Hong Kong -- When a group of young Taiwanese entrepreneurs approached potential investors and customers at a recent tech conference in Hong Kong, something was different: they were brandishing none of the hardware associated with the island's celebrated tech sector, only apps on their smartphones.
The occasion was RISE, the first event in Asia put together by European tech conference organizer Web Summit.
The variety of products from Taiwan included: Phone Doctor Plus, a paid iOS app that runs hardware tests on phones; UX Testing, which helps developers track consumer use of their apps; and LOOPD, which enables event organizers to gather and analyze visitor data.
"The best way to create a business for our own generation is to leverage the hardware expertise the older generation has accumulated," said 29-year-old Peggy Jou, founder of Ghosta. Far from being an app, her company's innovative product is a 'smart' helmet with augmented reality functions for motorcyclists. Wearers can monitor speed and other data on displays, and use it for connected activities including telephony.
"We cannot compete with the United States when it comes to software and we cannot compete with China when it comes to offline business models," said Jou. Her views reflect a conundrum in Taiwan's tech sector, which remains so vital to the local economy. Known for exceptional hardware manufacturing ability, Taiwanese electronics companies rarely rate with consumers and investors when it comes to new apps, and social media for mobile devices.
Taiwan's tech industry began to boom in the 1980s with the rise of the personal computer, grabbing global market share by churning out high quality hardware and components at low prices.
However, big Taiwanese manufacturers like Acer Inc. and Asustek Computer (ASUS) were caught off guard when Apple Inc. launched iPhones and iPads that encouraged consumers to ditch traditional computers for mobile devices. Taiwanese manufacturers have also been struggling with competitors from China offering similar quality at lower prices.
Even Taipei-based Foxconn Technology Group, a key assembler for Apple employing over 1 million workers in China, is struggling as demand for smartphones and tablets softens.
Taiwanese officials have been warning all year that China's supply chain threatens the national economy. The official estimate for second quarter growth was cut to 0.64% from the May forecast of 3.05% because of weak exports in the electronics sector.
With the hardware slump under way, the new generation of entrepreneurs hopes to tread a different path. To help with the transition, the National Development Council (NDC) launched a government initiative to support startups in August. It included a proposal to invest 50 million New Taiwan dollars ($1.58 million) annually for three years in Taiwan Startup Stadium which mentors local entrepreneurs.
According to Jan Fang-guang, the director of the NDC's department of industrial development, another NT$1 billion has already been invested in startups. Jan said the council hopes to see the initiative create 5,000 jobs and produce output worth NT$17.6 billion by 2018.
While the startups are small, nimble and creative in contrast to Taiwan's old large and standardized industrial production models, they share the same ambition of becoming international household names.
In Ghosta's case, Jou said the idea of a connected helmet was a response to the huge pool of motorcycle riders in Southeast Asia. The helmet, "designed and made in Taiwan", is due to ship in mid-2016.
Jou benefited from Taiwan's strong history in electronics hardware, but it has hampered others. Ryan Cheng, the 30-year-old co-founder of Phone Doctor Plus, and Rex Chen, the 32-year-old chief executive of UX Testing, have both found it hard to recruit qualified engineers. New graduates lack the programming skills essential for startups, and older hands prefer the stability of hanging on with big players like Taiwan Semiconductor Manufacturing Company.
Even so, the new generation is making progress and staying optimistic. UX Testing recently signed ASUS as a client, and Phone Doctor Plus is kicking off a phone recycling program in Europe with a local partner.
"I hope we succeed in Taiwan first, and then reach out to global companies," Chen said.