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June 23, 2017

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Science minister voices skepticism about future of local tech industry

TAIPEI -- Simon Chang, head the newly formed Ministry of Science and Technology, has expressed concerns over the future of Taiwan's technology brands, saying they are lagging behind bigger competitors in terms of marketing dollars.

Taiwanese brands like Acer Inc., Asustek Computer Inc. and HTC Corp. are all capable of manufacturing high-quality smartphones, but their market share remains smaller than that of Samsung Electronics Co. of South Korea, Chang said in a recent interview with CNA.

"Building a brand is a game of burning money," said Chang, who became the country's first science minister after the National Science Council was upgraded to a ministry in March.

Chang said HTC, for example, needs to promote its smartphones to various kinds of consumers around the world but its marketing budget for a single phone model is nearly 10 times smaller than Samsung's.

While bigger enterprises with deeper pockets are seen better positioned to continue pouring money into maintaining their lead in the marketplace, Acer, Asustek and HTC are destined to face increasing pressure because of their relatively smaller size, the minister said.

In comparison, contract manufacturers are able to focus mainly on basic production rather than on costly advertisement, Chang noted.

Contract manufacturers like Hon Hai Precision Industry Co. can win billions of U.S. dollars worth of orders because they need only to promote their manufacturing quality among fewer than 10 major customers worldwide, he said.

Though contract manufacturers are facing thinner margins, they could try to increase their economy of scale and boost their total revenue in order to achieve bigger profits, Chang said.

Meanwhile, the science ministry will encourage the establishment of more start-up companies in Taiwan to capitalize on the rise of mobile apps and the e-commerce industry and to help startups gain the attention of big international companies, he said.

Chang cited the successful example of Taipei-based mobile app startup Gogolook, which was acquired last December by South Korean firm Naver Corp., owner of the Line app, for NT$529 million (US$17.6 million). Another such success was Taiwanese Web app security firm Armorize Technologies Inc., which was acquired in 2013 by Nasdaq-listed Proofpoint Inc. for NT$750 million, he said.

Regarding his ministry's policies, Chang said it will not fund any research "far removed from Taiwan," such as studies on the electoral system in a U.S. state or rare disorders in Africans.

Instead, the ministry will help strengthen the cooperation between the academic sector and the Industrial Technology Research Institute by gradually allocating more of its budget to the state-funded institute for applied research, he said.

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