Business Week had a great article on Taiwan - Why Taiwan Matters - as part of their international cover story, which examines the growth of the country from a marginal player in the electronics industry to a dominant manufacturer whose companies are increasingly proficient at original design.
The article asserts that the country's advantages go beyond cheap labor - an entrepreneurial culture, effective government involvement that manifests in research groups that work closely with local companies and scientists from American universities such as MIT, CMU and UC Berkeley, and one of the deepest reserve of high-tech talent in the world. The article reports that Taiwanese companies control 72% of the world's production of notebooks PCs (valued at $22bn), 70% of chip foundry services (valued at $8.9bn), 68% of LCD monitors (valued at $14bn), 33% of the servers market ($1.8bn), 79% of the PDAs market ($1.8bn), and 34% of the digital stills camera market ($2bn). Further, as the much-sought-after Taiwanese engineers provide ingenious solutions to manufacturing and design conundrums, the companies are hoping to control design and innovation while handing over much of the manufacturing to China.
Victor Zue, co-director of the Computer Science & Artificial Intelligence Laboratory at MIT, quotes my favorite piece in the article: "In Taiwan, people say the U.S. understanding of outsourcing is backward. It feels more like the Taiwanese are outsourcing marketing and branding to the rest of the world."