Is Taiwan’s last chance at tech survival the connected home?

taiwanI’ve just finished another piece for IDG Connect taking apart the Taiwanese technology industry – it seemed like as good a time as any on the back of Computex 2014.

If you haven’t heard of the show it’s the second largest IT event in the world and is held every year in Taipei as it has been for 34 years.

Well, the island formerly known as Formosa has been punching well above its weight on the tech scene for decades now, thanks to lots of government investment, a booming chip industry and a steady stream of bright young engineers and designers pouring from its universities.

But as I found out, many of its major firms are facing an unprecedented set of challenges which could threaten its long term future.

Firstly the PC market is in decline – which is bad news for 4th and 5th placed global brands Acer and Asus. Whether terminal decline we still don’t know but it has certainly meant Taiwan’s major ODM/OEM firms have had to adapt to a new mobile-centric output.

The two big brands mentioned above, however, haven’t done a very convincing job so far.

“The whole shift to mobility including smartphones and tablets is the new growth curve for the whole industry,” Forrester analyst Bryan Wang told me from Computex. “What I have seen is that Taiwanese companies are losing in this space.”

Gartner’s Amy Teng was not much more optimistic.

“These manufacturers have to rely on brand vendors to consume their production outcome. This business relationship is weak because today’s PC supply chain is advanced and standardised enough to transplant from vendor to vendor easily,” she argued.

Teng added that the move from high volume, low customisation products to low volume, highly customised products is a big challenge – especially when these manufacturers are being asked to be more cost effective and quicker to market.

All is not lost, though. The country’s semiconductor firms are still well placed and there are opportunities in other areas for those ODM/OEM giants like Wistron, Foxconn, Quanta and Pegatron.

“Regarding how to overcome, or thrive in the coming decade, I do not see any opportunity in the smartphone/tablet space now. However, Taiwanese companies still stand a chance in the connected home space, which is set to evolve in the next couple of years,” said Wang.

“Home/smart gateways, set-top-boxes and smart routers – these could be the angles. At Computex here, I do see home grid, smart plugs, smart home solutions are evolving as an interesting area.”

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Apple taking one for the team in new labour rights abuse report

foxconn workerOne of the biggest stories of the past week I’ve covered in the Asia technology space was the latest report from China Labor Watch into alleged rights abuses at Apple supplier Pegatron.

In terms of the abuses uncovered by the rights group, they’re pretty similar to those detailed at Foxconn over the years which led to a landmark agreement between Apple, the Fair Labor Association and the Taiwanese manufacturer to sort out conditions at its plants.

When I say “similar” I mean things like overworking and underpaying staff, breaking local employment laws through discriminatory hiring, excessive overtime and the like and subjecting employees to sub-standard living conditions.

You can usually gauge the seriousness of the allegations by the speed of the tech giant in question’s response and the length of its statement. So it was that Apple came back within a few hours with a long response claiming it had undertaken 15 audits at Pegatron and that it had been “in close contact” with CLW investigating findings highlighted by the group.

It added:

Their latest report contains claims that are new to us and we will investigate them immediately. Our audit teams will return to Pegatron, RiTeng and AVY for special inspections this week. If our audits find that workers have been underpaid or denied compensation for any time they’ve worked, we will require that Pegatron reimburse them in full.

One para that was lopped off my story referred to the fact that Pegatron facilities, including the ones mentioned in the report, produce gear for a raft of big name technology brands besides Apple. Microsoft, Dell, HP, Nokia and Asus have all had kit made by the Taiwanese headquartered manufacturer in the past.

Beyond Pegatron too there have reports of various rights abuses, in Samsung suppliers, and Chinese manufacturers making kit for firms including Telstra, Sony and Phillips.

However, the fruity-themed Cupertino giant, unfortunately for it, now has a reputation which makes it easier for hacks like me and rights groups like CLW to build a compelling narrative around such incidents.

For better or worse that’s the way it is but hopefully with Apple taking a lead, as it is certainly appears to be trying to do, on improving labour rights among its suppliers, others will follow. We mustn’t forget Apple boss Tim Cook used to be the firm’s COO and so will be well aware just how big a task it is to clean up the supply chain.

This is a process which will take years, not months, but it’s reassuring to an extent that stories like this still make the headlines, because once they stop then the whole process of improving the rights of shop workers in countries like China is likely to grind to a halt too.


Computex 2013: chips with everything

windows OEM devicesSo that was Computex Taipei 2013. Asia’s largest IT show and the world’s second biggest was dominated this year by the launch of Intel’s 4th generation Haswell processor family, and to be perfectly honest there wasn’t an awful lot of other news knocking around, but here’s my brief take on events.

Local heroes Asus and Acer kicked things off in usual hyperactive fashion with a bevy of tablets, notebooks, smartphones and other hybrid devices. The most notable was probably Asus’ 3-in-1 Transformer Book Trio, which combines a notebook, tablet and even desktop functionality in one.

Acer’s presser was more subdued and it remains to be seen whether it’s done enough to win back some of the market share it’s been hemorrhaging over the past few quarters. It actually also depends on whether users decide they want 2-in-1 notebook/tablets – as Intel believes they do –  or a regular notebook with a smaller companion 7 or 8 inch tablet (phablet) device like the Acer Iconia W3.

How this market shakes out will be interesting to watch and to be perfectly honest no-one knows how it’s going to play out, least of all the many analysts I spoke to. It’s all about price, performance, and user experience – nail those three and as a manufacturer you’re giving yourself the best chance of success. Intel was marketing the hell out of the 2-in-1 concept at the show on the back of its Haswells and Silvermont Atoms, but I’m not convinced this will work out as intended.

It makes sense on paper – a tablet for tablet stuff and a notebook for work, in one hybrid device – but if you’re a fanboi, for example, you’re not going to want to give up your iPad, so a convertible isn’t going to cut it.

Form factor chat aside, Microsoft held its first public demo of Windows 8.1  at the show – the OS Windows 8 should have been. There are a lot of cool features in there – better search, the ability to view several apps on one screen and resize them, and the long awaited return of the Start icon. However, the experts are pretty guarded about whether it will be enough to a) rejuvenate the PC market and b) help Redmond grab more market share in the mobile computing space – tabs, phabs and notebooks.

“Being able to lock it in desktop mode and having a ‘Start Point’ will remove the chief barriers that people have with Windows 8. But that doesn’t necessarily address the things that are holding back the PC market as it is,” Forrester analyst David Johnson told me.

“Right now, at the consumer and enterprise level, non-Windows tablet adoption is massive, and Windows 8.1, while improving the tablet experience, will still be competing with Apple iOS and Android. Secondly, most enterprises are completely distracted by just getting to Windows 7 before the April 2014 deadline. They’re at capacity with that transformation and few will have the resources to worry about Windows 8.1.”

Taiwan was quite honestly the star of Computex this year.

I mean, it always has been, but the lack of news made it even more obvious. This is a country whose technology producers account for 80 per cent of the global “branded” tablet market and over 90 per cent of Intel notebooks. They might all be physically made in China but they’re designed here. The IP, basically, is Taiwanese.

It raises an interesting point about whether the People’s Republic of China can ever hope to emulate its tiny neighbour the Republic of China. The Communist Party desperately wants it to start innovating, but you can’t just turn on that tap at will after decades of stealing and copying IP.

Rubber ducks perfectly illustrate just how far it has yet to go.

Hong Kongers have been fawning over a new installation from Dutchman Florentijn Hofman for weeks now. It’s a giant, six storey, yellow rubber duck floating in Victoria harbour.

Now reports have emerged that similar ducks have been spotted across China, from Wuhan to Xi’an. They say imitation is the sincerest form of flattery, but in the tech world, it’s going to get China absolutely no-where.


Chinese OEMs still not auditing for labour rights abuses

China watchers will be well aware of the story by now. Most of the shiny tech kit we buy in the western world is produced in conditions ranging from ‘challenging’ to downright miserable. Apple provider Foxconn is often highlighted as a prime offender but the depressing truth is that it is one of the better employers. As long as labour rights abuses continue, though, they should continue to be reported.

The below is a piece I wrote up from my chat with IHS analyst Tom Dinges:

Half of China-based OEMs still don’t require third party audits of their manufacturing providers despite many high profile cases emerging this year involving serious breaches of labour laws and widespread strikes, according to market watcher IHS iSuppli.

The supply chain analyst revealed the news as part of a wider survey of the global technology industry.

Over the past year incidents at factories belonging to Apple supplier Foxconn, as well as plants run by contract manufacturer VTech and Samsung provider HEG Electronics, among others, have highlighted the poor level of compliance with local laws at many plants.

Although China has strict labour laws which prevent children under the age of 16 working, keep working hours and overtime to manageable levels and prohibit discrimination, they are poorly enforced.

Not-for-profit groups including China Labour Watch and Hong Kong-based SACOM have time and again uncovered incidents alleging such rules have been broken, with reports claiming physical violence, bullying and filthy living conditions are the norm in many factories.

Staff dissatisfaction comes to a boil periodically in the form of strikes or bouts of violence. In October it was claimed that thousands staged a walk out at Foxconn’s Zhengzhou factory where the iPhone 5 was being made, while a month earlier, scores of workers were hospitalised after a mass brawl at a managed dorm near Foxconn’s Taiyuan plant.

“There are aspects of the labour laws many firms turn a blind eye to for the sake of satisfying their customers and getting products out of the door,” IHS analyst Tom Dinges told me.

“Considering how much of the supply chain is embedded in China it’s too costly to move to another region so the issue is ‘what do we do to ensure our suppliers adhere to the local labour laws they’re supposed to?’.”

Dinges added that the ‘headline risk’ of bad publicity, especially as it filters down to middle America through regional media outlets, should be forcing change on this front.

Foxconn is one notable supplier which seems to be taking a lead on this, having agreed with Apple to on-going audits by the Fair Labor Association, although worrying cases of rights abuses continue to emerge at some of its plants.

China Labor Watch also claimed at a Congressional hearing in the summer that the audit process is flawed in many cases, with widespread bribery and collusion on the part of suppliers and auditing companies.

Dinges said that as the industry matures this situation should improve, with auditors taking their cue from financial investigators.

“These organisations will have to meet a certain expected level of authenticity, vigour and independence,” he added.

“We’re past the stage of hyper growth. Now a lot of what is produced there ends up staying in China. If that’s the case then the factory employee is also a customer and you want to be sure to treat your customers well.”


VTech next in line for the Foxconn treatment

factoryJust finished a beast of a story detailing more depressing news from China of  human rights and labour violations in factories making tech kit for some of the West’s biggest brands.

Yup, it’s not Foxconn this time but Hong Kong-headquartered OEM VTech, which mainly seems to make cordless and fixed line telephones for the likes of Motorola, AT&T, Telstra, Sony and others.

The report into poor working conditions at its Guangdong factories list, if anything, worse abuses to those discovered at Foxconn. These include mandatory and excessive overtime; exposure to harmful chemicals; sub-standard living conditions; violence and bullying towards staff; and below subsistence wages.

It’s worth noting that VTech strenuously denies all the allegations.

I’m not disputing any of the findings of the Institute for Global Labour and Human Rights, nor its deliberately confrontational tone and emotive, first-person testimonials from workers at the plant – after all it needs to shame the Western companies involved into taking action.

What is more interesting is what happens now that the genie is out of the bottle.

Motorola and Telstra reacted with shock, exclaiming that compliance with the law and their own codes of conduct are essential and that, if true, these abuses are unacceptable.

Fair play to Telstra for immediately suspending sales of any VTech products while it investigates, but it seems to me that large Western technology firms are more than happy to turn a blind eye to this kind of thing as long as the labour is cheap, the production costs are kept down and no-one is making a fuss.

Saying you mandate compliance with a code of conduct but never enforcing that compliance, for example, is less than useless. As is saying compliance with local laws is compulsory when you know that, as in China, local laws are not worth the paper they’re written on – they’re either not enforced or shot through with so many caveats that the employer can effectively do what they like.

There are those who say that improving conditions in these OEM factories will push up prices at the till.

Well, that is debatable given that the OEMs are making a healthy profit here and could probably stretch to curtains and mattresses in the dorms; better food in the canteens; and certainly stools for workers to sit on during their shifts, without pushing up the cost of production too much.

I think Foxconn was just the beginning. Any tech manufacturer that breathed a sigh of relief, thinking the buck stopped with Apple, better prepare themselves for a rather uncomfortable time going forward.

Bad publicity is the only thing that seems to spur these big name brands into action and as long as there is an appetite among the public to know what misery lies behind their latest shiny gadget then the stories will keep on coming.

Geoff Crothall, a spokesman for not-for-profit the China Labour Bulletin, told me that conditions like those highlighted in the report are endemic throughout factories in the Pearl River Delta.

The best that can come of the constant media scrutiny is that these brands and their OEMs are forced to institute regular inspections and improve living and working standards across the board, because the local government certainly isn’t going to.