A young Englishman fond of Chinese culture married a pretty Chinese girl on Taiwan. His parents expected the couple to live in England, but their new daughter-in-law, much to their chagrin, didn't seem interested in acquiring British citizenship, so they sent off an anxious letter of admonishment.
The letter said that even though England may have fallen on hard times, holding a British passport means you'll have the protection of twelve countries after 1992, and you shouldn't pass the chance up lightly.
The newlyweds thought it over and ended up heading off to England.
In view of the integration of the European market in 1992, it's naturally attractive to become a "citizen of Europe," and becoming a "legal entity" in the largest and most lucrative market in the world is even more enticing to companies around the world. Sensitive Taiwan businessmen with their noses to the wind are no exception.
At CeBIT '90, the Hanover computer show held this March in West Germany, Taiwan's 216 firms represented the second contingent, next to that of the United States. And according to the R.O.C. Board of Foreign Trade, computers and other information products were Taiwan's top-selling exports to Europe last year, with US$2 billion, far above textiles, machinery and other categories.
Besides its diligent attendance at trade shows, the industry's success can be largely credited to the work of its European branches, who are right on the front line of the battle.
"Dusseldorf looks just like the Chung-hwa computer market in Taipei now," quips Cycle Wang, general manager of Comphic International Trading Co. LTD. in Hamburg, West Germany.
Indeed, such well-known local computer firms as Acer, Mitac, Copam, Tatung, and Sampo, all have branches in Dusseldorf. The forty-some Taiwan companies that were there this March have now swelled to more than seventy, according to C.S. Ho, group president of Mitac, who has recently returned from Europe. That means one new firm every three or four days on average.
In addition, Hamburg, Rotterdam and London are also the sites of Taiwan computer firms.
The opening of so many branches has created a curious phenomenon--people switching firms but never managing to get away from Europe.
"If you've been in Europe for a long time and would like to come home to Taiwan, you've got to quit. And if you go to interview for a new job in Taiwan and they find out you've lived in Europe, they send you right back there again," says thirty-year-old Cycle Wang, who is already the general manager of a European branch but hasn't been given a chance to find a spouse for himself. And the only reason he was sent to Europe in the first place was that he "accidentally" took a year of German in college.
With serious protests from Uncle Sam about its trade deficit with Taiwan, the R.O.C. Board of Foreign Trade has been calling on local firms to diversify to Europe. But how has the European market heated up so fast?
According to Darius C. Chong of the Taipei Computer Association, Taiwan's exports of computer products to Europe have already surpassed those to the U.S., and Mitac says that the European market already takes up half the company's exports.
"The U.S. market has been covered so thoroughly that it's hard to make any money there," says C.S. Ho, pointing out the competition there is more intense than anywhere else in the world, except Taiwan--the Taipei Computer Association has a membership of 3,600 firms and is still growing rapidly.
Europe has no major computer manufacturers of its own, leaving a large niche for foreign-made goods. "Even with the Americans and Japanese entering the fray, they're just as far away as we are, so they can't put us at a disadvantage there," Hou analyzes.
In addition, Europe consists of many countries with small markets that Taiwan's small and medium-size businesses can adapt to individually without having to compete on a large scale or keep up with mass demand. Over the past three years, Taiwan's computers have already caused something of stir in Europe.
"Taiwan has changed German consumption habits," Cycle Wang says. Before they thought that "you only got what you paid for," but Taiwan computers have shown them that inexpensive products can be good too.
The bargains that consumers have been getting have posed a pretty big shock to certain companies there. Francis T. Tsai, senior vice president of Mitac, points out that after a large company in Germany lost more than US$100 million last year, a German reporter asked a Taiwan firm at a press conference, "Why are our companies about to fold, and you're still talking 30 percent growth?"
"Taiwan companies are still fighting price wars. Sales have boomed, but people there are getting the feeling of an economic invasion," Tsai says. "In the long term it's something to worry about." What makers fret about most is a 13 to 30 percent "anti-dumping" tariff.
Another potential source of trouble--the integration of the European market--is just two and a half years away.
Europe will become the largest market in the world and the one with the greatest purchasing power, but to small and medium-sized firms from Taiwan, used to competing on small scale, that represents less of an advantage than a threat.
Even more importantly, many people are worried that Europe, even as it opens up internally, may close itself off from the outside world, forming a sort of "Fortress Europe." Slipping inside before the gates slam shut has become an urgent race among major American, Japanese and Korean corporations.
The degree to which the European market will integrate is still under discussion, but since even American and Japanese companies with a lot of negotiating clout are trying to get a foot in the door, Hou thinks, "How can we not?"
Quite a few local makers think the same way. According to a survey by the Taipei Computer Association of more than 130 local firms this April, 78.5 percent plan to hop onto the European train. Among them, nearly half hope to set up a branch company in Europe, 40 percent want to set up a distribution center, 39 percent a production factory, 16 percent an assembly factory and three percent an R&D center.
The main reason why setting up a branch company is the most popular approach is that it's the easiest. The European branches of Taiwan companies have gone into operation with as few as two or three employees, at most twenty-some.
Nonetheless, if their products can't sport a Made in Europe label, makers may well meet up with the problems of protectionism and anti-dumping. As a result, despite the notoriously high cost of European labor, more and more firms are thinking about setting up factories in Europe, although only one--Tatung--has actually done so so far.
"In fact, going to Europe to produce personal computers makes much more business sense than doing it at home," says W.T. Lin, general manager of Tatung (U.K.) LTD. It's true that European labor costs are higher than Taiwan's, he explains, but all the main components have to be imported in Taiwan and makers there can't get the best prices from American and European suppliers that are competing in the same business.
Judging overall, from saving on sourcing components, providing better customer service, cutting shipping costs and lowering tariff duties, setting up a factory in Europe makes perfect sense, Lin believes.
But it also takes a huge amount of capital, and there are very few companies in Taiwan with the strength and determination of Tatung. So most firms come up with compromise methods.
Aquarius Systems Inc., for example, made use of the connections that its West German branch has in East Germany to set up a joint venture with the largest computer manufacturer in East Germany, Robotron Buromaschinenwerk.
Robotron handles production, Aquarius West Germany takes care of sales, and Aquarius Taiwan is in charge of product planning and development. That way the company lowered its risk and didn't have to make a large investment in capital equipment. It's an ideal method of investing in Europe.
To help domestic computer makers set up factories in Europe, the Taipei Computer Association initiated a plan late last year for opening an industrial park in Europe for the Taiwan information industry.
"The plan is aimed mainly at small and medium-sized firms," says Darius C. Chong. Setting up a factory overseas is a complex process--from understanding the investment climate, government policy and the local laws to buying land, building the plant and starting up operations--and often involves fighting for help from the local government. If a number of smaller factories join together, they may not lose out to the big corporations from Japan and the U.S. Many companies have expressed a lot of support for the idea.
The Taipei Computer Association has already held several seminars on the investment environment in various European countries and has decided to send a delegation in September to England, Germany, France, the Netherlands, and Northern Ireland to carry out onsite inspection of possible locations.
"We hope to select one or two sites by the end of the year and break ground by the middle of next year," Hou says.
Although the plan has received a favorable response from many local firms and several local authorities in Europe, doubts remain.
Aquarius Germany's managing director, Winfried Hoffmann, believes that Taiwan firms should merge with the local population and not give rise to people's antipathy by trying to set up a little Taiwan overseas.
W.T. Lin thinks that an industrial park is a lovely idea in theory but wonders if companies can set aside their selfishness and get along together in one place without copying and spying on each other.... That's up to the character and integrity of the companies involved.
In the rush to become "legal entities" in Europe, it seems that some companies still have to learn a lot.
[Picture Caption]
Miniatures of famous buildings from all over Europe are featured at this tourist attraction in Brussels.
Acer is one of the firms represented in the computer district in northeast Dusseldorf.
This molecular-shaped structure is located in Brussels, the headquarters of the European community. The community's flag is flying on top.
R.O.C. had the second largest contingent of firms at the Hanover computer fair this year, behind the U.S. but ahead of Japan.
This is Ariane, the satellite launcher developed jointly by the European community.
There are more than seventy computer firms from Taiwan in Dusseldorf now. The Taipei Trade Center has a number of office spaces it can rent out to newly arrived firms that are looking for temporary quarters.
The twelve flags of its member nations fly in front of the EEC's headquarters. In view of the political changes in Eastern Europe, there may be some additions in the future.
PCs and peripherals are the mainstays of our exports to Europe. Computer mouses were an eye-catching item at this year's Hanover fair.
After the integration of the European market, each country's currency may be used along with "Eurocurrency."
Tatung was the first company from Taiwan to set up a factory in Europe -- and is so far the only one.
Miniatures of famous buildings from all over Europe are featured at this tourist attraction in Brussels.
Acer is one of the firms represented in the computer district in northeast Dusseldorf.
This molecular-shaped structure is located in Brussels, the headquarters of the European community. The community's flag is flying on top.
R.O.C. had the second largest contingent of firms at the Hanover computer fair this year, behind the U.S. but ahead of Japan.
This is Ariane, the satellite launcher developed jointly by the European community.
There are more than seventy computer firms from Taiwan in Dusseldorf now. The Taipei Trade Center has a number of office spaces it can rent out to newly arrived firms that are looking for temporary quarters.
The twelve flags of its member nations fly in front of the EEC's headquarters. In view of the political changes in Eastern Europe, there may be some additions in the future.
PCs and peripherals are the mainstays of our exports to Europe. Computer mouses were an eye-catching item at this year's Hanover fair.
After the integration of the European market, each country's currency may be used along with "Eurocurrency.".
Tatung was the first company from Taiwan to set up a factory in Europe -- and is so far the only one.
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