The Taiwanese high tech industry has long held that ever since 26 year-old Malaysian Chinese Pua Khein-Seng founded Phison Electronics in 2000, Taiwan has not seen another “unicorn”-level technology startup.

A “unicorn” is defined as a startup company that achieves valuation of one billion US dollars within 10 years.

Beyond the science parks crammed with publicly listed companies, Taiwan is in fact home to an unlisted “unicorn”: Synology, a company jointly founded by Microsoft veterans Philip Wong and Cheen Liao above a stock brokerage office.

Also founded in 2000, Synology has captured over 50 percent of the European market with a NAS (Network Attached Storage) unit the size of a small toaster, at one time recording 60-percent annual growth for seven consecutive years.

Every NAS product sold worldwide bearing the Synology mark is 100 percent developed, designed, manufactured and assembled in Taiwan.

Synology held a developer conference on August 31, packing over 100 IT people into a conference room at the Taipei International Convention Center on a Saturday morning. Surprisingly, the first person to take the podium was Synology chairman Philip Wong, a thin man with gray hair dressed in a white shirt.

The mysterious, low-key founder, who normally never appears before the media, showed himself at his company’s own developer conference. His appearance set company staff in attendance abuzz, as many people got their first glimpse of Wong. But after a brief introduction, he turned the stage back over to staff members and made an unceremonious exit.

Forging Asia’s Largest Software Ecosphere

Presently Synology has achieved annual revenue of around NT$12B, firmly establishing its position as the dominant NAS brand in Taiwan. Other Taiwanese competitors in the field have the backing of conglomerates, such as QNAP Systems (a subsidiary of ICP Electronics) or Huayun Technology, whose largest shareholder is ASUS. In contrast, Synology’s only shareholders are Wong and his wife, co-founder Cheen Liao, and company employees.

“Revenue is not the most important thing,” related Synology chairman Philip Wong in an exclusive interview with CommonWealth, before clarifying: “Profitability is more important.”

Unwilling to disclose Synology’s profitability numbers, Wong would only hint that it was in the same neighborhood as ASUS’s profits for 2018.

ASUS yielded revenue of over NT$300B in 2018, with a net profit of NT$4.2B. Extrapolating based on Synology’s NT$12B of revenue in 2018, profitability in excess of 30 percent puts it in the top tier of profitability with the likes of Taiwan Semiconductor (TSMC) (with a net profit margin of 34 percent).

Extrapolating based on the 13-to-1 price/earnings ratio of fellow NAS industry company Netapp and the 14:1 P/E ratio of Wywinn, the cloud-based infrastructure company based in Taiwan, then Synology can be estimated to be worth over NT$50 billion, placing it firmly into the ranks of unicorns.

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This low-key CEO not only went back to the well this year to take on the role of chief executive officer, but he moved over 600 company employees spread among three offices on Chang’an West Road and Chengde Road in Taipei into a new 14,850 square-meter office space in Banqiao’s Far Eastern T-Park, across from the facility currently under construction that will eventually house Google’s largest R&D facility in Asia. 

Synology CEO Philip Wong wants his company to be as valuable as top international brands, and to forge Asia’s biggest software ecosystem. (Photo by Kuo-Tai Liu/CW)

Given Synology’s relative lack of name recognition outside the technology sphere, not only had the T-Park sales agent never heard of the company, but he even wondered whether Wong could afford such a large space. In turn, this only drew more fight out of the company co-founder.

“I have great ambition, to make Synology as valuable as top international brands,” states Wong.

According to Gartner’s classifications, high unit price products in the NAS realm costing US$5000 or higher are dominated by the top international brands Wong referred to, such as EMC and NetApp. As for products that individuals and small- and medium-size businesses rely on under the US$5000 price point, this sector is nearly completely dominated by Taiwanese brands, with Synology at the forefront.

In recent years, Synology has set its sights even higher, seamlessly integrating NAS - which are like personal clouds - and its own public cloud. This way, users use data storage, backup, and sharing management services provided by Synology and commercial software the company developed, like email, multimedia, and social media applications tools. It is like a Taiwanese version of Microsoft cloud services, except that Synology also has its own hardware brand.

“We don’t just sell NAS hardware, but wish to establish Asia’s biggest software ecosystem,” says Wong, describing his vision for brand upgrading. Despite a full head of gray hair, Wong’s ambition does not take a back seat to that of most young entrepreneurs.

Yet observers are curious as to how this exceptionally low-key man with the greatest of ambitions drove Synology to become such a valuable brand at such a trying time for Taiwanese technology brands, and about this man’s story.

The Key to Taiwanese Smartphone Brand HTC’s Rise

Holding a degree in forestry from National Taiwan University, Philip Wong joined Microsoft in 1990, in the last days before the Internet began to take off. Back then, Microsoft had not even introduced Windows, and starting by selling DOS products Wong made it to executive vice president of the OEM division, where he came in contact with Taiwan’s front line PC brands and OEM manufacturers.

“Later, Windows gave rise to Windows CE, for which Taiwan was a key base. And Microsoft tasked me with putting together a team to work on adaptation,” recalls the ever-modest Wong.

When Microsoft launched its WinCE operation system in 1996, Philip Wong was executive vice president of Taiwan Microsoft. He called Cher Wang at the FIC Group to propose licensing the OS to FIC to develop it for hand-held products, inadvertently igniting the fuse for the subsequent founding of HTC. (Photo by Chien-Tong Wang/CW)

In her book 10 Lessons From God, Cher Wang, HTC founder and the company’s largest shareholder, gave a detailed account of what transpired next.

Microsoft introduced the WinCE operating system in 1996 in preparation for going after the hand-held device market. Before long, Philip Wong, then an executive vice president at Taiwan Microsoft, called Cher Wang of First International Computer (FIC) on the phone to propose that Microsoft license the OS to FIC to develop it for use on hand-held products.

Within three days, H.T. Cho, a veteran of Taiwan Digital Computer, also called Cher Wang, and both of them brought up the plan to develop hand-held devices.

“I recall very clearly how, in order to promote the WinCE platform Philip Wong and Eddie Wu (former Taiwan Microsoft Consumer Channels Group president) asked Chen Wen Chi and I to lunch. We met at the members’ club underneath the Hungkuo Building next to the Formosa Plastics building, and it was the first time I saw WinCE,” recalls Cher Wang in 10 Lessons from God.

Cher Wang believes that under the environment at the time, although it would take some time for the WinCE platform to gain currency, hand-held devices had the potential to take off and become the mainstream market. Accordingly, when Philip Wong approached her saying that Microsoft wanted to licence WinCE to the FIC Group, Cher was excited about the proposal.

At that time, 3Com’s Palm OS was firmly established as the leading global brand in the personal data assistant (PDA) market. Going up against Palm, Microsoft pushed its WinCE platform products and lobbied aggressively for the world’s top-10 computer companies to come on board.

Back then, before HTC had been established, H.T. Cho often discussed with Cher Wang, Chen Wen-chi, Chou Yung-ming (former COO of HTC), Chen Wen-chun (former HTC director of operations) what should be HTC’s first product once it got up and running.

In the 1990s the PDA market was entirely dominated by the Palm operating system, with over 90 percent of the worldwide market, followed by mobile phone leader Nokia’s Symbian and Linux, respectively, whose market shares were barely worth noting in comparison to Palm’s.

However, Chou Yung-ming favored Microsoft’s Handheld PC (or HPC) concept. Although it was more complex, it had greater potential for development. This resulted in the decision to invest in WinCE platform, for which a platform had yet to be completed, earning Cher Wang and H.T. Cho’s support.

HTC’s first bucket of gold after its founding was a PDA built for HP and Compaq, which ran on the Microsoft platform.

Photo by Ming-Tang Huang/CW

At Microsoft I did more than sales. I really love new things and new technology, and will eagerly urge you to upgrade; and suggest that vendors can use these things,” says Wong, matter-of-factly recalling how it became a major spark in HTC’s founding.

                       

Fond of new things and new challenges, plus being in contact with Taiwan’s OEM manufacturers at the time, Wong felt strongly that Taiwanese vendors were all doing work for foreign manufacturers, on products whose core technology was limited. In essence, they were putting in a lot of work for little return. 

First Obstacle: Immature Market

After leaving Microsoft, Philip Wong dipped into his personal savings to start a company in 2000, where his thinking continued to be deeply influenced by Microsoft. One executive familiar with NAS companies admits that at first they were simply a Microsoft licensing company, and that if Microsoft was selling computer software licensing, then Philip Wong and Cheen Liao saw the niche market of server software licensing.

Philip Wong was razor focused on data management from the start, “But I always wanted to find the shell, which turned out to be NAS. At first we couldn’t bring ourselves to make claims about doing data management, and just focused on storage.”

Wong concentrated on browser based storage equipment. However, the trick was to avoid becoming completely beholden to Microsoft Windows. If Windows ran underneath all of Synology’s products, Philip Wong knew very well that he would share the same fate of other Taiwanese technology brands and OEM manufacturers.

“So we deliberately avoided Windows from the beginning,” Wong relates. Yet reality is cruel, and in the beginning Synology experienced a lot of difficult stumbling.

“With Microsoft licensing, one copy was US$25, plus software and hardware integration wasn’t quite yet mature,” admits a former Synology executive, relating that the company had experienced a great many ups and downs leaving it on the brink of closure.

“In the beginning we suffered more than our share of hardship. We wanted to make browser-based software, but browsers at the time were not that mature, and even HTML coding tools were quite limited,” relates Wong, who insisted on never turning back in spite of the temptation to return to Windows-based storage.

“It’s a good thing we didn’t circle back.” Having come from Microsoft, Wong took the biggest risk since the company’s founding, which unexpectedly turned out to be the right move.

“It was really a harrowing time,” recalls Darren Lu, senior vice president of technology development at Synology.

Shortly after graduating from National Taiwan University in 2000 with a degree in computer science, Darren Lu interviewed with Synology’s other founder, Cheen Liao, who was responsible for recruiting engineers, to join the company. Lu remembers very clearly that Philip Wong’s vision for the company at the time was “to become the EMC of Asia.”

Synology’s entry into the NAS sector came at a time when major global vendors like EMC and NetApps were working with Fortune 500 companies.

Learning from The Toyota Model for Accessing the North American Market

Knowing that company resources were limited, as an upstart brand Philip Wong could not possibly make inroads into the high-end market occupied by EMC and NetApp. Accordingly, he concentrated on learning from the model that Toyota used to break into the North American market.

Wong made the deliberate decision to stay away from the high-end market dominated by European and American brands, which in his words was “too crowded.” Instead, he opted to start out by going after “power users” and small- to medium-sized businesses.

“American corporations aren’t too interested in this market sector, so we gradually worked our way up from here, slowly eating away at their base. That’s the Toyota strategy,” relates Wong. He knew that people driving Mercedes-Benzes and living in luxury homes could never go for driving a small car and living in an apartment.

As it approached the North American market, Toyota was certain to face stiff competition from major brands like General Motors (GM), Ford, and others. So they decided to take on low-cost compact car market first, win over that segment, and force GM and Ford to migrate to the next level up in the market, while Toyota gradually worked its way up.

Having gotten its start in software, in addition to NAS hardware, Synology developed a series of six solutions with NAS at the core, including backup, file management systems, productivity tools, pure storage, monitoring, and multimedia. Essentially, by purchasing Synology hardware and software services, a company is all set for everything from its internal software to storage, email, and communications needs.

“Back then a machine only cost around US$100, and now it can sell for as much as US$10,000,” relates Wong.

Photo by Kuo-Tai Liu/CW

Power users love Synology for inexpensive prices and excellent functions. Most of these power users are MIS department staff in large corporations, who gradually introduced Synology products to their companies, like Swiss pharmaceutical company Roche.

For years Synology had no peer in the power user sector, commanding over half of the European market, with seven consecutive years of 60 percent growth. “For me that is the definition of competition, eating away at one level after another on the way up. That’s how competitive we are,” relates Wong.

Although Synology gradually worked its way up to the commercial realm, this is where it hit the second bottleneck since the company’s founding.

Second Obstacle: Different Needs of Corporate Clients

Power users demanded speed and freshness, and would help with troubleshooting and testing whenever they felt Synology’s products were lacking or had issues. Corporate clients, on the other hand, demanded better product durability and stability.

Early in its efforts to go after corporate clientele, no one at Synology, from as high up as Philip Wong down to engineers, dared sleep at night, as customer emails with problems and questions poured in like snow in a blizzard.

“That was really a totally different mindset. From product development and testing, to going on the market, demands on our engineers were different. The difference between 99 percent and 99.99 percent took a tremendous amount of effort for us to adjust,” admits Darren Lu, expressing the difficulty of the challenges faced.

Liu Chia-yu, vice president of the Synology Applications Development Department recalls that Philip Wong went over customer emails with engineers practically every day, trying to understand their issues and unearth new customer needs.

Liu Chia-yu, who has worked at Synology since 2009, is currently responsible for working on the cloud services product “C2” in development at the company for the past two years. He led a team to establish three data centers in distant Frankfurt, Germany, which was like setting up Synology’s own public cloud to complement NAS and offer customers with mixed cloud and data management services. This arose out of customer feedback, which showed their desire for simultaneous and secure data storage and backup in one device.

At the time, from channels to loyal users, customers began to feel that “Synology is releasing products at a slower rate.” Wong knew all about these reviews, but insisted that this was a necessary sacrifice, and that products should only be brought out when all issues were resolved.

Photo by Kuo-Tai Liu/CW

“We really constantly tested, and kept making changes until everyone was satisfied before releasing them,” offers Liu, whose goatee makes him look like a millennial. At first it was truly a grind.

Synology, which at one point enjoyed a period of 60 percent growth, saw growth flatline during the transition to corporate clients, even hitting zero. After two years of adjustment, Synology is now back at double-digit growth. And corporate enterprise clients account for 70 percent of revenue, up from 30 percent five years ago.

It took two years to build two data centers for the new cloud services program Liu Chia-yu currently heads. The first facility sold over half its output within six months of completion. The next one installed has double the capacity of the first, and has already sold out its entire capacity. A third facility is currently under construction, now having reached 30,000 customers, indicating the robust demand.

“We were thinking that we wanted to establish a company with software as a core value, and the value of today’s PC’s and mobile phones is built on software,” notes Wong, who insists that his company have the in-house capacity to forge a complete software ecosystem, knowing that this is the key to Synology’s competitiveness.

Taiwanese Version of Google, Dream Job of CS Talent 

Always keeping a low profile, Philip Wong goes to work early and gets off early each day, rarely spending more than six hours at a time in the office. Synology, a company chock full of computer science wonks from Taiwan’s top institutions of higher learning, has always sanctioned full participation by young staff members in the entire process from product development to launch. This gives them a strong sense of accomplishment, and fosters a sense that they are not just small cogs in the organization.

Wong light-heartedly relates an anecdote from Synology’s early days concerning the relatively anonymous company’s tough recruiting standards. At a time when computer science geeks were pouring into Taiwan’s science parks for jobs at major technology companies, one job candidate fresh from an interview posted on a message board, “They don’t just eat you raw, they dry you out in the sun,” said the job seeker, mockingly expressing indignation that this little company could be so picky.

Fast forward to the present day, where job seekers not only post Synology interview questions, but the company has become a dream job for computer science majors, like a Taiwanese version of Google.

“Not many people end up leaving them, and it’s not easy to pry people away,” admits the president of one Synology competitor. Clearly, Synology has its charms.

“Our team is smart, and military-style management doesn’t work for a group of smart people; you have to give them a good topic, and then everyone goes all-out to solve it. Our function is to find good topics,” offers Wong, candidly.

“He’s always been very enthusiastic. A lot of people do something for 10 or 20 years and start coasting, but he remains committed. He pours his heart and soul into seeing that his brand is rooted in Taiwan and goes out to the entire world,” Darren Lu, a member of the first group of employees to join Synology after its founding, observes after nearly 20 years with Philip Wong as his boss.

Now entering its twentieth year, Synology has determined to hold events around the world. Philip Wong is all-in, committed to keep going, holding them every year.

“It takes a lot of manpower and commitment, but he’s very focused. He opens your mindset, and wants you to go out and get face to face with clients and users around the world, and not just rely on email and the telephone,” offers Lu.

Today, Taiwan contributes just 3.6 percent to Synology’s bottom line of over NT$10 billion.

Philip Wong is committed to leveraging technical know-how to forge a brand with core competency. Hailing from Taiwan, it is even more important for Synology to reach out globally and become a worldwide brand. The quiet entrepreneur speaks with all his voice for the brand he forged with his own hands.

Translated by David Toman
Edited by Sharon Tseng