ACER'S STAN SHIH LOOKS BEYOND POLITICAL CHAOS FOR

C O N F I D E N T I A L AIT TAIPEI 002780

SIPDIS

SIPDIS

DEPT FOR EAP/TC







E.O. 12958: DECL: 08/11/2016
TAGS: ECON EINV PINR TW
SUBJECT: ACER'S STAN SHIH LOOKS BEYOND POLITICAL CHAOS FOR
ECONOMIC VISION


CLASSIFIED BY: AIT DIRECTOR STEPHEN M. YOUNG, REASON 1.4 D


1. (C) SUMMARY: THE AIT DIRECTOR MET WITH ACER GROUP
FOUNDER STAN SHIH ON AUGUST 9. SHIH COMPLAINED ABOUT THE
CHAOTIC POLITICAL SITUATION IN TAIWAN, BUT DID NOT EXPRESS
SUPPORT FOR A PARTICULAR PARTY OR CANDIDATE. HE CRITICIZED
TECHNOLOGY-BASED RESTRICTIONS ON INVESTMENT IN THE PRC. IN
ADDITION, SHIH OUTLINED HIS VISION FOR TAIWAN'S ECONOMIC
FUTURE, INCLUDING HIS INTEREST IN USING INDIAN SOFTWARE
EXPERTISE TO CREATE NEW SPECIALIZED IT EQUIPMENT. END
SUMMARY.


2. (C) AIT DIRECTOR YOUNG MET WITH STAN SHIH, THE FOUNDER
OF ACER GROUP, ON AUGUST 9, 2006, AND DISCUSSED THE EFFECT
OF TAIWAN'S CURRENT POLITICAL SITUATION ON THE ECONOMY,
CROSS-STRAIT ECONOMIC ISSUES, AND SHIH'S VISION FOR
TAIWAN'S ECONOMIC FUTURE. SHIH HAS BEEN CALLED THE FATHER
OF TAIWAN'S IT INDUSTRY. ACER GROUP, WHICH SHIH FOUNDED IN
1976, IS THE WORLD'S FOURTH TOP SELLING COMPUTER BRAND NAME.
OTHER IMPORTANT TAIWAN FIRMS THAT WERE SPUN OFF FROM THE
ACER GROUP INCLUDE BENQ, WINBOND, AND AU OPTRONICS. SHIH
RETIRED AS CHAIRMAN OF ACER GROUP IN 2005 AND NOW HEADS A
VENTURE CAPITAL FIRM CALLED ID SOFTCAPITAL.

PROBLEMS WITH DEMOCRACY
--------------


3. (C) EXPRESSING A GOOD DEAL OF FRUSTRATION, SHIH
DESCRIBED THE CURRENT POLITICAL SITUATION IN TAIWAN AS
CHAOTIC. ALTHOUGH OTHER BUSINESS LEADERS COMPLAIN ABOUT
IT, SHIH SAID HE DIDN'T HAVE TIME TO COMPLAIN. INSTEAD,
HE VIEWS POLITICAL UNCERTAINTY AS ONE OF THE LIMITATIONS
OF THE BUSINESS ENVIRONMENT HE HAS TO OPERATE IN. SHIH
BELIEVES THAT POLITICAL LEADERS NEED THE VISION, PATIENCE
AND COMMITMENT THAT ALLOW THEM TO THINK BEYOND THE NEXT
FIVE YEARS. HE HOPES THAT THE SITUATION WILL IMPROVE AFTER
PRESIDENTIAL ELECTIONS IN 2008, BUT STOPPED SHORT OF
ENDORSING A PARTICULAR PARTY OR CANDIDATE.


4. (C) SHIH CONTRASTED TODAY'S POLITICIANS WITH TAIWAN
LEADERS IN THE 1970'S LIKE THEN PREMIER SUN YUN-SUAN AND
MINISTER WITHOUT PORTFOLIO K.T. LI, WHO NOT ONLY CREATED A
STRUCTURE THAT ENABLED TAIWAN'S IT INDUSTRY TO TAKE OFF,
BUT ALSO PERSONALLY SHOWED THEIR SUPPORT FOR INDUSTRY.
(NOTE: LI HAS ALSO BEEN CALLED THE FATHER OF TAIWAN'S HIGH-
TECH INDUSTRY. END NOTE.) SHIH ALSO CRITICIZED FORMER
PRESIDENT LEE TENG-HUI'S "DON'T RUSH, BE PATIENT" POLICY IN
THE 1990S, WHICH DISCOURAGED TAIWAN FIRMS FROM INVESTING IN
THE PRC. SHIH TOLD THE DIRECTOR THAT TAIWAN BUSINESS AND
GOVERNMENT LEADERS SHOULD HAVE SAT DOWN TOGETHER IN THE
EARLY 1990S TO DISCUSS WHAT KIND OF CROSS-STRAIT ECONOMIC
POLICY WOULD BE BEST FOR TAIWAN, WHICH COULD RECEIVE BROAD
SUPPORT FROM THE PEOPLE OF TAIWAN.

CROSS-STRAIT TECHNOLOGY TRANSFER RESTRICTIONS CHAFE
-------------- --------------


5. (C) SHIH COMPLAINED OF CURRENT RESTRICTIONS ON CROSS-
STRAIT TECHNOLOGY TRANSFER, NOTING THAT LIMITS ON THE
SEMICONDUCTOR SECTOR PREVENT TAIWAN FIRMS FROM INVESTING IN
TECHNOLOGY IN THE PRC THAT IS SEVERAL GENERATIONS OLD. HE
ARGUED THAT TAIWAN FIRMS WOULD KEEP THEIR MOST ADVANCED
TECHNOLOGIES IN TAIWAN OUT OF SELF-INTEREST. HOWEVER, THEY
SHOULD BE PERMITTED TO TRANSFER TECHNOLOGY WHOSE VALUE HAS
STARTED TO DEPRECIATE TO PARTNERS IN LESS-DEVELOPED MARKETS
BEFORE IT EVAPORATES ENTIRELY. HE SAID THAT USING
TECHNOLOGY TRANSFER TO DEVELOP LONG-LASTING PARTNERSHIPS
WOULD BE BENEFICIAL TO BOTH SIDES. ACCORDING TO SHIH, HE
ARGUED FOR THIS KIND OF TECHNOLOGY TRANSFER TO SOUTHEAST
ASIA IN THE 1980S AND 1990S, BUT HIS PROPOSAL WAS NOT WELL
RECEIVED IN TAIWAN. HE COMMENTED THAT TODAY, TAIWANS
COMMERCIAL TIES WITH THOSE COUNTRIES ARE NOT AS CLOSE AS
THEY WOULD HAVE BEEN IF HIS PROPOSAL HAD BEEN ACCEPTED.

ECONOMIC VISION
--------------


6. (C) OUTLINING HIS VISION FOR TAIWAN AND ASIA'S FUTURE
ECONOMIC PROSPERITY, SHIH EXPLAINED HIS "SMILE CURVE"
CONCEPT, WHICH IS OFTEN CITED BY BUSINESS AND GOVERNMENT
LEADERS IN TAIWAN. SHIH'S "SMILE CURVE" SHOWS THAT THE
HIGHEST VALUE-ADDED OCCURS AT THE BEGINNING AND THE END OF
THE PROCESS OF DESIGNING, MANUFACTURING AND SELLING A
PRODUCT. SHIH BELIEVES TAIWAN FIRMS SHOULD FOCUS ON HIGH
VALUE-ADDED PROCESSES, NAMELY RESEARCH AND DESIGN AT THE
BEGINNING OF THE "SMILE CURVE" AND BRAND MANAGEMENT,


MARKETING AND SALES AT THE END, INSTEAD OF THE CUT-THROAT
BUSINESS OF LOW-COST MANUFACTURING AT THE BOTTOM OF THE
CURVE.


7. (C) IN THAT VEIN, SHIH DESCRIBED SOME OF HIS CURRENT
WORK AS A VENTURE CAPITALIST. SHIH SAYS THAT HE IS EAGER
TO LINK INDIAN SOFTWARE KNOW-HOW WITH TAIWAN IT HARDWARE
MANUFACTURING EXPERTISE. HE WANTS TO USE INDIAN AND TAIWAN
EXPERTISE TO PRODUCE NEW IT EQUIPMENT THAT HAS SOME
FEATURES OF COMPUTERS BUT IS MORE SPECIALIZED. HE CITED
RETAIL SALES AND MEDICAL SERVICES AND INDUSTRIES THAT WOULD
BE PARTICULARLY GOOD TARGETS FOR THIS KIND OF SPECIALIZED
EQUIPMENT. HE ALSO SUGGESTED THAT THE PRODUCTS COULD BE
SPECIALIZED FOR USE IN ASIAN COUNTRIES.
YOUNG