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Taiwan + Israel

Synergy in the Making


Synergy in the Making


Israel may be a hot investment destination, but Taiwan has been late in joining the bandwagon. Two Taiwanese companies active in Israel share three secrets for working with Israeli companies.



Synergy in the Making

By Yuan Chou
From CommonWealth Magazine (vol. 549 )

"This will replace the iPad," Chen Shi-chiung declared proudly, holding up a piece of transparent plastic and bending it back and forth.

While transiting at the Hong Kong airport, CommonWealth Magazine serendipitously ran into this Taiwanese businessman, who was also heading to Israel. The chairman of Eastern Microelectric Lab Inc., Chen had a newfangled gadget with him.

The A4-sized flexible plastic sheet in his hand, about the same thickness as a magazine, was actually a tablet computer prototype. After studying QR-LPD (quick response liquid powder display) technology in Germany, Chen invented this tablet computer with touchless control that is operated by fingertip gestures in front of the display.

The logo on the sample indicated that Chen had already been in contact with a Taiwanese flat panel display manufacturer. So why was he headed to Israel?

"To prove the technology," Chen said. Displays available commercially have up to 380 pixels per square inch, but the United States Federal Bureau of Investigation and Israel's Ministry of Defense demand higher resolutions of 500 pixels per square inch. Chen felt that if he were able to get orders from Israel, signing up other customers would be a cinch.

In looking to Israel to validate his product, Chen stands out as one of just a few Taiwanese pioneers looking to do business with the Middle Eastern state. Only rarely does one hear about tie-ups between Taiwanese and Israeli companies.

Like 'Getting Married'

When asked about the lack of interest in investing in Israel, Taiwanese entrepreneurs cite similar concerns. "Companies that have only been in business for a few years demand prices as high as those of established European brands," and "Everybody knows Jewish people are very good at doing business; you can't get an edge when working with them," were among the common refrains.

"It's true that Israelis really like to argue. Collaborating with them is like getting married. You can't foretell success or failure early in the relationship," quips Kou-I Szu, senior executive vice president of linear motion device manufacturer Hiwin Technologies Corp.

Even then, however, Szu tells his friends, "If Taiwanese equipment makers want to get orders from world-class manufacturers like TSMC, the fastest way to do it is to go through Israel or Silicon Valley." In fact, the American corporation Applied Materials Inc. sells devices to chip maker Taiwan Semiconductor Manufacturing Co. (TSMC) that detect imperfections in its chips, using positioning systems from Hiwin. And some of Hiwin's high-performance drive technology comes from Israel.

Access to Anti-missile Technology

In an interview with CommonWealth Magazine in 2012, Hiwin chairman Eric Y.T. Chuo revealed his secret Middle East R&D base two years after acquiring Israel-based Mega-Fabs Motion Systems Ltd.

"Taiwan didn't have the talent I needed to help me solve problems with drives and controllers. Many of the drives bought around the world are from Israel. They developed them to make missiles," Chuo said at the time.

Two years later, CommonWealth visited the high-tech park in Yokneam in northern Israel just outside of Haifa where Hiwin's secret base is located.

Housed in a two-story building with only 20 employees, Mega-Fabs barely stands out. Chief Technology Officer Max Sakhartov does not say much, in part because he is from the former Soviet Union and speaks little English. It's only when one peers into their "warehouse" that one understands why Chuo felt he had to buy the company.

The warehouse is the building's air-raid shelter, its ceiling equipped with an escape ladder. Among Mega-Fabs customers is the Israeli military, and products used in anti-missile systems and tank defenses are hidden here to keep them secure.

"This is the brain on the controller," says Mega-Fabs CEO Shimshon Ben-Dov as he almost magically pulls out a digital signal controller about half the size of a credit card. When installed in anti-missile weapons, it can quickly take down enemy rockets. When installed in machine tools, it can detect flaws in electronic components with great precision, helping Taiwan-made machine tools become mainstays in the factories of top-flight contract chip makers.

"Electro-mechanical integration and automation are future trends, and Mega-Fabs is the heart of these systems," says Hiwin's Szu, who is also Mega-Fabs' chairman.

Another Taiwanese company with interests in Israel is semiconductor vendor Winbond Electronics Corp. In 2005, Winbond spent NT$2 billion to buy National Semiconductor's Advanced PC Division. National Semiconductor was headquartered in the United States (it's now been acquired by Texas Instruments), while its Advanced PC business was based in Israel. This was the first time a Taiwanese enterprise had ever bought an Israeli company.

"With the PC industry in decline, Taiwan needs to find a new direction. Here there are people from international brands like HP and Intel who can provide a new vision," says Chester Hwang, president of Winbond Israel Ltd. "Taiwan's entrepreneurs have even gone to the United States looking for talent. Why not come to Israel?"

Venture capitalist Jon Medved, known as Israel's "unofficial economic ambassador," sees potential in the Taiwan-Israel relationship.

"You (Taiwan) have had a great past in semiconductors and computing industries," Medved says.

"We are on the verge of a new golden age in hardware, in robotics, wearables, the IoT. This is going to play to Taiwan's strong suit, which is embedded systems, small semiconductors, inexpensive manufacturing, and it's also Israel's strong suit. We are good at designing hardware, and I think the opportunity for Israel and Taiwan to work together on some of these projects is very strong."

With Israel coveting the Asian market, Taiwan represents an ideal springboard and production base. Similarly, Israel offers Taiwanese businesses a gateway into Europe and the United States.

Israel native Revital S. Golan is now based in Taiwan as managing director of Anemone Ventures, which helps companies from outside Asia, and especially Israel, address commercial opportunities in Taiwan. Golan believes that Taiwan and Israel are similar in many respects, including their democratic values, economies built predominantly on small and medium-sized enterprises, and respect for intellectual property rights.

Taiwanese manufacturers are very strong and very knowledgeable about Asian markets, Golan says, and they have the ability to take Israeli ideas and innovations and turn them into commercially viable products.

Mega-Fabs CEO Ben-Dov jokes that even though Hiwin bought his company, Mega-Fabs actually "acquired" Hiwin's marketing network.

The Secrets to Working with Israel

Regardless of what biases Taiwan may have had in the past, it will likely have to work with Israel to keep pace with international trends in the future.

Fortunately, the Taiwanese companies that have already established business ties with Israel have gained experience that can help others follow in their footsteps. That experience can be boiled down to three basic guidelines:

1. Learn to communicate with Israelis, and speak your mind: When renowned economist Stanley Fischer stepped down in mid-2013 as governor of Israel's central bank after serving in the post for more than eight years, he said he would miss "the friendships with many people" but not the "yelling all at once around the table," referring to meetings at which everybody talks at the same time.

When Taiwanese have objections, they tend to bottle them up and keep them to themselves. Israelis have no such reservations and speak their minds, making some meetings feel like fights.

That's because Israelis seek to reach consensus, rather than being forced to accept decisions they don't agree with, and in this way prevent problems from erupting in the future, Winbond's Hwang says.

"Don't try to control them. You have to trust them and stimulate them to achieve their potential and meet the objectives you've set," Hwang says.

2. Understand what they expect of you: Winbond and its Israeli employees have worked together for nearly 10 years and developed very good chemistry. But it wasn't always that way. After Winbond took over the company, there were many misunderstandings because of poor communications.

"In the beginning, when we tried to build a bridge towards each other, we built two bridges, not hearing each other," says long-time employee Ilia Stolov of the situation at the time.

Israelis are accustomed to doing things quickly; issues should be resolved after two meetings. If the Taiwanese side constantly puts off decisions by saying, "We'll see. We need to talk it over some more," the Israel side will lose patience and feel you are not sincere, eventually ending the relationship.

Similarly, Israelis expect Taiwanese bosses to provide the tools necessary for them to do their jobs efficiently and meet the company's objectives. Winbond's Israeli employees often complained in the early stages of the operation that Winbond "expected everything but gave us nothing," with the result that neither side's expectations were fulfilled.

3. Be prepared before entering into negotiations: Don't want to be outmaneuvered by the Israelis? Do a SWOT (strengths, weaknesses, opportunities and threats) analysis first to understand what the other side hopes to gain.

The managing director of Anemone Ventures in Israel, Hanoch Kaftzan, suggests that if an Israeli company being eyed by a Taiwanese business is still in its "seed stage" – when a product is just starting to take shape – it will likely need a major injection of capital and will be less amenable to giving ground on the cost of acquiring a stake in the company. But if the company is looking for a manufacturing partner, Taiwan's competitive edge in manufacturing could be leveraged to persuade the Israeli side to be more flexible on price.

Peter Fan, a certified public accountant with Deloitte Taiwan, advises Taiwanese companies to strengthen their international perspectives by first shopping around and becoming familiar with the company's competitors before trying to negotiate prices down.

"You won't be able to just talk your way around the Israelis," he says.

Some foreign companies hire Israeli consultants to help with the process. Or they can follow the approach of Hiwin's Szu, who not only studied the Bible and Jewish literature before getting involved in the company's acquisition of Mega-Fabs, but also travels frequently between Taiwan and Israel, becoming a bridge between the two countries.

"Our collaboration with Taiwan is all thanks to the trust and friendship we have with him," says Mega-Fabs CEO Ben-Dov of Szu, again demonstrating that Taiwanese hoping to earn the confidence of the often distrustful Israelis must exercise patience.

Translated from the Chinese by Luke Sabatier