IN SEARCH OF UNI­CORNS

Tai­wan is shift­ing gear to re­vi­talise a stag­nat­ing econ­omy and keep pace with the new dig­i­tal revo­lu­tion, writes Tam­sin Cocks

Business Traveller (Asia-Pacific) - - CONTENTS -

Tai­wan aims to re­gain its place as the tech hub of South­east Asia by cap­i­tal­is­ing on the In­ter­net of Things and fos­ter­ing a healthy start-up ecosys­tem

On a Satur­day af­ter­noon in March, I headed to App Works, one of Asia’s largest start-up ac­cel­er­a­tors, which fo­cuses on in­ter­net-ori­ented ven­tures. Housed in a com­mer­cial build­ing in the heart of Taipei’s CBD, the mod­ern 1,150 sqm “school for start-ups” was buzzing with ac­tiv­ity de­spite the week­end.

In one of the 11 glass-fronted meet­ing rooms, a group of 30-some­things were locked in an­i­mated dis­cus­sion, sur­rounded by notes, spread­sheets and di­a­grams. A Pow­erpoint pre­sen­ta­tion was tak­ing place next door un­der a bright-orange ceil­ing with a bold call-to-ac­tion graf­fiti mu­ral in the back­ground. In another cor­ner of the cen­tre, I spied a stand­alone bas­ket­ball hoop that added a def­i­nite “Google HQ” feel.

App Works was founded in 2009 by Jamie Lin, a suc­cess­ful en­tre­pre­neur and chair­man of the Tai­wan In­ter­net and E-Com­merce As­so­ci­a­tion, who’s on a mis­sion to en­sure Tai­wan – and South­east Asia as a whole – takes its place in the fore­front of the cur­rent dig­i­tal revo­lu­tion.“The in­ter­net is rewrit­ing hu­man so­ci­ety,” says Lin.“Our the­sis is, if you don’t lever­age the in­ter­net in the 21st cen­tury, it’s prob­a­bly im­pos­si­ble for you to be suc­cess­ful.”

Every six months, App Works ac­cepts 35 start-ups who ben­e­fit from one-on-one men­tor­ing, im­mer­sion in a com­mu­nity of like-minded en­trepreneurs, and op­por­tu­ni­ties to pitch for in­vest­ment from prom­i­nent cor­po­rate part­ners.

“If you want to be a jour­nal­ist, you go to a school of jour­nal­ism, learn a lot, get a de­gree and em­bark on your ca­reer,” says Lin,“whereas if you want to be a start-up founder, there’s no school for you to go to. And ac­tu­ally, most start-ups will fail, so it would be weird to pay tu­ition for that. We don’t charge any­thing, and it’s more like de­sign school, where you learn by in­spi­ra­tion, not rep­e­ti­tion.”

The re­sults are im­pres­sive: af­ter seven years, App Works has 305 ac­tive start-ups in its com­mu­nity gen­er­at­ing US$850 mil­lion per year and with 3,800 em­ploy­ees. To­gether, they are val­ued at more than US$1 bil­lion.

START-UPS PLAY CATCH-UP

Lin’s rea­son for set­ting up the cen­tre and play­ing such an ac­tive role in Tai­wan’s start-up com­mu­nity is sim­ple. “Some of the coun­tries in this re­gion missed the boat at the turn of the last cen­tury. China for ex­am­ple was a power coun­try in the 19th cen­tury, but it missed the In­dus­trial Revo­lu­tion so it be­came an un­der­dog, the ‘sleep­ing dragon’. I don’t want to see that hap­pen again to Asian coun­tries where this dig­i­tal revo­lu­tion goes on and we miss out.”

Lin is right to be con­cerned. By the 1980s, Tai­wan had es­tab­lished it­self as one of the big­gest elec­tron­ics man­u­fac­tur­ers on the planet – ar­guably the most fe­ro­cious of all Asia’s tiger economies. This con­tin­ued through­out the 90s, with ma­jor multi­na­tional firms such as Acer, HTC and Fox­conn all hail­ing from Tai­wan. Ac­cord­ing to The New York Times, in 2001 Tai­wan was mak­ing 53 per cent of the world’s lap­tops and 25 per cent of its desk­top PCs, plus an even larger per­cent­age of pe­riph­eral prod­ucts like scan­ners, mon­i­tors and key­boards.

Even now, Tai­wan is still a mas­sive pro­ducer, sup­ply­ing com­po­nents for com­pa­nies such as Ap­ple, Mi­crosoft, Com­paq, Dell and IBM. How­ever, dur­ing the past decade the econ­omy has stag­nated. Ac­cord­ing to April 2016’s Asian Devel­op­ment Out­look, Tai­wan’s GDP in 2015 grew just 0.7 per cent, while the 2016 fore­cast was just 1.1 per cent – lag­ging far be­hind key Asian neigh­bours such as South Korea (2.6 per cent), Hong Kong (2.1 per cent) and China (6.5 per cent).

Part of the prob­lem is the grow­ing com­pe­ti­tion from these neigh­bour­ing coun­tries: Tai­wan is no longer the only coun­try with the abil­ity to mass-pro­duce tech­ni­cal parts. With cheaper al­ter­na­tives, elec­tronic gi­ants are nat­u­rally shop­ping around, leav­ing Tai­wan’s ex­portre­liant econ­omy in shock.

And this is the sec­ond part of the prob­lem: while Tai­wan has ex­celled in hard­ware, it hasn’t man­aged to bridge the gap into soft­ware – de­vel­op­ing applications for the In­ter­net of Things (IoT) – and so has lost its tech­ni­cal edge. The in­no­va­tion and cre­ativ­ity needed to go to the next level just isn’t there.

PLAN OF AC­TION

Luck­ily, it’s not just Lin who is de­ter­mined to stop Tai­wan be­ing left be­hind. Recog­nis­ing this short­fall, the gov­ern­ment has started to play a much more ac­tive role in sup­port­ing en­tre­pre­neur­ial ef­forts, with high­tech parks and hubs be­ing es­tab­lished in cities such as Hs­inchu and Taipei. The Tai­wan Startup Sta­dium is one such ex­am­ple.

In 2016, Pres­i­dent Tsai Ing-wen un­der­lined this com­mit­ment, un­veil­ing plans to cre­ate the “Asian Sil­i­con Val­ley” – a cru­cial part of her bold 5:2 re­forms to re­ju­ve­nate the ail­ing econ­omy. The Asian Sil­i­con Val­ley Devel­op­ment Agency (ASVDA) was of­fi­cially in­au­gu­rated in Jan­uary this year, with head­quar­ters set up in Taoyuan to fos­ter the cre­ation of an in­no­va­tion hub in the coun­try’s main in­ter­na­tional gate­way.

CEO of the ASVDA com­mit­tee, Gong Mingxin re­vealed: “Ac­cord­ing to in­sti­tu­tions like McKin­sey, the es­ti­ma­tion for the global mar­ket value of the In­ter­net of Things by 2025 is US$6.2 tril­lion. If we can get 5 per cent of that mar­ket share, it’s worth about US$310 bil­lion – so there is great po­ten­tial. Ac­tu­ally, the po­ten­tial eco­nomic value is much higher when you con­sider the knock-on ef­fects to our ev­ery­day lives.”

The ASVDA ini­tia­tive is com­pre­hen­sive, with a re­al­is­tic as­sess­ment of the coun­try’s strengths and weak­nesses, and a strat­egy de­vised to bridge the gap. “There are a num­ber of bot­tle­necks in Tai­wan,” says Gong.“Busi­nesses con­cen­trate mainly on man­u­fac­tur­ing in their spe­cific do­mains, with lit­tle ef­fort put into things like re­search and devel­op­ment. There’s also lit­tle in­volve­ment with in­ter­na­tional IoT or­gan­i­sa­tions and even a lack of in­te­gra­tion among lo­cal IoT com­mu­ni­ties.”

The plan is to cre­ate an all-en­com­pass­ing ecosys­tem that con­nects uni­ver­si­ties, cor­po­ra­tions, re­search in­sti­tutes, start-up com­mu­ni­ties and re­search and devel­op­ment clus­ters. By cre­at­ing the right breed­ing grounds, the gov­ern­ment hopes to en­cour­age col­lab­o­ra­tion, cre­ativ­ity and even­tu­ally a vi­brant in­dus­try that sparks in­no­va­tion, start-ups and even a few uni­corns (the in­dus­try term for start-ups so suc­cess­ful they are val­ued at more than US$1 bil­lion).

The gov­ern­ment has set aside NT$10 bil­lion (US$331.4 mil­lion) for the first year, with a fur­ther NT$100 bil­lion (US$3.3 bil­lion) planned to sup­port var­i­ous ini­tia­tives that will ma­ture by 2023. The funds will be in­vested di­rectly into this ecosys­tem, via ini­tia­tives such as fi­nan­cial sup­port pro­grammes for cre­ative en­trepreneurs, sup­port­ing fund­ing from an­gel in­vestors, and mak­ing young en­tre­pre­neur start-up loans avail­able.

The gov­ern­ment, in part­ner­ship with ven­ture cap­i­tal­ists, has also hand­picked 21 start-ups to re­ceive di­rect in­vest­ment, with the aim of de­vel­op­ing up to 100 com­pa­nies over the next seven years. Part of the fo­cus will be to con­tinue the ef­forts of the Tai­wan Startup Sta­dium (launched in 2015) by fos­ter­ing in­no­va­tion in IoT with di­ver­si­fied test beds for smart prod­ucts and ser­vices.

CAST­ING THE NET WIDE

But while cre­at­ing a thriv­ing home net­work is im­por­tant, the gov­ern­ment is also keenly aware of the need to es­tab­lish in­ter­na­tional links and at­tract for­eign tal­ent. To this end, the gov­ern­ment is work­ing on ma­jor eco­nomic leg­is­la­tion re­forms to re­lax re­stric­tions on for­eign and over­seas stu­dent visas, pro­vide tax breaks for for­eign com­pa­nies and pro­vide in­cen­tives to at­tract for­eign tal­ent in the form of health in­sur­ance plans, salaries and re­tire­ment pen­sion plans.

Send­ing lo­cal tal­ent out to be­come ed­u­cated and forge in­ter­na­tional con­nec­tions is another key aim. Many of Tai­wan’s lead­ing com­pa­nies through­out its golden pe­riod were formed by Tai­wanese re­turn­ing from Sil­i­con Val­ley with knowl­edge, in­no­va­tion and con­nec­tions. How­ever, the ten­dency for stu­dents to study abroad has also tailed off. The gov­ern­ment now plans to spon­sor 500 in­di­vid­u­als to go to Sil­i­con Val­ley over the next four years and bring back les­sons from the tech­no­log­i­cal nexus.

Lin agrees that fos­ter­ing in­ter­na­tional com­mu­ni­ties is key:“What we’re see­ing is that no com­pany in this re­gion can sur­vive by hav­ing only its own coun­try as a mar­ket. Even­tu­ally it has to try to be­come a re­gional player.

“The rea­son why Sil­i­con Val­ley is so suc­cess­ful is its abil­ity to at­tract not just the best tal­ent from the US, but the best tal­ent from all over the world. So as a com­pany, you can go there, set up shop and very eas­ily re­cruit tal­ent for the global mar­ket. For Tai­wan to have the same suc­cess, com­pa­nies need to be able to re­cruit tal­ent from other re­gions.”

While Lin re­serves some scep­ti­cism for the gov­ern­ment’s grand am­bi­tions, he nev­er­the­less ap­plauds the ini­tia­tive and has al­ready seen some en­cour­ag­ing signs: “A few big in­ter­na­tional play­ers have re­cently an­nounced plans to have a big­ger foot­print in Tai­wan. Face­book just brought their start-up pro­gramme to Tai­wan. Tesla also re­cently set up shop here.

“I’m still very bullish for Tai­wan. At the end of the day, it’s prob­a­bly the best place to live in the whole of Asia, and that’s a huge ad­van­tage. But we need to fix some fun­da­men­tal prob­lems, so that more peo­ple want to come here and start their start-up.”

HO­TELS FOR MIL­LEN­NI­ALS

The hos­pi­tal­ity in­dus­try seems to be tuned in to Tai­wan’s am­bi­tions for a new dig­i­tal-fo­cused econ­omy, with a raft of cool new “mil­len­nial-minded” ho­tels pop­ping up.

In Jan­uary, Aloft Taipei Beitou opened its doors – the sec­ond Aloft-branded prop­erty in the cap­i­tal. The new 292-room ho­tel has been de­vel­oped with a strong fo­cus on de­sign and tech­nol­ogy. Public ar­eas and gue­strooms fea­ture works by lo­cal artists show­cas­ing el­e­ments indige­nous to Beitou, while the loft-in­spired rooms and suites are equipped with SPG Key­less tech­nol­ogy, al­low­ing guests to ac­cess their rooms us­ing their mo­bile de­vice.

Key among the ho­tel’s of­fer­ings is its so­cial spa­ces, in­clud­ing F&B and events ar­eas. The ho­tel’s ground­floor Re:mix lounge has six-me­tre-high ceil­ings with but­ter­fly wing-styled wooden panel light­ing – along with a large floor-to-ceil­ing, pix­e­lesque LED wall. The ho­tel’s pet-friendly restau­rant Nook is an Amer­i­canstyle eatery, while live acous­tic mu­sic per­for­mances are of­fered at W:XYZ bar.

“Look­ing for a dif­fer­ent ho­tel experience?” asks the home­page of the Amba Taipei Song­shan, which opened in Au­gust last year. De­signed for the “savvy ur­ban trav­eller who ap­pre­ci­ates cre­ativ­ity, con­nec­tiv­ity and con­ser­va­tion”, Amba Taipei Song­shan fo­cuses on adding an el­e­ment of fun through mod­ern, play­ful de­sign and large, open so­cial ar­eas. All 189 rooms are “dig­i­tal ready” with power ac­cess and fast, free wifi, while the “next-gen­er­a­tion” de­sign ho­tel con­cept in­cor­po­rates ecofriendly ma­te­ri­als and all-nat­u­ral prod­ucts. Ar­tyzen Hos­pi­tal­ity’s life­style ho­tel con­cept,

Cit­i­zen M, is also due to open in Taipei soon. It will be lo­cated in the colour­ful re­tail and en­ter­tain­ment district of Xi­mend­ing, close to the city’s pedes­tri­anised shop­ping area and rail­way sta­tion. Like all Cit­i­zen M ho­tels, it will fea­ture a “hive” liv­ing room lobby filled with art and de­signer fur­ni­ture, along with mul­ti­ple zones to work, meet and con­nect.

Another sig­na­ture el­e­ment is the on-site F&B, with out­lets such as Can­teen M, a 24-hour cock­tail bar and restau­rant. Check-in and check­out pro­cesses are via touch­screen ter­mi­nals with as­sis­tance from the ho­tel’s am­bas­sadors. Other fea­tures in­clude rooms con­trolled via tablet, wire­less stream­ing to smart TVs, a 24-hour self-ser­vice can­teen, and “ab­so­lutely no trouser presses, bell­boys, towel swans or pil­low choco­lates”.

From left: Jamie Lin, suc­cess­ful en­tre­pre­neur and chair­man of the Tai­wan In­ter­net and E-Com­merce As­so­ci­a­tion; and an App Works class­room ses­sion

Above and

op­po­site: Amba Taipei Song­shan; and Aloft Taipei Beitou

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