Catching Up

In December 2012, Chan Hung-chih, chairman of PChome Online, proclaimed the launch of the Taiwan Internet and E-Commerce Association (TIEA), a “big collective” designed to promote Taiwan’s Internet industry. Within just three months, the group had enrolled nearly 80 corporations of all sizes seeking to build a prosperous future for their industry.

With that, Internet entrepreneurship immediately became a hot media topic.

TIEA is built around two main objectives: being a portal for communication with the government and getting on track with the global industry. The domestic industry has found the latter task challenging, but it is an absolute necessity if local firms are to make international inroads.

Taiwanese e-commerce is booming.

The “Internet industry” covers a lot of ground, everything from online shopping and gaming to social portals, search engines, mobile data, and resource matching platforms such as employment websites. Importantly, the Internet has also become part and parcel of our workaday lives and is widely expected to be one of the key drivers of human development in the 21st century.

Two numbers help illustrate the potential of Taiwan’s Internet sector.

First, according to the Institute for Information Industry, Taiwanese spent NT$660.5 billion shopping online in 2012. This figure has been growing at a rate of nearly 20% per annum and is expected to surpass NT$1 trillion by 2015.

Meanwhile, a 2012 research report from McKinsey and Company on the impact of the Internet on national economies noted that Taiwan’s Internet industry accounts for 5.4% of our GDP. Though our e-commerce sector isn’t as developed as those of the United States and the United Kingdom, it is on a par with Japan’s and ahead of South Korea’s.

According to Dr. Steven Yang, director of Research Division VI at the Taiwan Institute of Economic Research, Taiwan’s Internet industry operates in an environment with several distinguishing characteristics.

The first, and the one that he sees as the industry’s biggest obstacle, is that regulation hasn’t kept pace with technological developments. He argues that Taiwan’s intellectual property and personal information laws are holding back micro-enterprises, and that large Internet service providers are using the law to take down upstart rivals.

The second issue is that while Internet startups are easy to establish, they are very hard to grow. Investors have been leery of the sector since the dot-com bubble burst in 2000. Nowadays, few have the knowledge and experience necessary to evaluate potential investment targets, making it even more difficult for Taiwan’s Internet startups to acquire the capital they need to grow.

Third, Taiwan’s tech industry is in a transitional state, slowly moving away from using hardware to drive growth and towards using software. Though Taiwanese are entrepreneurial by nature, most people’s thinking is still built around the manufacturing paradigm. In other words, we’re still adapting to the Internet business model, which requires that you pour initial profits back into the business to grow it.

According to entrepreneurs and financial experts, trends that bear watching in Internet entrepreneurship include e-logistics, gaming, price-watching services, and the conversion of niche markets into mass markets.

Taiwanese are quick to import international trends and apply them to our own industries, where they often provide a competitive edge. The rapid growth of the gaming industry and of sales platforms for independent music are cases in point: successful integrations of the creative-cultural and Internet sectors.

Taiwan Panorama’s new series on how young entrepreneurs are invigorating our economy offers readers a glimpse into Taiwan’s next big thing.