Stan Shih, Acer Inc founder and the man who put Taiwan's PC brand on the world map, recently fired himself and many of Acer's old guard to let a new management generation take over, while the old headquarters cohort reformed as iD SoftCapital to dispose of Acer's peripheral assets and let the company begin anew as a brand business outsourcing most manufacturing to China. iD SoftCapital's longer term business is venture capital and intelligence sharing on change management and globalization with companies in Greater China, a topic he expanded on in a recent conversation with CHINA ECONOMIC REVIEW. Excerpts:
Q: What is your new venture all about?
A: iD SoftCapital is a totally new business, totally split off from Acer. It shares ideas with companies in Greater China, and tries to develop them effectively for the new knowledge-based economy. Over the next three to five years, Acer has to be very focused on gaining market position. So iD SoftCapital absorbed many Acer businesses considered non-core.
Q: What are those?
A: Many are operated by iD SoftCapital right now … We will divest these over the next three to five years, and the funds will either be returned to Acer for engineering the core business or distributed to shareholders.
Q: Why this structure to handle these divestments?
A: Focus – to allow the current Acer team to focus on their core business; and to reduce the overhead at Acer headquarters. So [Acer] headquarters was spun off to become iD SoftCapital, and we have to find their own new business to survive. Acer will no longer support them in the long run. It's a new arrangement – nobody has done this anywhere in the world.
Q: I'm trying to think of a company without a headquarters – can you elaborate?
A: I'm the headquarters, right? The CFOs and many of the original US, European and Asia-Pacific regional heads are all a little bit like headquarters. Well, they all become members of iD SoftCapital. You have to understand – the PC business is so competitive now that [Acer] cannot carry this heavy overhead. So after I retired and many other people took early retirement, Acer became very competitive.
Q: It's kind of like firing yourself, isn't it?
A: Well, that's the point. I don't like to talk in this way, but in order to save Acer, I not only fired myself, I fired headquarters. Headquarters was going to be a problem for the future – because a headquarters was developed for BenQ, a headquarters was developed for TI Acer and we developed many, many operations because we diversified so much. So all this was restructured so Acer could become a totally new group.
Q: What about the venture capital side of iD SoftCapital?
A: We have been doing venture for years (as Acer). I started the first venture capital fund in Taiwan in 1984. So in Acer we still had a venture operation operating out of headquarters – so this became part of iD SoftCapital. We are invested now in about 20 companies in mainland China – all in Internet services. Linktone, one of our companies, listed last year on the NASDAQ.
Q: What portion of your investment is in mainland China, and how is that likely to change?
A: In the past, it was about 30%. Now it's about 50:50 and maybe we'll put more in China.
Q: Can you talk about how China has changed over the years in terms of your investments?
A: From a hardware point of view, we already have a market and we have shifted manufacturing from Taiwan to mainland China [via outsourcing] pretty much to reduce costs and that will continue. We have moved very gradually in Mainland China over the past four years. Compared to our competitors, we are very conservative. China is strategically a very important market for us, so we had to go in, testing the waters, developing know-how slowly to win in the long run.
Q: Among other things, iD SoftCapital manages funds from the Executive Yuan Development Fund. Are you investing any of that in the Mainland?
A: Those funds are for investing in Taiwan and the US – those [investee] companies can invest in mainland China. We cannot invest directly in China, depending on the item, and we have to make sure we follow the regulations – for example, in semiconductors – but we are not interested in capital intensive projects.
Q: iD SoftCapital focuses on management issues. What are the big ones?
A: We have a lot of experience we would like to share. The point is Greater China has a lot of opportunities. We talk about how to be effective in change management and globalization, both areas we have a lot of experience in. Right now Chinese companies have to find a way to globalize. Brand names are not easy. Globalization is not easy. Companies have to pay the cost. We try to share some of their costs since we already paid them [becoming a global company]. But we've just started – we will be working with start-ups and big companies working on restructuring.
Q: What do you make of the IBM-Lenovo deal?
A: Number one, this may be the only way for Lenovo to become a global company. Number two, they will face a big challenge in international management, brand management, trust issues. There are many questions about the [deal] from my personal point of view but I'd rather not discuss it: we are competitors, but we are all Chinese and we would like to see them succeed.
