Taipei, Dec 26: Taiwan's computer makers are morphing fromsimple contract manufacturers into designers and innovators as theyfight for survival in a competitive sector.

Four out of five new notebook computers are now designed on theisland, as firms making everything from cellphones to PCs move from a''do what you're told'' mentality to a ''let's innovate'' one,transforming the ''Made in Taiwan'' label.

The change is partly driven by new business opportunities, butalso by sheer competition as companies try to set themselves apart withtheir innovative design.

Some of the world's top electronics makers, from PC makers DellInc and Hewlett-Packard Co to cellphone makers Nokia and Motorola, arelooking to domestic behind-the-scenes players with names like QuantaComputer Inc. and Asustek Computer Inc to not only make, but alsodesign their latest gadgets.

Dell, the world's top PC maker, said that over 50 per cent of itsnotebook PCs are now designed in Taiwan by its locally based teamworking closely with its manufacturing partners.

Dell, whose top Taiwan manufacturing partners include Quanta, setup its design centre in Taiwan in 2002 with 50 people for PC andnotebook development.

Since then the facility has grown more than six-fold to 330 staffers.

''We still plan to further expand our design team in Taiwan as itis an important part of our business,'' said Shane Cheng, Dell'sregional director.

Value Added

As competition in the fast-paced IT world intensifies,Taiwanese firms are trying everything they can to give their clientsadded-value services.

Taiwan computer makers such as Quanta, Asustek and Lite-OnTechnology Corp have all created their own design teams, earningreputations as new product pioneers and winning awards in globalcompetitions.

''Over 80 per cent of the world's notebook computer design is outsourced to Taiwan now,'' said JP Morgan analyst Alvin Kwock.

Having design teams close to the manufacturers has also becomemore strategically logical for foreign tech firms, said Kwock. Mostfinal production is done nearby, in mainland China.

Contract makers are using their design capability to distinguishthemselves from one another, realising sophisticated designcapabilities can attract customers who want everything from MP3 playersto mobile phones and laptop computers.

''At some point you can't compete on cost alone, so you have toturn to design,'' said Markus Wierzoch, a product design manager forAsustek.

The move to design marks a coming of age for Taiwan firms, whichhave migrated from pure manufacturing work, or Original EquipmentManufacture (OEM), in the 1980s to a new type of work, called originaldesign manufacturing, or ODM, starting in the 1990s.

As competition heats up, the level of design services offered inTaiwan has increased as well, as players try to distinguish themselvesin industries where margins are already razor-thin.

As a result, the island is earning a name for its new generationof young engineers and designers who are winning awards in globalcompetitions for their work.

''Perceptions regarding Taiwan's design has really changed a lot in the past five years or so,'' said Wierzoch.

While awards may be a pat on the back, the Taiwanese firms are less motivated by prestige and payment than by sheer necessity.

Quanta Computer, the world's largest notebook contract maker,whose main clients include Dell and Hewlett-Packard, said its designdevelopment services are provided almost free of charge for bigcustomers since competition is so intense.

''It is what Taiwan makers have to do to survive,'' said JP Morgan's Kwock.


Reuters