Taiwan Tries to Regain Its Lead in Consumer Electronics

TAIPEI, Taiwan — Jonney Shih, the chairman of Asustek Computer, has epitomized the Taiwanese electronics engineer for a generation: a slender figure in rumpled, baggy trousers, he once helped Intel solve heat problems in its Pentium 4 microprocessors.

So it has been a surprise over the last several years to see Mr. Shih, now 60, reinvent himself with snug-cut Italian suits, innovative designs for tablet and notebook computers and scathing criticisms of Taiwan’s test-obsessed, engineering-oriented educational system.

“I don’t think the Taiwanese got very good training to drive the mentality of innovation,” he said during an interview at Asus’s headquarters here on the outskirts of Taipei. (Mr. Shih also demonstrated his flexibility in the interview, assuming the lotus position while wearing a dark blue Armani suit with a sky-blue Armani tie.)

Fostering innovation has become a mantra among corporate leaders and government officials alike in Taiwan this year because the island’s huge consumer electronics industry has run into serious trouble.

Worldwide sales of PCs, for which Taiwanese companies control over 90 percent of the final design and manufacturing, are declining steadily. Sales of smartphones, for which Taiwanese companies control less than a fifth of the market, are rising briskly. Tablets based on the Android operating system, which most Taiwanese companies, with the exception of Asus, have been slow to embrace, are also on the same upward trajectory.

“Outside of Asus, all the others are struggling,” said Helen Chiang, a Taiwan electronics specialist at the IDC research firm.

Foxconn and Acer have each reported that sales in the first quarter dropped 19 percent from a year ago. HTC’s sales plunged 37 percent, although that was partly because the company began shipping the annually improved version of its best-known smartphone in late March instead of February. At Quanta, a 70,000-employee contract designer and manufacturer of notebook computers, sales have shown double-digit percentage drops from year-earlier levels for 14 consecutive months.

Foreign rivals have proved more nimble. In South Korea, Samsung is expanding rapidly in smartphones, tablet computers and other sectors. After embracing the Android operating system early, the company has built on its huge economies of scale in the mass production of components, like display screens and microprocessors.

In China, Lenovo and many smaller manufacturers are relying on labor that, while no longer cheap, is still less expensive than in Taiwan. That helped make Lenovo the only one among the top five PC makers worldwide to eke out a gain in shipments in the first quarter — although by only a tenth of a percent.

And in the United States, Apple, Google and Amazon have shown themselves adept at producing breakthrough consumer products, while pending legislation would allow them to import more foreign engineers at a lower cost than hiring and training domestic engineers.

As notebooks and other Windows-based PCs have lost ground, first to Apple tablets and now to Android-based designs, even Microsoft has been indicating dissatisfaction with the pace of PC innovation in Taiwan. Despite a longtime aversion to hardware, Microsoft recently introduced its own Surface tablet.

“The Surface tablet is a pretty strong signal to the whole Taiwan PC ecosystem that they’re not innovating enough,” said Bill Whyman, a senior managing director at the ISI research firm.

One exception to Taiwan’s difficulties is Asus. Its many new Android-based tablets, including one that it has branded with Google, allowed it to surpass Amazon in the first quarter of this year to become the third-largest player in the global tablet computer market, behind Apple and Samsung, according to IDC.

And some of its designs are downright clever. One new model, the PadFone, lets the user slide a cellphone into the back, turning the tablet into an oversize cellphone. Another tablet, the Transformer, features a detachable keyboard with a wireless connection and a two-sided display panel that can show a movie on one side to entertain children or guests while the other side is a regular computer display for the owner.

Monti Resigns in Italy, but May Seek to Regain Office

At a news conference scheduled for Sunday, Mr. Monti is expected to present a political agenda — pro-Europe and pro-fiscal rigor — and call on all parties to endorse it, aides said Friday. Mr. Monti, an economist who has helped restore Italy’s international credibility but has suffered politically for championing a series of tax increases and budget cuts, has steadfastly refused to say whether he will run for prime minister or present an agenda that he hopes parties will endorse. Whether he does run or not, however, he has already radically shifted Italy’s political landscape.

With Italy facing economic uncertainty and sluggish growth, Mr. Monti has emerged as a centrist force in a field previously divided between the center-left Democratic Party of Pier Luigi Bersani, which opinion polls place first, and former Prime Minister Silvio Berlusconi, who has risen in polls since taking to the airwaves with a populist message critical of Mr. Monti’s tax increases.

“He’s de facto a candidate. He is the head politician of this coalition,” said Stefano Folli, a columnist for the business daily Il Sole 24 Ore, referring to a centrist grouping that has been courting Mr. Monti.

On Friday evening, Mr. Monti handed in his resignation to President Giorgio Napolitano, who in a tough speech to lawmakers last week lamented the “brusque” end of the government and Parliament’s failure to carry out significant structural changes in Italy’s encrusted economy.

Mr. Napolitano is soon expected to dissolve Parliament, opening a hard-fought campaign amid rising unemployment, taxes and populism. Mr. Monti will stay on as caretaker prime minister until a new government is formed. In that time, he is expected to retain the power to pass emergency legislation.

“He’s already a senator for life, so he doesn’t have to become a candidate in the technical way,” Mr. Folli added.

After losing the support of Mr. Berlusconi’s People of Liberty party this month, Mr. Monti said that he would step down after the budget was passed. On Friday, lawmakers voted 373 in favor and 67 against with 15 abstentions in a confidence vote over the budget, which stipulates spending cuts of $4.8 billion through 2015.

Mr. Monti could run as a candidate or endorse a centrist alliance that includes a veteran political party, the Union of Christian Democrats, and Toward the Third Republic, a fledgling civic movement led by the chairman of Ferrari, Luca Cordero di Montezemolo. If Mr. Monti lends his name to the centrists, he is expected to draw moderates from Mr. Berlusconi’s party. Mr. Monti also has the implicit support of the Catholic Church, which is crucial to the survival of any Italian government.

After weeks of wavering, Mr. Monti seems to have decided to stay involved in Italian politics after other European leaders, concerned about the prospect of an increasingly populist Mr. Berlusconi, urged him to stay in the picture.

Last week, members of the European People’s Party, a group of center-right parties across Europe, asked the unelected Mr. Monti to attend a summit in Brussels, which Mr. Berlusconi attended as the head of Italy’s largest center-right party. “I can say that there was massive support from E.P.P. members that Monti should remain at the helm of Italy,” said Kostas Sasmatzoglou, the group’s spokesman.

“It was Europe pushing him to continue,” Mr. Folli, the columnist, said. “Germany already has Hollande,” he said, referring to France’s Socialist prime minister, François Hollande. “It doesn’t want another country to go to the left, to go back on fiscal rigor.”

He added: “It can have Bersani, but Bersani ‘corrected’ and supported by Monti.”

Indeed, if he lends them his support, Mr. Monti and the centrist groupings are not expected to get more than 15 percent of the vote. Mr. Bersani’s Democratic Party is expected to place first, but without enough votes to govern in both houses even if it allies with the smaller Left Ecology and Freedom party. It remains to be seen if the center will take votes away from Mr. Berlusconi or Mr. Bersani.

On Thursday, Mr. Monti was widely perceived to have begun his campaign with a politically calculated speech at a Fiat automotive plant in southern Italy. With Fiat’s chairman, Sergio Marchionne, by his side, he said that Italy needed to stay the course on structural changes. The speech effectively challenged Mr. Bersani, a moderate who will most likely have to tack further left.

Mr. Monti came to power in November 2011, replacing Mr. Berlusconi amid global financial panic. He helped burnish Italy’s image abroad, but effectively raised taxes, worsening Italy’s recession. Although populists have depicted Mr. Monti and his government as a puppet of Europe and the banks, many Italians support him as a needed change from politics as usual.

“I prefer Monti to Berlusconi or any other politician, even if he left us in our underwear,” said Annalisa di Piero, 50, a costume designer and stylist, referring to the tax increases that have left Italians with less in their pockets in the holiday shopping season. “I just paid my property tax, but I still prefer him to these other clowns.”

Gaia Pianigiani contributed reporting.