Doing business in China has been the priority for many companies for the past 20 years.
As you might already know the business boom of China propelled it to be the second-largest economy in the world; quite an accomplishment for a country that suffered a massive famine in the ’60s.
Textiles, personal care products, electronics, you name it, companies from all industries wanted to do business in China and they did; but is China the only country in Asia where it makes sense to manufacture products?
The answer is no, some of you might not remember it but before the exodus to China many products, including electronics, had a tag that read Made in Taiwan or Made in Taiwan r.o.c
And currently, Taiwanese companies dominate the electronics industry behind curtains; Foxconn, Apple’s manufacturer, is a Taiwanese company.
If you were an immigrant in Taiwan during the 90’s trying to figure out whether to start an electronics business in Taiwan or China, where would you go?
On the one hand, doing business in China is all the rage, that’s where mass manufacturing is moving to.
On the other hand, something tells you that the Made in Taiwan R.O.C label won’t completely disappear; Taiwan has expertise, especially in electronics.
“Before you have to deal with how to start an electronics business, you have to begin with where to start an electronics business.”
This was the situation Case Engelen, now CEO and owner of Titoma, a company that manufactures custom electronic devices and which headquarters are in Taiwan, had to deal with.
As you read, he founded his company in Taiwan, but why? Well, if you want to find out more listen to the interview below or read the transcripts.
Additionally, you can flip through the slides for the highlights of the interview.
ASIA TECH PODCAST – EPISODE 101
FIRST PART – INTRODUCTION – LIVING IN CHINA AND TAIWAN
Hi this is Michael Waitze and welcome back to the Asia tech podcast.
Today I’m joined by Case Engelen the CEO, I didn’t get that right did I? at Titoma.
At least I got the company name right
Case how are you doing today?
I’m great Michael. Thanks for having me here it’s wonderful.
Can you give our listeners a little bit of your background for context?
um yeah so I’m from Holland and I actually came to Taiwan already like 25 years ago.
So, I’ve been here for uh a while
What is it like like? what was the thing that brought you 25 years ago moving from where? From the Netherlands right to Taiwan?
Yeah
I can’t believe there’s a flood of people that was doing that right?
Yeah, there were quite a few already, for me personally, I really like uh languages and I had just spent eight months in uh, in France in an exchange program and I really liked meeting lots of people from different countries and learning a new language.
And I really enjoyed that.
And so after I graduated I thought I want to do that once over but now one level higher, Chinese.
Did you have any exposure as a youngster to sort of Chinese culture? Probably Chinese food but, did you know what you were getting yourself into when you were going to Taiwan for the first time?
I’d never been to Taiwan but I’d been on a study trip to Hong Kong and I was actively considering doing something like this already and so I remember that I was standing there in one of these big roads of Hong Kong and with hundreds of people, uh walking by me.
Uh from all sides and, like yeah, How does it feel being alone here?
And uh and it felt fine, so I decided yes, I can do this.
Was there any culture shock or were you just so open-minded when you got there you just thought like, okay this is the way it is and I’m just going to try to become part of this?
I think that the people in Taiwan are really very welcoming to foreigners so that makes it really easy.
It’s very easy to make friends. We had an intern who came off of the train and he needed to find a bus and so some lady said, oh my daughter will get you to the bus stop.
And the daughter said, you know well I have nothing to do and I will accompany you to where you need to go, and so they were on the bus for half an hour and they chatted.
And that was very nice, and then the next day she typed on Line, which is a thing in Asia and she said
well you’re not getting back to me like, do you want to break up?
Wow that’s fast. So that’s aggressive helping.
But in general people are very open, very interested in making friends with foreigners and uh they will walk you two blocks to get you where you need to go.
So it’s very easy that way and Taiwan is this beautiful country. It’s known as a computer country or something, but if you come here like, my I am looking out of my office it’s
It’s beautiful.
Green mountains that I’m looking. There’s jungle with waterfalls, there’s great hiking in the weekends, the mountains come within 10 minutes walk of the 101 tower straight in the middle of the city. It’s a very nice place to live.
I think it will surprise you to know that I’ve been in Asia for 30 years so from February of 1990 until today, right so now more than 30 years.
And I’ve only been in Taiwan for like two days and all I did was go from my hotel to the office from the office back to my hotel and then home, so I have not seen any, I think I went to one noodle shop and that was it.
Which is terrible because I can see from the outside of your office it is gorgeous there. I have to go.
Yeah it’s a great place and I think if you’re a foreigner coming to Asia
It’s one of the places where there’s a lot of people who stay here for for years and years because it’s nice and the air is relatively really good.
Especially if you compare it with the big cities in China. Nice people to deal with I think that is one of the most important things.
After you studied school, I want to get to Titoma in a second but after you studied at school there and learned mandarin or studied mandarin, did you go home and try to get a job at home or did you just say I’m staying, here I like it a lot and I’m staying.
No when I left I said I’m gonna be gone for a year and three months, if I really don’t like it the first semester or five, because I knew learning Chinese is going to take at least two years
And yeah If you invest that amount of time, you need to use it. So that was the plan all along and then I started, uh yeah managing an industrial design company, and then later my own. So I extended by a bit more.
And was your background originally in industrial design?
No no no, my background is in marketing and so I was studying Chinese and then my mother read in the newspaper that a design firm in Holland was saying well all these these products are all made in Taiwan these days.
So we, as industrial designers, we should be in Taiwan, because that’s where it’s all happening. So um so, the next time I was in Holland, I called them up and I went to see them the next day
And they said yeah, great and um, here’s a stack of brochures, and go, and sell our design in Taiwan.
And that’s what I started doing.
SECOND PART- STARTING A BUSINESS IN TAIWAN
Wow, so what made you start Titoma and then maybe you can tell me a little bit about what Titoma does.
Yeah so, I did the the industrial design the styling of products for for Acer and Mytech and also for polaroid and gateway, the American side of things.
I did it for about five years okay.
And, so we designed the outside we do the mechanical details on the inside of the devices but that’s where it sort of stopped, and I got a little bit frustrated that being a consultant you would say well dear boss this this is what we propose and it’s going to be looking great if you make it this way.
And then they would say yeah yeah yeah
yeah well
My own engineers will take it from here.
And then, they often would find a way to make it cheaper, to pay less for the injection molds, and then the the whole feeling of the design was sort of lost.
yea and I mean. I’m not really a control freak but if you want to make something nice you want it to be nice and and so you do.
We decided to that yeah.
I started to tone with a couple of friends because we felt we needed to control the full process, and basically we help western companies to do the end-to-end design to manufacturing of custom electronics.
So what does that mean does that mean if I if I’m a company in Europe or If I’m in a company in the United States, and I have an idea for a product so, like a sketch of something, that you’ll take that and actually you and your engineering team and your design team will then take that and actually turn it into a workable product?
You build all of the sort of iterative designs that goes along with building that product?
Yeah yep correct so we we do the complete thing. We have mechanical engineers, uh hardware, firmware a little bit of software, because it has to connect to the cloud right?
And we we make the prototypes and test them.
But to be honest, the best use I think is for product ideas that are a little bit more mature.
Because if something is a really early idea.
You’re gonna have lots of crazy iterations and you go from left to right, and that is something that the founders, the owners of the company, that I feel they should do at home. Where they can really interact with their target consumers.
And gauge their reactions and optimize, and pivot, and all that and our contribution, is best when we get that idea and then make it into something that is very reliable, that can be reliably manufactured in Asia at a very affordable cost.
Got it, so today the whole world is dominated by conversations about startups. How venture capitalists fund, I mean all this kind of noise right but when you started your own company two decades ago almost, right?
THIRD PART – THE RIGHT BUSINESS MODEL FOR ELECTRONICS
Did you just fund it yourself and get to profitability as fast as possible so you could then start hiring as many people as you needed? Does that make sense? You know how it’s very different than it is today.
Yeah, it wasn’t quite the kickstarter and all that, yeah I was just being thrifty I guess. I had saved up some salary so I could run for about a year or a bit more, which is needed of course
I had started a sort of a virtual team, with some other friends of mine and that was our management team on the website, so we had a director of electronics who was a very experienced electronics guy also a guy from Holland
Director of manufacturing and the director of this and that, yeah they were all, if a project were to come in, they would be available to do it, but uh they were not taking a salary yet.
But that’s interesting so you were using a model that’s very common today but probably wasn’t that common 20 years ago by saying, like building virtual teams is, it feels like it’s a new thing but I guess it’s not really.
Yeah we were all in the same office and people would come in if there was something to do but in the beginning it’s slow starting of course it’s a bit fake it until you make it.
Yeah I know the feeling what do you think is a better place for a hardware electronics entrepreneur today, right?
And part of the reason why I ask this is because there’s this very complex relationship still between china and Taiwan.
FOURTH PART – DOING BUSINESS IN CHINA VS DOING BUSINESS IN TAIWAN
But how do you see that today is it better to be in china is it better be in Taiwan what’s what’s the right balance there?
Well China is really where 60-70% of all the the world’s electronics manufacturing is happening and there’s everything there, every supplier of every possible component.
This is there within an hour drive and there is a lot of energy and go go
So it’s very exciting to be there but for longer term living, personally I didn’t enjoy it as much, like I lived a bit in shanghai, I’ve lived in Dongguan and yeah especially an industrial town like Dongguan is just very boring to live.
And basically the whole electronics industry started 10 15 years earlier in Taiwan and then all the Taiwanese went to china to to start up the factories there, so all the roots are here all the networks all the suppliers and they now have all factory in china.
And I have a little bit the feeling in, China they’re really go go they’re very aggressive as they call it and that’s really good for the the economy of a country where they they grow exponentially.
Right but if you’re just, want a team of engineers to get your product done just get it done you don’t want half of them to run away halfway the project and start a similar kind of company you just, that’s not very good so Taiwan is much more stable in that aspect.
And I feel that’s a lot safer environment and also to protect your IP of course.
FIFTH PART- SETTING UP A INTERNATIONAL TEAM IN TAIWAN
And is most of your staff local? like your engineers?
We have a mix of local but we have a lot of foreigners as well, our manufacturing director is from uh South Africa, we have people from Colombia, a lot I’ll get into that later, our CTO is from there.
From France from El Salvador, from Nicaragua. So it’s a very international team, the last four or five years our CTO. Leo, he’s from Colombia and in Colombia there’s no electronics industry, and so his professors they said oh one of us has become a CTO of an international company that’s
That’s that’s fantastic, and right wow and and so they wanted more of that.
So we started a program where they, give us their list of the top 15 graduates we run a battery of tests and then we take the top five every six months they come to Taiwan for six months of training and then they go back to Colombia.
And continue the good work there, and that is working out really nicely.
But that’s really super right, because you’re basically promoting an industry or a specialty in Colombia that wasn’t there before and you’re no worse off for it but you’re making those people way better off by giving them that opportunity that’s kind of cool though.
Yeah it’s really nice Colombia is, since a couple of years ago has become a lot more stable now.
Yeah there’s a lot of capacity there a lot of potential and it’s really nice to use that and giving people an opportunity that they’re really happy to come here and see this part of the world and learn the whole industry and I think.
With 30 people or so there now we are already the biggest design firm in the whole of Colombia.
That’s amazing can I ask you this? There are certain countries that I think, the US, is becoming harder to get foreigners into the country particularly for work right?
Is there any? um are there any roadblocks to bringing foreigners into the country and do you feel like there’s a handicap if you’re a foreigner trying to run a business in Taiwan?
Yeah like like I say I have like six, seven foreigners employed here now with work permits we bring in these trainees every five, six months.
Yeah it works well we have that process down, what is a little bit difficult this is getting a credit card here they sort of expect you to to have a house or have somebody being guarantor and so you need to put up like a deposit to be able to get a credit card, personal one but otherwise I feel it’s pretty easy to establish a company here.
SIXTH PART – THE US, CHINA AND TAIWAN
I want to understand, look it’s December, on January 21st 2021 the united states is getting a new administration a new president a whole new cabinet all that kind of stuff how do you think?
Just from your perspective you’ve been in the region, you’ve been in you’ve been there for 25 years, how do you think the relationship between china and united states will change or evolve under a Biden administration from where it is today?
Well I hope it will be less eventful. I think uh the whole world came with some quieting down and some more predictability stability yeah and
Predictability agreed, what’s your view what do you think well..
One of the really good things about Biden is that the environment is much more important for him and I think that is one of the big Challenges of our our age, so I’m really happy about that and China is putting a bit push on that as well with solar and with electric vehicles.
So yeah I think that is a very good point, for them to come together.
I don’t think that Biden is going to suddenly cave in because there’s a lot of negative sentiment about china now with their theft of intellectual property or forcing foreign companies to open up.
Their service to their secret services and all that and I think that was a good step of Trump that he really addressed those issues very powerfully.
Uh human rights issues. Yeah I would expect that the relations will uh mellow down a bit and that the constant poking that the Trump administration did is is gonna ease down, on the other hand you can expect Biden to be much more of a coalition builder internationally with Europe and Australia and Japan.
And so in that sense there is some, China can expect a more united front I think to become more of a uh play by the rules kind of uh participant in the international arena.
So in that sense China can yeah expect a more stronger opponent perhaps.
Yeah I mean that was supposed to be the whole concept of the right, no but not fighting china alone but sort of cooperating with each other to put a little bit of pressure where it was necessary anyway.
Do you think there’s anything that’s going to stop china from becoming the world’s largest economy in the next 10 years?
I mean Ics are a major chokehold
IC semiconductors
Taiwan is producing about 60% of the world’s semi-conductors basically Trump has said tsmc alone does 50% of the world’s semiconductors, is no longer allowed to, uh deliver them to Huawei
Which is a very invasive and a very, aggressive step, and uh more such step could be taken uh but then of course, there would be force for retaliation.
uh but with ICs are our core component, where the US is still uh has a lot of Ip in the production process and where Taiwan is also a key player.
You’re talking about Taiwan semi?
yeah TSMC Taiwan semiconductor, and uh so uh that that is, sorry what was the the overall question again?
uh just is there anything that’s gonna stop china from becoming the world’s largest economy in the next decade? I mean they’re so close already
I think they will, I mean they because yeah you could theoretically, completely choke them off of ICs because, uh for now they only 16%, all the ICs used in china are made in China
The rest is at least the IP for it is imported, but on the other hand the rest of the world, uh it’s great to have fantastic ICs but you need a lot of bits and bobs to to work with those ICs, to do to get products
Those come from Shenzhen so, I really think that both sides need each other and yeah complete separation really doesn’t make much sense.
In my view and can’t we all just live together?
SEVENTH PART – THE PRODUCT DEVELOPMENT PROCESS FOR ELECTRONICS
It would be nice so can you talk a little bit about how like what is the best way to organize the product design and then the manufacturing sort of in the way the world is organized today what’s the best way to do that?
Yeah well electronic components really are the key for electronics because if you look at the total cost of an electronic product, the components are like like 70 of the whole cost and so labor cost is important for for t-shirts and for shoes and china stopped being cheap in labor about 10 years ago and so all the t-shirts and all that has come to Vietnam and to Indonesia.
And wherever but the reason that China has stayed so strong is because of this humongous ocean of factories of everything and especially for electronics that the supply chain is is so complex you need so many different kind of factories for different kinds of .components
China is really the ideal country to make stuff and if you’re in the design stage or something you don’t quite know yet which components you’re gonna be using from which factory, so it’s really nice to to be working with with three factories in parallel and if one is not for example, you need a display and you need it slightly customized you want the connector to be on the side and not on the bottom and
If one factory is not willing to do that or not fast enough or suddenly changes their price or something there’s three other factories within an hour drive, that can make a very similar display for you.
So that keeps everybody really fast, really cooperative they don’t have a minimum order quantity of a hundred thousand units no they’re willing to make a custom unit for you for a thousand units the component really is is what makes China product designers heaven and so that stays in a really important part of the equation.
At the other hand there are the import tariffs so 25% is serious and so there’s a lot of people who are exploring options of a China plus one strategy like we need to to balance our portfolio or we need to take final assembly out of china and we’re working on projects now where we move final assembly to Taiwan.
But still the final assembly is part of of the whole unit cost price but components are still in my view.
And how about the greater bay area does the organization of the greater bay have any impact on production design manufacturing that kind of thing?
um I think it will be your, you meet the greater bay around
uh Shenzhen right yep where, uh where you’re gonna connect Shenzhen with yeah with the cities around it, it’s gonna make their their ecosystem progress still and there’s lots of subsidies for people to to set up universities there research centers so that is a positive factor but yeah there’s a lot of more negative sentiment these days about China.
So I do think that a lot of universities and startups and companies are getting more reluctant to start something new in China.
So that is counter factor yeah, the whole yeah social control social score for example the the the covid app that everybody has on their phone now that app is is not going to go away
No it’s not so yeah, the government is always going to know where you are and where you’re being
but this actually started before covid right? and you know this yeah Shenzhen city Huawei and the government working together to put cameras and face recognition technology everywhere to understand you know and the auspices was we’re trying to prevent crimes from happening
We can figure out who the criminals are right away but it’s very big brother-ish very orwellian in the sense that now that the government has a copy of your face it can now know where you are at all times and you’re right if you have a tracking app on your phone.
Well then all bets are off on like where you can and cannot go yeah without having somebody know it
yeah and what is actually I just read a comment by a US lawyer, Dan Harris who said that people used to think that as a Chinese society matures because they want child policy uh
They’re gonna age pretty quickly, it will become a bit like like a really big Japan um but he’s now saying that it’s going to be it may become like a really big North Korea
Which is a rather uh extreme stance and I really hope it doesn’t come to that but
Yeah so one of the comments that used to get made about the sort of comparison between the age breakdown in China and Japan was that the Japanese got rich before they got old
yeah but that the GDP per capita has not caught up with age in china so they’re getting old before they get, before the entire country gets rich
So it’ll be interesting to see how that plays itself out as well
yeah yeah I mean the government has tremendous support in China because for the last 25 years everybody in China has only seen things go up get better yeah absolutely so yeah
There’s absolutely no reason to complain by anybody or by very few but but yeah there’s been some loan problems uh
Recently as I understand we’ll have to see how that plays out I don’t know.
I want to ask you one more question and I’ll let you go right.
EIGHT PART – TAIWAN ELECTRONICS SUPREMACY
What is the impact of companies like Foxconn or Honhai precision right same company, what role does it play in this whole manufacturing process is it just going to keep getting bigger or are there smaller factories better sort of positioned to compete with them because of like you said this sort of minimum order size?
The Taiwanese, it’s really interesting if you look at the top 10 ODM original design manufacturers seven eight of those are Taiwanese
Yeah which which is really strange because if you’re the purchasing manager from Dell you’re gonna go factory direct right but, right but no they don’t
They go to Taiwan and they say dear Mr. Compal or foxconn please build a factory for me in China you go and manage it and I’ll buy it from you is that okay so that is a really strange construction and that is basically because yeah if you entrust a company with both the design and the manufacturing of your laptop or of your toaster oven or whatever it is.
You need to be really trusting that company and that’s all the big firms uh Siemens and Fujitsu and Sony that everybody’s going with the Taiwanese and very few are actually going with trade Chinese armed firms so that is an interesting consultation in itself.
But isn’t it also the case isn’t also the case that companies like acer and Asus actually started off as what I would call an OEM but what you’re saying is an ODM
Didn’t they and they said wait a second if we’re manufacturing super high quality computers for other people why not just be in the computer business as well?
Yeah that’s true like Acer they spun off their their ODM. uh acer built their own computer brand and then they spun off their ODM section called Wistron and Asus they spun off Pegatron who’s a really big supplier for apple now and so they basically said well if we make it two different companies then our clients will be a little bit more secure about it
It’s true that that they have made a bit of similar evolution but I think they have gone about it in a much more civilized way than Huawei for example
uh where where maybe yeah I mean you know stories that the first Huawei started making routers for cisco and then they suddenly started selling their own Huawei branded routers and in the manual that was copied on the last page it said if you have any problems just call our service line and that service line turned out to be just a cisco’s number
That’s the best thing that’s that’s such a great thing look I feel like you and I should have more of these conversations
There’s a great sort of evolution that’s taking place it’s been going on for 25 years but it’s probably going to go on for another 25 years and remember the relationship we didn’t spend a lot of time talking about this but maybe the next time we can
Sure
The China and Taiwan relationship
Is fraught with complexities right because the Chinese don’t consider Taiwan a separate country and we could spend days talking about that I don’t want to spend any more time on that today
And remember Foxconn right Honhai precision started in Taiwan, Terry Guo a lot of the production though now is in China so they have to be related to each other at some level but it’s just going to be interesting to watch that progression and frankly I’d love to learn more about it
And the fact that you’ve been in Taiwan for 25 years and are actually in the electronics and manufacturing and design side means you should have a really interesting insight into this and I would say this to you too before I let you go I would love to have more conversations with people like you are in Taiwan or even in China that could participate in the Asia tech podcast
And let the rest of the world know right because there is a lot of pressure on china from the rest of the world but
I think a lot of it comes from the fact that people don’t know anything about it they just know what they read but they don’t know anybody on the ground so if you have other people like yourself
I’d love to get them on the show as well
Sure I’ll be very happy to uh to some, yeah excellent and yeah we we certainly
uh, look forward to do another conversation with you Michael
Awesome thank you so much for doing this today
Thank you for having me cheers
