development team for the Linux-based operating system Android in 2006, Google sought cooperation with brand makers of mobile devices to expand the company’s dominating position in web-based services to the rapidly growing smartphone sector.
In June last year, Google released the Nexus 7, a handheld tablet co-branded with Asustek Computer Inc. (Asus). Attractively priced at US$199 (about NT$6,000), the Nexus 7 costs half the price of Apple’s iPad. As soon as it hit the market, the new Google device flew off the shelves worldwide. In Japan it even outsold the iPad. As a result, Google pushed its way into the ranks of top-selling hardware brands.
“If you're not doing some things that are crazy, then you’re doing the wrong things,” is how Google CEO and cofounder Larry Page described his approach to business in an exclusive interview with Wired magazine in late January. When creating products and services, Page expects his employees to outdo the competition by a multiple of ten. A 10 percent improvement, he told the magazine, means “that you’re basically doing the same thing as everybody else.”
One of the reasons for Google’s “10x” competitiveness can be found on the other side of the Pacific Ocean in Taiwan, in Guandu on the banks of the Danshui River.
It is 7 p.m. and the lights in many office buildings have gone out.
But the Asus headquarters are brightly lit. The spacious staff cafeteria on the second floor looks like the food court of a department store. Despite the lateness of the evening, it is brimming with dining engineers and managers. The same scene is taking place a five-minute drive away at the computer maker’s Beitou District office, located in an old, green Tatung factory.
Asus’ about 800-strong Android team is concentrated within a one-kilometer radius along the banks of the Danshui River. They are readying themselves for action at this hour because a new workday is about to begin on the other side of the Pacific.
At 9 p.m. Asus CEO Jerry Shen arrives with a dozen people to review products in the making.
Eyes wide open behind his thin-rimmed glasses, Shen scrutinizes the product samples brought to the table by his product developers. Without omitting any detail, Shen peppers the developers with questions about user experience, functions and cost structure. For the R&D engineers the meeting is a test of nerves. It is already 11 p.m. when Shen adjourns the meeting. The engineers rush downstairs to their offices to work on solving the just-diagnosed problems. They return home in the wee hours of the following morning.
“Google has its own ideas when it comes to insisting on perfect products. Their standards are very high,” notes Asus vice president Samson Hu, who was in charge of creating the Nexus 7.
Hu, clad in a light-colored dress shirt and suit pants, has worked his way up to Asus’s top management from motherboards to notebooks and the mini notebook Eee PC, and is now general manager of mobile communications products.
Hu is well aware that the success of the Android operating system has begun to shake up the mobile device segment.
Asus once cooperated with Garmin, a leader in global positioning system navigation devices, to release an Android-based handset. But their smart phone flopped, with market response lagging behind expectations.
For Asus, the joint venture with Google is a precious opportunity.
“Google excels at software, so they need to develop in partnership with a company that possesses a strong hardware manufacturing capability,” observes Chris Hung, senior analyst with the Market Intelligence and Consulting Institute (MIC) under the Institute of Information Industry (III), in analyzing Google’s mobile device strategy.
The Google-Asus relationship dates back to 2011.
Back then, the craze for small tablets, triggered by Apple’s iPad, took the world by storm. Asus had just weathered a crisis caused by excess inventory. But Chairman Jonney Shih nonetheless traveled boldly to New York to release the Transformer Pad, the world’s first tablet with a detachable screen and keyboard dock.
Not long afterwards, Asus got an invitation from Google. Shih, Hu and Shen flew over to Google headquarters in the United States to formally introduce their R&D team to Andy Rubin, then Google’s Android chief.
That’s when Google finally noticed the existence of a company called Asus.
Speed: Three Months Faster than Apple
The market was rife with rumor at the time that Google would launch its own tablet products. Everyone was speculating whom Google would pick as its partner.
The answer got out when Rubin personally flew to Taiwan after the 2012 Computer Electronics Show in January to announce to the Asus team that Google wanted to release a 7-inch tablet as soon as possible.
What Google wanted seemed beyond the pale: a tablet with uncompromised functionality, but at a better price than competing products. On top of that, the new tablet product was supposed to hit stores within half a year.
Typically, brand manufacturers need half a year to just develop a product. But Shih, Shen and Hu, all accomplished engineers, fearlessly embarked on this mission impossible.
In the end, Asus spent only four months to develop the product and bring it to market. The Nexus 7, which was launched under the Google brand, hit the stores three months ahead of Apple’s iPad mini.
“This industry changes very quickly. If your product isn’t much of a ‘hero’ product, it won't be strong enough. You need to reach hero level from the very beginning,” posits Shih in a spirit that matches Page’s 10x mentality.
Software: Helps Hardware Differentiation
The key to the differentiation of a hardware product lies in its degree of software integration.
“Android is free software, but free is actually the most expensive,” reveals the vice president of one contract manufacturer. To make a product stand out in the red ocean of free software requires a massive infusion of resources.
But Asus did not start from scratch.
Shih has always spent a higher share of operating costs on training software engineers than his major competitor Acer.
For the Eee PC, for instance, Asus in-house software engineers used the open source software Linux to write the operating system. And in a lucky coincidence, Google’s Android is a Linux-based operating system too. Therefore, the software developers who worked on the Eee PC became an important human asset for Asus in bidding for the Google project.
Moreover, although Asus’s efforts in the smartphone market met with little success, Shih refused to downsize the R&D team. While industry insiders originally regarded them as a liability for Asus, the team proved themselves a valuable asset when the company switched gears and entered the tablet race.
Within two years the Android team at Asus grew from some 500 engineers to 800.
Thanks to this carefully cultivated engineering prowess, Asus has been able to churn out a string of innovative products in close succession over the past two years from the Transformer Pad tablet to the PadFone – a smartphone that transforms into a tablet when slipped into a screen. The Nexus 7 was developed in just four months.
With the new device, Google demonstrated that the Android operating system is not limited to smartphones, but can also run a tablet computer with a price-performance ratio Apple can’t match. And within less than a year, Asus has boosted its market share in the United States from 2 percent to 7 percent.
“Asus is no longer just a notebook brand,” acknowledges Fubon Securities Investment Services analyst Arthur Liao. In the first quarter of this year, notebook shipments contracted at an unprecedented rate. But at Asus mobile devices already account for 25 percent of revenue, up from less than 10 percent a year ago. Clearly, Asus is reducing its reliance on the notebook market by aggressively moving into the mobile device segment.
“It’s very tough, but it's worth it,” Hu says frankly.
Taiwanese manufacturers like Asus continue their hard-fought ascent, in a world of 10x competition.
Translated from the Chinese by Susanne Ganz