Taiwan Today

Taiwanese information and communications technology companies are enjoying thriving business in emerging markets by using Dubai as a gateway.

According to the World Economic Forum’s Global Information Technology Report 2009–2010, the impressive high tech gains of the United Arab Emirates (UAE) in recent years have been driven by a strong and consistent government focus on information and communications technology (ICT), with the country coming in second and 29th for government readiness and usage respectively in the report’s rankings. Strong government support of and priority for the ICT sector also raised the UAE’s ranking among the world’s most networked economies from 27th to 23rd place.

The extensive government efforts range from direct investments in ICT infrastructure, such as fixed, mobile and Internet communication networks, to market liberalization in a drive to promote ICT diffusion and private sector activity. Of the UAE’s seven emirates, Dubai appears to be the most aggressive in creating a liberalized, ICT-conducive market environment. “There are now more than 10 PC brands in the marketplace. The entry barrier has been much less in the last two years. Anybody can talk to retailers and put their products on the shelves,” says Krishna Murthy, the Dubai-based regional managing director of Acer Middle East and Africa (MEA). “The market has thus become highly competitive. The challenge is to maintain our market share and push for more market share.”

Currently, Taiwan’s Acer Inc. is No. 2 in total PCs sales in the MEA, behind Hewlett-Packard Development Co. (HP) of the United States. “We’ve a more than 50 percent share in the consumer market in the UAE. Today in the market, 80 to 90 percent of computers are notebooks. About 80 percent of our revenues come from notebooks,” Murthy says. “Get the right product with the right technology and the right price to the right customer segments—that’s the key to our success.”

Acer established a branch in the Jebel Ali Free Zone (JAFZA) near Dubai’s main port in 1992 with initial capital of US$135,000 and a team of five people. The company’s revenues have grown very fast since then, from US$30 million in 1994 to US$160 million in 1997 and US$750 million in 2009 amid its territory expansion from the Middle East to Africa.

Over the past 20 years, a number of Taiwanese ICT makers including Acer, ASUS Technology, BenQ Corp. and HTC Corp. have set up offices in JAFZA or the Dubai Airport Freezone (DAFZ). DAFZ, which is located close to the international airport, also offers extensive facilities and investment incentives to help businesses in their pursuit of market development and internationalization.

“Initially, when intending to establish a base in the Middle East, we studied four places: Bahrain, Egypt, Oman and Dubai, and eventually picked Dubai,” Murthy says. “Dubai proved to be the best place to start. It has a good port with a huge capacity, free import of labor from anywhere in the world and no currency restrictions.” In addition, Dubai has quality healthcare and education systems, a high standard of living and people can move around freely and safely. All these things made a difference in Acer’s decision to operate in Dubai, he adds.

JAFZA, founded in 1985 and the first free trade zone in the Middle East, is currently home to 6,500 companies, including more than 150 Fortune Global 500 enterprises, from across the globe. Some 70 percent of them are trading, logistics and distribution firms. The trade zone offers clients a variety of services ranging from assistance with personnel issues such as helping with immigration visas, health cards and setting up communications, to offering a wide range of facilities including office units, warehouses, light industrial units, land on long-term leases, medical centers and food courts.

“We pioneered the concept of the ‘one-stop shop’ in the region and provide global investors with world-class infrastructure, well-rounded services and incentives,” says Mohammad Al Banna, vice president of Commercial Sales at JAFZA. “As a logistics hub, JAFZA also offers huge business opportunities from a potential market of over two billion consumers in the Middle East, Turkey and Africa [META],” he says.

The incentives on offer at JAFZA and other free zones in the country encompass 100 percent foreign company ownership, no restrictions on the repatriation of capital and profits and no customs duty, together with 100 percent exemptions for corporate, import and export, and personal income tax. These benefits have enabled the number of companies operating in the free zone to post stable growth of about 20 percent annually since its inception, Banna says.

Meanwhile, the Dubai government is working to enhance cargo shipments through the improvement of air, sea and highway networks. The planned Al Maktoum International Airport, for example, is under construction and its first-phase development of a cargo terminal will be completed by late this year. In addition, the six-lane highway in JAFZA South will cut the transportation time of goods from the port to cargo aircraft to just 30 minutes.

Banna says Taiwan is famous for computers, consumer electronics, machinery and technology products. With the worldwide demand for such goods, he sees more Taiwanese industries going overseas to look for business opportunities, and encourages them to consider establishing logistics centers in Dubai to cultivate the META market.

Likewise, DAFZ, established in 1996, has become another popular operational destination for international companies from diverse industry sectors, including aviation, freight and logistics, automotives, pharmaceuticals, engineering and ICT, with its convenient location, modern facilities, administrative assistance and investment incentive packages.

DAFZ director-general Mohammed Al Zarouni says his free zone was set up as a part of the Dubai government’s strategic plan to be an investment-driven economy while enhancing its position as a hub of trade and business in the region. “DAFZ prides itself on its state-of-the-art facilities and pivotal location. What we feel stands out though is our comprehensive, efficient services to our clients,” he says. “Since at the free zone, businesses operate around the clock, we offer 24-hour banking, postal and customs services and rapid cargo clearance through a dedicated logistics center.”

Another advantage of DAFZ, Zarouni says, is connectivity. Its integrated infrastructure and proximity to Dubai International Airport, which has 120 airlines serving more than 210 destinations, makes transportation simple and straightforward. All these offerings have prompted more than 1,500 companies to settle their regional operations in the free zone.

Taiwan’s ASUS, BenQ and HTC are among them. George Su, regional director of ASUS’ META Department, says his company started to cultivate the META market in 2003 and set up a branch at DAFZ in 2008. “The main task of our office is business development. Over the last seven years, we’ve been able to expand our business from Turkey, the UAE, Saudi Arabia and other Gulf countries to Egypt,” Su says. “We are here to provide local agents and distributors with any necessary services and support.”

Su considers Dubai to be a good choice to set up a base as, besides offering easy access to Saudi Arabia, Turkey and Egypt, the Dubai government welcomes foreign investors and is serious about serving them. He cites the multitude of facilities, incentives and services on offer to companies stationed within the free zones. DAFZ, in particular, provides swift, convenient transportation for electronics components and products thanks to its closeness to the international airport, he says.

The META market, Su points out, covers as many as 67 countries and has strong growth potential for businesses due to the region’s oil and mineral reserves. There are also huge populations, with the number of people aged between 25 and 45 on the rise, as is per capita income. Countries in the region are characterized as emerging economies and play an increasingly important role in world trade and economics.

Emerging META Market

In terms of notebook computers, current demand in the META market occupies a 10 percent share of global consumption and is projected to increase by 15 percent to 20 percent this year versus 2009. Su believes that demand in Africa, in particular, will pick up in the near future given the rapid growth seen in several African countries in recent years.

One big challenge is that these countries vary in culture, religion and language, and it takes time and effort to understand each of them and their respective needs. Compared with its rival vendors like HP, Dell Inc. and Acer, Su says his company was a late entrant to the META market. “We should have come here earlier so that we could record a better performance sooner,” he says. “Taiwan, or say, the Far East, generally has a vague knowledge if not outright misunderstanding of the Middle East and that has caused the loss of many opportunities.” 

Nevertheless, ASUS has endeavored to catch up and has made significant progress. After establishing a branch in Dubai to pursue a more aggressive business development strategy, Su says ASUS was able to enter the top 10 PC brands in the META market and currently stands as the sixth largest notebook brand. The regional director expects his company’s sales, including PC systems, motherboards and hand-held devices, to grow 160 percent this year compared with 2009. ASUS has set an ambitious goal of being among the top 3 brands in the region in three years.

“We place a major emphasis on product quality and believe that it’s the right way to appeal to consumers, as well as help Taiwan’s international image,” Su says. “We have a strong sense of mission in building our brand to be not only a prominent Taiwanese, but also international brand and hope that people can get to know about Taiwan by using our products in their day-to-day life.”

Purchasing Power

Another ICT maker, BenQ, initiated its Middle East operations in 2001 by establishing a logistics office in JAFZA and subsequently opened a sales marketing office in DAFZ in 2003. “People in this region have strong purchasing power. New technology products get accepted immediately. They just want to buy something new no matter whether they know the technology or not,” says Manish Bakshi, general manager of BenQ Middle East. “By bringing new, high-tech products very fast to this region, we are able to grow our business consistently.”

BenQ’s main product lines are LCD monitors, netbooks, LCD TVs, camera recorders, digital cameras and projectors. Its LCD TVs and projectors are selling especially well, occupying the No. 4 and No. 3 sales spots respectively in the UAE.

Bakshi says his office of 20 employees has practiced localized management, or operating without the presence of Taiwanese executives, since 2007. This does not mean the Dubai office is out of the loop, however, as the general manager is in close communication with the parent company in Taiwan on a daily basis, he says. “We keep analyzing our everyday marketing activities and give feedback to our Taipei headquarters with regard to what product category is popular,” he says. “As well, executives in the Taipei headquarters share with us their successful experiences of product marketing in the Asia Pacific.”

With strong support from the headquarters in Taipei in terms of providing quality technology products and offering guidance in marketing and promotional activities, Bakshi says his company’s business has enjoyed growth of about 20 percent annually and achieved a new high of US$100 million in revenue in 2008. Though sales decreased in 2009 due to the global economic slowdown, they started to pick up in September 2009 and had increased by 45 percent to 50 percent in the first four months of 2010 year-on-year. At present, the Dubai branch contributes a 7 percent share of BenQ’s worldwide revenues.

Meanwhile, Bakshi says there are a number of advantages to setting up a branch office within DAFZ, as the free zone provides good infrastructure and support inclusive of facilities and client services covering corporate licensing, registration, employment visas and insurance. That has enabled his company to save on startup expenses and has helped operations run smoothly.

Additionally, Dubai holds a number of different festivals that attract international tourists throughout the year, and has established numerous shopping malls where the retail sector plays an important role in marketing consumer and ICT products. A large number of multicultural and multiregional organizations also have set up offices in Dubai, which is a regional hub for business. Bakshi says these attributes represent opportunities for his firm to promote its brand name effectively to people from across the region through local advertising campaigns and promotions at retail stores.

Taiwanese smartphone maker HTC has also enjoyed significant brand presence and market share in the META market after nearly four years of product launches, branding promotion, sales channels buildup and cooperation with local telecom service providers. It currently occupies a 10 percent to 15 percent share of the market and ranks in the top three in the META region, behind Finland’s Nokia and Canada’s Research In Motion Ltd., the maker of the BlackBerry.

Kevin Chen, general manager of HTC MEA, says his company set up a branch in Dubai’s DAFZ in 2007 as part of its execution of a global deployment program, which started in the United States and has been followed by Europe and the Middle East, Africa and other emerging markets. The selection of Dubai was made in view of its easy access to other nations in the region, convenient air and ocean cargo transportation, market openness and pool of talented workers from some 100 countries.

Chen attributes his company’s success in the MEA in such a short time to its brand value, technology, product quality and after-sales service, as well as taking local languages and cultures into consideration in its product development.

To date, HTC has launched more than 10 smartphones in 13 countries in the region. Besides having user-friendly interfaces, multiple functions and customizable screens, the devices are largely both Arabic and English enabled.

Something for Everyone

“What HTC believes is to understand what customers want and make devices to suit their business, as well as entertainment needs,” says Ramit Harisinghani, sales manager of HTC MEA. “Also, we’ve a solution for every kind of consumer.”

Take his company’s new product, the HTC Tattoo, for example. Harisinghani says the handset is based on the popular Android platform that supports hundreds of applications, and the device also has a changeable, customized cover and screen. It supports Microsoft Word, Excel and Outlook documents and can access email and social networking sites like Facebook or Twitter.

Harisinghani says the global smartphone market is booming with annual growth projected to reach 30 percent in the next five years. As far as the UAE is concerned, the SIM card penetration rate is around 180 percent, or the equivalent of nearly two mobile phones per person. The overall telecom business amounts to 60 billion dirhams (US$21.8 billion) a year. “People love new technology and have money to spend. They want the best and the latest,” he says. “However, it is an open region. There are a lot of players and devices coming from everywhere, so competition in the market is very fierce.”

Though faced with rigorous competition, Taiwanese ICT companies operating in Dubai have been performing well and making steady progress by taking advantage of the emirate’s various incentives, as well as by delivering good quality products at competitive prices. They also have demonstrated strong ambitions to increase their market penetration and business territories.

“Dubai is a logistics center with a huge distribution network to many destinations all over the region, as well as a gateway to Africa where we foresee substantial growth potential,” says Krishna Murthy of Acer MEA. “There are more opportunities to come. While striving towards excellence, we aim to become the No. 1 PC vendor in the region by 2012. With our good brand and products, we are confident of success.”

Write to Kelly Her at kelly@mail.gio.gov.tw