June 30, 2005 – Observing The Return of Gifted Sons

June 30, 2005 – Observing The Return of Gifted Sons

Four years and three months after my first trip to Taiwan and other technology centers in Southeast Asia as a magazine editor, I was on my way again. I’m now the editor-in-chief of a technical magazine that covers integrated circuit software design tools and I'm also a shareholder in the small start-up publishing company that produces the monthly periodical. It’s a controlled circulation periodical—the readers receive it free in exchange for their demographic data, which we use to sell advertising space in the magazine. I’m here in the wake of having had the ignoble duty of closing my previous publication—a sixty-year old periodical that coined the term “Electronics.” I’m determined this new venture not suffer the same fate. We’ve been fortunate in that the market has continued to grow since 1995 when I first joined the company. There appears no end in sight as the semiconductor industry strives to keep up with demand generated in the wake of an explosion of Internet ventures. Little do we know we’re accelerating toward a cliff.

It’s Sunday September 7, 1997, I’m on United Airlines, Flight 845 bound for Chiang Kai-shek Airport, nonstop. The rationale for this trip was to find partnership opportunities with other publishers in Asia who might distribute our content or jointly publish a version of our magazine for the local market. I have three stops: Taiwan—with visits to Hsinchu—their Silicon Valley—and Taipei, where the publishers are; Singapore—we have a large advertiser there we want to treat nicely; and Tokyo—one of our investors is a Tokyo-based publishing company who we would like to engage for access to the Japan market.

Beyond the business reasons for the trip, for me this is a journey of self-discovery. I would be 52 years old in two months and I needed to understand how far I had come in life and where I should be heading. Going to Asia seemed a perfect way to find the answers to these questions. This revelation came to me nearly twenty years earlier. I had been helping the engineer who designed the original Pong Video Game—he sold low and was hoping for another chance at trying to sell high. He now had designed a piano tutor that would allow anyone to sit at a standard piano keyboard and play. In trying to find funding and a manufacturer, we kept running into Hong Kong money and production capacity. Over the years, the emergence of Singapore, Malaysia, Taiwan, India, and China as high quality offshore manufacturing capacity, clearly indicated that wealth creation was moving to Asia.

When I landed in Taiwan, there was a car waiting to drive me to the Carleton Hotel. HC, an executive at one of the companies my magazine covered and his Sales Representative in Taiwan, TS, had produced my itinerary in Hsinchu and had made reservations and arranged transportation with the Carleton Hotel. Shortly after I arrive and get checked into my room HC and TS knock on my door and invite me down for dinner. It was just after 8:00 PM on Monday evening, September 8th. I had eaten but wanted the company of familiar faces and joined them. (In a couple of years both these guys would become a major part of my life.) We talked for a couple of hours about the next day’s visits, progress of our respective businesses, the latest happenings in Taiwan, and gossip about those we know in common.

HC recounts the story of traveling to Beijing when he was VP of marketing at his previous company. He was placed under house arrest at the airport overnight as they checked him out. Kafka came to mind as he relayed details of his detention. HC is a pretty tough guy. Built like a football player—he played in high school—he has a body builder’s torso. Before immigrating to the states, he attended military school in Taiwan. His description reminded me of my weeks in Navy boot camp. Only his entire adolescent school life seemed to be regimented by the Martinet we had for drill instructors. I knew less about TS and still do. He owned a small distribution company that sold design tools used to develop semiconductors. He had close to 20 salesmen—and all were men—working for him. He was an investor in HC’s company and drove a nice relatively new Japanese 4-door sedan.

I need to say something about Hsinchu Science-Based Park, which is a creation of the Taiwan Government. In 1976, the Financial and Economic Development Committee of the Executive Yuan—the executive branch of the government of the Republic of China (Taiwan)—decided to establish Science Park. The government set aside land, built schools to serve the park, and provided incentives to encourage high tech companies to take up residence. Founded in 1980, semiconductor foundry giant UMC was Taiwan's first chip company and an early resident of the park. Its larger rival TSMC, another park resident, moved in seven years later. (The two companies and their partially owned affiliates were among those I was visiting the following day.) The park and the Taiwan Government’s investment is an example of corporate and human capital investment that created incredible wealth for a small island.

Beyond the Taiwan government there is one other element that made the park so incredibly successful, the return of expatriates from the U.S. to ride this wave of growth. Of the top executives of the largest semiconductor company in the park, all but two have advanced degrees from U.S. universities: two each from Stanford and U.C. Berkeley, Yale, Princeton, Illinois-Urbana, Purdue, Cornell, Columbia, and Missouri. Only two of these top execs lack a PhD and all the PhDs are in science and technology. And of those with U.S. educations, most of their bios show years of management positions in top U.S. electronics companies. The brightest and the best went to the U.S., acquired a top-notch education, honed their management skills enriching U.S. investors and themselves. Now, they had returned to Taiwan to repeat the feat, with Americans now working for them. In one generation, the apprentice became the master. And most of the large companies in the park had the same management composition.

HC, who had left Taiwan as a teenager, had now come back, his rusty command of Mandarin returning as the number and length of his visits increased. He relayed his embarrassment when attempting his first presentation in Mandarin. Less than a minute into his pitch, his very small audience suggested he continue in English. After that first encounter he honed his language skills and now dazzles me by switching effortlessly between Mandarin and English as he speaks with TS and me. He is among the next generation of ex-patriots to return to the island. The return was made easier by the westernization that had swept across the island. The U.S. has nothing that cannot be found on Taiwan. HC is twenty years my junior and it is his time and he is well equipped to ride the growing wave of Asian affluence.

During my visits to companies inside the park, I would enter marble-floored, glass and chrome appointed lobbies, some with water fountains and other displays of affluence. Arrayed before me were the trappings of new wealth, the symbols of companies who build product for a continually expanding market. Companies in the U.S. did the same over two decades earlier but steadily rising costs made offshore facilities like these in Hsinchu Science Park, with lower wage rates, cheaper land, water, and power more competitive than equivalent manufacturing facilities in the states. I realized that every U.S. high tech worker was competing with Taiwan engineers and programmers for jobs. Our advertisers would pay dearly to reach these workers if we could demonstrate they were reading our publication.

HC took me to dinner on Tuesday evening. I had dinner at the hotel by myself on Wednesday. And Thursday, TS, drove me from Hsinchu to Taipei, took me to dinner, and afterwards dropped me at the Hyatt Hotel where I would stay until Saturday morning. Friday was the day I visited a publisher who we thought might be interested in partnering to distribute our editorial and split the advertising revenue from the joint venture. Sitting alone in my room after dinner on Saturday night at the elegant Hyatt Hotel in Taipei, I realized that the world was moving at a breakneck pace, Below me the lights of Taipei were ablaze—the high rises were all constructed during my adult life many in the four-year interval since my last visit.

I have been aware for some time that I have spent my life as an observer of what was going on around me, writing about the success that others enjoyed as well as the failures they suffered. With the demise of my last publication I had to become a participant not just an observer, which explains my trip and my concern for appeasing customers and a desire to leverage partnerships with other publishers. However, in my discussions with companies the last couple of days, I realize that wealth resided in high tech not in the publishing companies that wrote about them. The dilemma I faced was continuing in publishing or jump into the real world of creating and building what I had been writing about for these past couple of decades. HC would help make that decision for me just over two years later.

What I found in Singapore and in Japan in future entries.