T.C. Wu was in Taiwan for Christmas this year(2016), probably not used to the balmy 25-degree-Celsius weather. For the past 40 years, Wu has spent most Christmases with his family in the United States, but he was in Taiwan for the opening of the Asia Silicon Valley Development Agency, in which he serves as the technology director.

It may be hard to believe that the humble, low-key Wu, who seems awkward in front of the camera, is the founder of Atmel Corporation, one of the three biggest suppliers of touch controller ICs in the world. The company was acquired by Microchip last year for US$3.56 billion.     

The Asia Silicon Valley Development Plan, based in Taoyuan, represents a key part of the Tsai Ing-wen administration’s initiative to transform Taiwan’s industrial sector and is aimed at moving Taiwan up the value chain from IT “information technology” to IoT (internet of things). The opening of the agency responsible for the plan comes a third of a century after the launch of the Hsinchu Science Park, which had a profound effect on Taiwan by helping turn the country into one of the world’s high-tech powers.   

“Industries around the world are all moving forward and even several late-developing countries such as mainland China are engaging in internet innovation and have moved ahead of us,” says Kung Ming-hsin, the deputy chief of the National Development Council who heads the Asian Silicon Valley project.

“If Taiwan continues to spin its wheels, it will be extremely dangerous.”

The Gamble of a Lifetime

A longtime observer of the industrial economy, Kung has emerged as a new star in the Democratic Progressive Party (DPP) Cabinet after being mentored by older DPP-leaning economists Chen Po-chih and Wu Rong-I. When candidate Tsai Ing-wen first announced the Asian Silicon Valley plan on the campaign trail over a year ago, Kung was sitting beside her.

“This is the gamble of a lifetime for Kung Ming-hsin,” says Taoyuan Mayor Cheng Wen-tsan. When the Asia Silicon Valley Development Agency (ASVDA) celebrated its launch on Dec. 25, 2016, Kung maintained a low profile, hiding behind others during both the opening ceremony and the press briefing, but he sat in the first row listening attentively during a more than three-hour seminar.

Both before the presidential election on Jan. 16, 2016 and after, Kung has been to Silicon Valley several times, visiting Google and internet equipment provider Cisco and also attending the Demo Show for startups, shaking the hands of many native Taiwanese angel investors. Also, when promotion of the plan was criticized by internet startup circles in Taiwan, it was Kung who stepped up to address their concerns.       

Kung has stressed that the Asian Silicon Valley initiative is not his own personal battle but an important fight being waged by all of Taiwan. Behind the sentiment is a deep-seated fear that Taiwanese vendors might be unable to grab a ride on the Internet of Things bandwagon.

International consulting firm Mckinsey & Company estimates that the economic scale of the global internet of things market could reach as high as US$6.2 trillion by 2025, and it foresees IoT applications finding their way into factories, cities, the retail trade, automobiles, homes, and even individual wearable devices. Kung believes Taiwan’s strengths to be sensing devices and communications technology, but it lacks data storage and analysis capabilities and the ability to develop application services.  

 The Asia Silicon Valley Development Agency is attempting to create an open and interactive ecosystem, hoping that new startups will make up for Taiwan’s deficiency in innovative service development.    

Three months ago, Microsoft established an IoT Innovation Center in Taiwan. Cathy Yeh, principal PM manager of the center under Microsoft Taiwan’s Cloud Enterprise Product Group, says the key to the internet of things is the connection and integration of partners in multiple fields, noting that the growing number of innovative application scenarios are being developed by new startups.

“This group of people is part of the internet generation that believes that new application scenarios are perfectly natural,” Yeh says, citing the example of a toothbrush in an IoT context. The IoT would not consider the toothbrush itself but how to keep teeth healthy by collecting data on customer behavior and then developing or improving applications involving everything from health insurance to medical devices, Yeh says.

A Chief Investment Officer from Silicon Valley

Startups have suddenly emerged as the masterminds behind IoT applications and services, but with every country around the globe desperately trying to attract these innovation trendsetters, does Taiwan have any real attributes that can give it an edge in recruiting talent? The National Development Council has moved aggressively to create an edge, pushing to get burdensome regulations eased at home while recruiting Taiwan-born angel investors in Silicon Valley to create a new pipeline for raising capital in Taiwan.   

“I really hope to see a team with ideals and good ideas that can raise funds, including from early stage and mezzanine funding to M&A funding,” says David Weng, who was recently named chief investment officer of the ASVDA.

Weng worked at Cisco for 11 years and then changed course, establishing InnoBridge Capital Management. He has also been an angel investor for 20 years and just recently became the head of the nonprofit startup incubator SVT Angels (SVT stands for Silicon Valley Taiwan). Among his best-known projects are the Netscreen Technologies IPO on the Nasdaq and that company’s acquisition by Juniper Networks in 2004. T.C. Wu also serves as one of the SVT Angels.

 “Many people from Netscreen then came out to start their own businesses. Once they saw a successful example, they all wanted to replicate it. One company generated 10 companies, and 10 companies turned into 100 companies,” says Weng, who believes that an uninterrupted chain of capital and funding has been the source of the endless stream of energy fueling Silicon Valley’s startup culture.

In the future, Weng will guide investment at the ASVDA, with two main missions. First, he hopes to use government funding to spark the formation of an angel investor culture in Taiwan, including by encouraging companies to set up venture capital companies to invest in startups those companies and their industries will need in the future.

“We will help point companies in the right direction and make it a path for growth for the companies themselves,” Weng says.

Second is managing strategic investment and deciding whether to invest in startups “with important strategic significance for Taiwan” or that “are interested in setting up R&D centers in Taiwan.” These strategic considerations will also draw on T.C. Wu’s extensive industrial experience.

Speaking just days before the ASVDA was officially launched, Kung used the example of Tesla to explain how investment can be strategically leveraged. Tesla’s prototypes were manufactured in Taiwan, with the components all supplied by Taiwanese vendors, Kung said, and “had we invested in this at the time, we would have more opportunity for cooperation today.”

Challenging Taiwanese Software Engineers

One of the quantitative goals of the six-year Asian Silicon Valley plan is to “create a virtual teaching institute” to cultivate cross-disciplinary talent. Wu, who has experience with talent from many countries, describes Taiwanese engineers as flexible, loyal, and technically skilled enough, but believes their overall competence level needs to go up a notch, from being simply able to execute tasks to becoming systems or software development methodology specialists.

At this critical juncture for Taiwan’s industrial competitiveness, it is fortunate to have Taiwan-born Silicon Valley heavyweights to lean on for help.      

David Weng and T.C. Wu have humbly described their roles as contributing what little value they still have left to offer in a bid to help their native country as they serve the agency as unpaid volunteers. They will travel between Taiwan and Silicon Valley in the future, unfazed by the potential toll of shuttling across the Pacific. “Transportation today is well-developed. You can arrive [across the Pacific] overnight,” Wu says.

The two men are like the heads of a pack backed by the collective energy of successful Taiwanese entrepreneurs in Silicon Valley. Wu joked that he would recruit a group of half-retired people who play golf every day.   

The question now is whether the ASVDA, located just eight minutes from the Taiwan high-speed rail line’s Taoyuan Station, can follow in the footsteps of the Hsinchu Science Park in incubating new engines of growth for Taiwan’s economy.

For Kung, there is no doubt about the answer: “Taiwan has to win this bet.”

Translated from the Chinese by Luke Sabatier

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Asian Silicon Valley Plan Profile

The Asian Silicon Valley plan was one of the industrial policies articulated by President Tsai Ing-wen during the presidential election campaign to develop internet of things applications and spark industrial transformation.

The role of the ASVDA in the future will be to integrate resources at home and guide domestic hardware manufacturers into investing in software applications, while also promoting the commercialization of the R&D results of research institutions. Externally, it will serve as Taiwan’s window to the world, bringing together Silicon Valley’s technology, capital and talent. 

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