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Taiwan's Love/Fear Dilemma


Taiwan's Love/Fear Dilemma


Taiwan's NT$4 trillion IT hardware sector and 2 million engineers are being profoundly influenced by Google, coming to rely on it for their futures. CommonWealth Magazine takes a journey to see how healthy that dependence is.



Taiwan's Love/Fear Dilemma

By Hsiao-Wen Wang
From CommonWealth Magazine (vol. 537 )

Stop No. 1: Changhua County

The first stop in this story of Google's growing influence in Taiwan is the coastal township of Xianxi in Changhua County, home to Google's heart – Asia's biggest cloud computing data center.

Windswept, sparsely populated Xianxi has long been best known for the many oyster racks blanketing its coastline. But what now grabs the eye is the tightly guarded three-story gray building sitting in the industrial park built on reclaimed land next to the oyster farms. People at Google like to call it "Voldemort Industries."

The structure is Google's Taiwan data center, occupying a plot about half the size of Daan Forest Park in Taipei. On Dec. 11, Google announced it was doubling its investment in the center to US$600 million after scrapping plans for a Hong Kong project, the biggest single fixed investment by a foreign company in the country in 20 years.

Xianxi resident "old Huang" has parked his small truck diagonally opposite to the facility's entrance selling grilled sausages and Mr. Brown coffee to construction workers at the site on its second phase and tourists braving cold winds to fish for eel nearby. 

"This is Asia's biggest cloud computing center, bigger than Singapore's or Hong Kong's. But if you can't speak English with the foreigners, you can't get in to work there," observes old Huang, who says that the data center is so secretive, constructive workers must even tape over the lenses of their mobile phones to prevent any images from leaking out.

Google's obsession with secrecy stems from the fact that it is quietly embedding Taiwan into the heart of its operations. If search algorithms represent this global technology leader's mind, then its 13 data centers scattered around the globe represent its heart, pumping data as if it were blood throughout the giant's body.

"A data center is the engine of the search engine," Joe Kava, Google's vice president of data centers, tells CommonWealth Magazine.

Gmail's Quarter-second Journey

Two billion people use Google every day to make five billion searches that take long spatial journeys through the company's data centers.

Starting when you click "send" on your notebook computer at home, every Gmail travels through your Internet line at home, electric poles in the neighborhood and underwater cables to a Google data center, from where it is sent to ride through underground fiber optic cables to a telecom company's backbone network. After traveling around the globe, it finally arrives at the recipient's tablet or mobile phone.

This journey that covers so much ground lasts an average of a quarter of a second. Almost every communication leaving or arriving in Asia in the future will pass through Google's facility in the Changhua Coastal Industrial Park.

The complex, which began operations in early December, is making Taiwan an indispensable link in the Google cloud experience. And with purchases by foreign IT vendors showing no growth this year, Google's investment will establish it as the best ally of a Taiwan desperately trying to reinvent itself.

"Though you can't say Taiwan has won the jackpot, it's drawn a pretty good lot," observes Hope Bay Technologies CEO Ben Jai, who helped Google develop the energy-efficient data center before starting his own business.

If the investment has a downside, Jai says, it's that it will not generate many jobs because of the facility's high degree of automation. It currently employs 60 people. But the upside is that through the convergence of the data center, submarine communications cables and satellites, the cost of every Google gigabyte (1 gigabyte can store about 300 songs) will fall, helping Taiwanese and Asian network and software providers extend their reach into global markets.

Taiwan's NT$4 trillion IT hardware sector and its 2 million engineers are eager to participate in the future envisioned by Google.

Taiwan's leading IT hardware manufacturers – from chip maker Taiwan Semiconductor Manufacturing Company (TSMC), chip designer MediaTekInc., and electronics contractor Hon Hai Precision Industry Co. to notebook maker Quanta Computer Inc., PC vendors Asustek Computer Inc. and Acer Inc. and touch screen producer TPK Holding Co. – are all rushing to jump on the Google bandwagon to build stronger footholds in the smartphone and data center markets.

Young Taiwanese software engineers are also betting on Google to gain supremacy over Apple and Microsoft in dictating the future and have devoted themselves to working on software for Google's semi-open Android operating system and Android compatible apps. Others have decided to tie their fate – and their youth – to the technology giant by investing their time in developing software and apps for Google's wearable computer, the Google Glass, which is expected to be released next year.

Taiwan's Burgeoning Hardware-Software Alliance

Taiwan's close alliance with Google has drawn foreign engineers to settle in the country and forge their futures here. One of them is 36-year-old Finnish engineer Taro Aaltonen.

The urban "utopia" for him and other like-minded backpacking entrepreneurs can be found on the third floor of a meat stew shop on Fuxing South Rd. in Taipei, less than a minute away from an MRT station.

The aging 130-square-meter apartment epitomizes the warmth and openness of a common workspace. Aaltonen enjoys working here and discussing with other entrepreneurs in Finland and Japan how to sell augmented reality software compatible with Google Glass.

The software Aaltonenis working on would enable Google Glass users to take a picture simply by making a sign for double quotation marks with their hands.It can also display number keys on a flattened palm that can be used to dial a phone number.

"I like Taipei. Taiwan is the most important hub of tech hardware in Asia. I can easily visit important tech companies on the island within one day. Here, I can help shape the future,"Aaltonen says excitedly.

As Google continues to invest heavily in this high-tech island, almost every one of its new mobile phones, tablets and notebooks involve work by Taiwanese electronics contractors.

Another of these engineers who are defining their futures in Taiwan has a major say in those partnerships is Vince Wu, the 33-year-old responsible for Google Chrome OS products in 14 markets in the Asia-Pacific region.

"I told my boss I wanted to come to Asia," says Wu, who volunteered four years ago to leave Google's headquarters in California and ended up in Taipei.

After meeting with some of its Taiwanese partners, electronics contractors Quanta, Compal Electronics Inc. andInventec Corp., in the morning, Wu holds a video conference with Hong Kong in the afternoon to go over a press conference he will attend in the former British territory the next day.

Hu carefully supervises all aspects of Chromebook notebook computers, from their design and production to their retail network. When he waves his conductor's baton, Taiwan's big five contractors and the NT$1 trillion notebook supply chain move in concert. 

Yet while Google has broken through Apple's technological hegemony forged through a closed operating system, the semi-open Android system poses its own dependency risk for Taiwanese suppliers. 

Open in Name, 'Kidnapped' in Reality

Android is known as an open-source operating system, but any brand or contractor using Android must first receive authorization from Google and guarantee that the most popular Google Play apps, such as Gmail, Google Map and YouTube– are installed and can be run without hindrance in their devices.

"Among themselves, Google engineers describe these Google Apps compatibility tests as a lock that forces contractors to toe the line. It's like in the movie The Godfather when you are made an offer you can't refuse," wrote well-known Chinese tech blog"36kr" at the beginning of October, criticism that resonated in Taiwan's tech circles.

In September 2012, for example, Acer was punished for planning to use the Alibaba Group's AliCloud OS in one of its products. Once Google found out about the project, it threatened Acer to drop it or facing losing its authorization to use Google Apps.

"This was a clear signal that any contractor thinking of embracing somebody else would face the kiss of death and be kicked out of the Android camp. A clean break from Google would be terrifying for any contractor. Going with Android is like riding a tiger, and there's no turning back," the bloggerwrote.

Taiwan's tech sector harbors the same mixed feelings for Google that are felt when falling in love – it is full of anticipation but jittery about getting hurt. "Google is 40-50 percent Taiwan's friend, and 50-60 percent its enemy," says an executive of a major Taiwanese high-tech company.

Google's cooperation with Samsung Electronics Co. on the semi-closed Android system enabled the South Korean electronics giant to speed past Taiwanese smartphone vendor HTC Corp. in the smartphone market after originally lagging far behind. Samsung has since leveraged its huge profits in thesmartphone business to   attack Taiwan's high-tech sector, smothering Taiwan's LCD display and DRAM sectors, eroding the monopoly Taiwan once held in the global notebook computer market, and even threatening contract chip maker TSMC.

Friend vs. Enemy Dilemma

Despite Google's close association with Samsung, Taiwan's high-tech enterprises cling tightly to the search engine monolith, fearful of being left out of the future Google is defining.

"Asustek, for example, is betting that Google will rule the world, and has shifted all of its resources to supporting Google," observes CIMB Securities analyst Wanli Wang.

For many companies, the simple reality is that they have to cooperate with Google if they want a place in the market because Google has emerged as the company with the most profound influence on people's daily lives.

In Google's virtual economic universe, every time we key in a search, we are optimizing Google's algorithm. Whenever we click on a blue link, we help Google earn an advertising fee. The company, in effect, has turned every one of its users into salespeople, to the point that it has amassed the power of a country.

Google's net income in 2012 of NT$300 billion equaled the combined earnings of Taiwan's four most profitable companies – TSMC, Hon Hai, Chunghwa Telecom Co. and Quanta – and the NT$200 billion it invested in Taiwan last year was roughly 10 times the annual budget of the country's leading high-tech R&D organization, the Industrial Technology Research Institute.

And Google has yet to hit its peak. Its share price of more than US$1,000 is nearly double that of Apple, and its market value of roughly US$360 billion as of Dec. 10 is not far off Taiwan's GDP. Google has deeper pockets than Apple, with cash reserves equal to NT$1.6 trillion, leaving it ideally positioned to make an acquisition or attack a rival at any time.

At this point of time, more than 1 billion people around the world own smartphones run on Android, while not even 200 million use the iPhone, and over 700 million people use the Google Chrome browser to surf the Internet, slightly more than the number using Microsoft's Internet Explorer.

Fifteen years ago, Google was just another start-up founded by two Ph.D. students at Stanford University. Today, the company has changed the course of seven global businesses: computers, the Internet, smartphones, telecommunications, media, entertainment and retail trade.

So why is Google so powerful?

Stop No. 2: Google's Silicon Valley Headquarters

The answer can be found at Google headquarters, where on a 10-degree Celsius day under the California sun, Google employees ride colorful bicycles around verdant grounds.

The beach volleyball court, fresh juice bar andbig airplane balloon that catch visitors' eyesmay all stretch the imagination, but they are par for the course at this eccentric Silicon Valley enterprise that has more ambition and a bigger dream than any other company on earth.

With a firm foundation in the Internet world, Googlehas embarked on a series ofhighly ambitious "moonshot projects." Google Glass, the self-driving Google Car, wifi solar-paneled hot air balloons floating in the stratosphere over New Zealand –these are all moonshot innovations designed to change our futures by enabling anything and everything to access the Internet.

In this fast-approaching future, every transaction will be conducted online and every memory stored online; the virtual world will, in effect, metamorphose into real life where the bottom line is if you can't be searched, you don't exist.

"We are at the early beginning of a sea change in computing. Right now, we are barely scratching the surface," says SundarPichai, a Google senior vice president who oversees the Android operating system and the Chrome browser, in an interview with CommonWealth Magazine. The 41-year-old Pichai, one of Google's highest-ranking executives, is seen as a potential successor to the company's leaders.

"Cloud-connected computing devices can bring everything to everyone's hand. This is the biggest power,"Pichai says, citing the examples of a car appearing at your doorstep when you need it or having a clinic in a hospital appearing on your television screen when you need to see a doctor.

Pichai, who grew up in southeastern India, recalls that his childhood impression of a technology giant was IBM, which was selling US$2,000 mainframe computers at the time. Today, a smartphone hidden in his pocket packs far more powerful functions than the IBM computer, he says, though he is unwilling to give a visiting reporter a peek.

The Google executive sees the 1 billion Android smartphones and 700 million Chrome users as merely a cornerstone of innovation, a platform on which more innovative services, such as health care services or theUber app that enables people to hire cars with drivers, will multiply and open new markets.

Bold Thinking, Long-term Mindset

Thinking boldly and concentrating on the long term are the secrets behind Google's climb to record market values. Pichai, who has worked side by side with Google co-founder Larry Page for nine years, says the only specific goal Page gives him is to"drive innovation at scale."

Examples abound of Google's boldness. Last year, the company introduced Google Fiber, which delivers Internet connection speeds 100 times as fast as average U.S. broadband connections, forcing American telecom operators to ramp up the speeds of their networks.

Elsewhere, Google sent 30 balloons equipped with wifi into the skies over New Zealand, reaching altitudes twice as high as commercial airliners, in an attempt to extend Internet access to remote areas around the world.   

It even recently established a company dedicated to researching aging and extending human life called Calico.

When Google now weighs the performance of new products or services, the unit of measure it applies is 1 billion users, and when it strategizes long-term, the time frame is 50 years.

"If you are going to make a smartphone for a dollar, one dollar, that's almost impossible to do. But I think, you know, if you took a 50-year time frame for something like that, you'd probably start to make investments you needed to. And along the way, you would probably figure out how to make money," says tech devotee Page.

Google's empire has steadily expanded, from virtual networks, to mobile phones, tablet computers, glasses, cars and fiber networks, and its product portfolio has become so diverse that some Wall Street analysts have come to attack Google for not focusing enough on its core businesses and biting off more than it can chew.

What, in fact, does Google really want to focus on?

Becoming Your Second Brain

The future Google envisions for itself is actually quite simple: becoming every person's second brain.

Tamar Yehoshua, director of project management for Google search and a mother of two children, has her own method of balancing life and work. She asks her mobile phone, "When is my next flight?" and gets the answer "Southwest Airlines Flight 2725 on Nov. 27 at 10 p.m."

This is Google's voice search, which enables users to access Google search simply by speaking to their mobile phones or computers. Combining your personal calendar and external databanks, the service can tell you things like what time you should leaveto avoid getting stuck in traffic based on real time traffic conditions.

When Apple founder Steve Jobs eliminated the mouse so that three-year-old children could "slide" open mobile phones, Google went a step further and sought to eliminate hands from the operation, wanting people to directly "converse" with a smart cloud.

"What drives us is we want to have technology there to make your life easier and, as we say, to get out of your way when you don't need it,"Yehoshua says.

Google's vision is to serve as every individual's cloud-based personal assistant, second brain and hidden conscience. The "ultimate" search engine imagined by Yehoshuawould enable her as she is playing baseball in the back yard with her son to yell into the house, "When's the next Giants game? Record it for me and remind me to watch it." The Google search engine in the house would then take care of everything for her, allowing her to devote her full attention to have fun with her child.

Google's power is also challenging people's social habits, to the point that the Economist, which generally embraces technology, felt compelled to take a stand and call for regulation of new cameras and recognition technologiesto let people decide whether they want to be anonymous or not.

"The freedom that a gadget gives one person can sometimes take away liberty from another. Liberal politicians have been lazy about defending the idea of personal space, especially online. The fight should start now. Otherwise, in the blink of an eye, privacy could be gone," the magazine said in a cover story dated Nov. 16.

Stop No. 3: The Chinese University of Hong Kong

What's interesting is that Google executive chairman Eric Schmidt, who recently became an independent board director for the Economist, had answers ready when reporters raised some doubts about his company at a speaking engagement at Chinese University of Hong Kong, including the nature of the new Calico venture.

"With Calico, we want to delay aging. Surely no one wants us to fail," Schmidt said. Wearing a gray suit and a light blue tie, Schmidt was working on a new type of moonshot project – getting the world's young entrepreneurs to invest in the future.

More than 200 Asian faces were packed into the university's lecture hall looking up at the personable Schmidt, and at one point, other guests had chances to ask Schmidt questions.

"How do you deal with the fear of failure?" asked one young Hong Kong entrepreneur on the stage.

"It's important you be allowed to fail. You learn more from failure than success," Schmidt answered. "I love it when entrepreneurs fail. The trick is to fail quickly."

"What do you think about the balance between big goals and limited resources?" asked another young Hong Kong businessman.

"Every start-up has the same problem, from Silicon Valley to Hong Kong. Larry said we're not thinking big enough. We say, we are not a web company, we say it's all the world's information. We thought at the time it would be 300 years to reach our goal. What we learned was, you have to articulate what you want to do," Schmidt said.

"You phrase something as a real problem, you think big, then you go from a local problem to the big one."

Schmidt cited the example of Google Maps, invented by "two crazy brothers in Australia." Google bought their company when it had about five people without any idea what the profit model would be.

"You might imagine when we bought maps, we already knew what we wanted from it. We didn't. We thought it was interesting. Serendipity is much more likely to occur then," Schmidt said.

After people started contributing ideas to build up the application, Google Maps become so popular that it even hooked its fierce rival Apple.

During Schmidt's whirlwind stop in Hong Kong, he set up a one-year incubation and mentorship program designed with Chinese University of Hong Kong to help young entrepreneurs there. Outstanding participants will be sent to Google headquarters to "meet and connect with experts in the global community."

This global offensive to promote business creation has the younger entrepreneurs everywhere seeing Google as the world's arbiter of the future and fertile soil for innovation. They are drawn to the technology giant not only because of its size but also for the sense of utopia it has created. 

Jefferson or Stalin?

Google fans believe that the company represents the corporate version of one of the United States' founding fathers, Thomas Jefferson, because it is drafting the virtual world's declaration of independence and emphasizing freedom, independence and equality. Its critics, on the other hand, see the company as a ruthless Joseph Stalin exercising total dominance in the current technology meleewho needs to be encircled and crushed.

Back in Taiwan, along the coast near Google's new data center in Xianxi, aside from ubiquitous pearl white oysters, one sees a new couple taking wedding photos. The groom picks up his bride wearing a red chiffon dress in front of a setting sun, creating a beautiful silhouette for posterity.

Taiwan and Google similarly seem to be the perfect couple, but what will ultimately decide the future of the relationship is what true quality Taiwan has that can be leveraged through Google without being constrained by the company. The drama is just beginning.

Translated from the Chinese by Luke Sabatier