Nations Of Notebooks

Summer heat covers downtown Taipei like a wet wool blanket. Motor scooters swarm around masses of cars stalled in Rome-like traffic, turning the road into a linear parking lot. Horace Tisane, the 55-year-old CEO of First International Computer Inc. (FIC), a $1.1 billion manufacturer of notebook computers, motherboards, and PC systems, shifts restlessly behind the wheel of his nondescript black Mitsubishi sedan. Finally, after what seems an interminable wait, he pulls slowly onto Taiwan's only major highway, heading south to Linkou, a Taipei suburb 12 miles away and home to FIC's manufacturing facilities.

Five years ago Tsiang, a Chinese-American and former R&D chief at Wang Laboratories Inc., came here to take over the day-to-day operations at FIC, an affiliate of Formosa Plastics Group, Taiwan's largest industrial conglomerate. Today, under Tsiang's leadership, FIC is the second largest and fastest growing notebook manufacturer in Taiwan. And Taiwan has achieved its goal of becoming the center of the notebook manufacturing world. Tsiang and his Taiwanese competitors -- companies with obscure names like Inventec, Twinhead, Quanta, and ASE -- accomplished this remarkable feat by perfecting their business model. Tsiang's FIC, with its 4,500 employees worldwide, is a contract manufacturer or OEM (original equipment manufacturer) for the world's most famous name-brand computer companies.

Take a look at your own sleek, powerful laptop. If it bears the brand of Compaq, Dell, Apple, NEC, Texas Instruments, IBM or other companies modestly referred to on FIC's homepage as "the most famous names in the international computer industry," chances are it's a Taiwanese product. When it comes to notebook computers, Taiwan is the unchallenged champion, last year surpassing Japan as the world's leading notebook manufacturer.

Today Taiwan owns roughly 30% of the 12.7 million unit world notebook market. Taiwan's notebook makers and their tightly integrated circle of suppliers are on a growth tear, turning out 3.6 million units in 1996, forecast to grow 20% in 1997. In a global economy of fast companies competing in the fastest of industries, Taiwan has been willing to do what it takes to establish itself as a fast country.

"What Taiwan brings to the party is very fast development, quick time to market, low cost -- and a manufacturing capability that is very flexible and very responsive," says John Sedmak, vice president of notebook computing at Dell Computer Corp. in Austin, Texas. To drive FIC toward the top of the notebook industry's unforgiving competition, Horace Tsiang has delivered what the brand-name computer companies are looking for. And he has done it in near-record time. In January 1994, FIC shipped its first product -- a mere 14 notebook computers. By July 1996, FIC was shipping 35,500 notebooks per month. According to Tsiang's projections, FIC should pass the 80,000 units-per-month mark during 1997.

For anyone seeking lessons in -- and ultimately warnings about -- the art of industry creation and domination, Taiwan, Tsiang, and the notebook computer business offer ample instruction.

The business model here is a simple but potent mixture of speed, flexibility, cost control, connections, and attitude. One business proposition dominates: do whatever it takes to make the customer happy. Over the past decade, the Taiwanese have melded their way of working and their culture into a winning business system, manufacturing an entire industry with the same precision they use to manufacture the product itself. A notebook computer consists of 2,000 parts from 300 suppliers; FIC and the other assemblers are merely the largest, most visible link in a fast, cheap, and reliable national supply chain.

"It is better to be the head of the chicken than the tail of the ox," say the Taiwanese. The slogan defines the country's business model: More than 800,000 small and medium-sized businesses make up 95% of the country's economy. Of the 4,000 technology companies, 85% have less than $2 million in capital. The system has turned Taiwan into the world's high-tech manufacturer: this tiny island of 21 million people accounts for more than half of the world market share in keyboards, monitors, scanners, mouses, and motherboards. In 1995 Taiwan shipped more than $14 billion worth of IT hardware to the world.

To see how Taiwan's notebook computer industry operates is to journey into the hot, crowded, and seemingly incomprehensible streets and back alleys in and around Taipei -- an Escher-like maze of places and players, each an essential piece in the national manufacturing system.