Ralph Jennings of voanews.com writes:

Taiwan's massive high-tech industry has long been synonymous with building gadgets cheaply for foreign companies. But at the country's annual technology convention, locally designed tablet computers are hoping to change that image by challenging Apple's wildly popular iPad.

After decades of making PCs at a discount for more well-known foreign companies, Taiwan firms are using their manufacturing experience to design their own machines.

Following the success of Apple's iPad computer, local firms are now building their own tablet PCs, the slate-like devices that are bigger than phones, but smaller than laptop computers. Computex organizers say Taiwanese brands account for many of the show's 50 tablet exhibitors.

Local firms are still building gadgets for others, but they say a mix of contract and self-branded work helps protect them during recessions. Taiwan's high-tech industry is about one eighth of its GDP, but faces increasing competition from emerging markets such as China and Brazil.

To compete with Apple's global brand, local companies are relying first on their experience in finding cheap but viable components by hunting for deals within Taiwan's giant technology supply chain. The practice gives local manufacturers a unique flexibility to customize PCs for business users, who represent a market not fully tapped by Apple.

Market research firm Gartner still expects iPads to command almost 70 percent of the global tablet market of 69 million sales in 2011, though its lead may shrink by 2015.

Local firms say they still cannot fully compete with Apple's in-house hardware and software designs or with its application store. But beating Apple has become such a big cause in Taiwan that its two best known PC makers, Acer and Asustek, openly market their tablets as being priced close to the iPad but with features such as USB ports that Apple missed.

Richard Ma, a senior vice president with Taiwan's Gigabyte Technology, explains why local firms are becoming more competitive.

He says the contract work has let Taiwan IT firms quickly get established while self-branded PCs come with the high costs of finding sales channels, marketing products and clearing inventory. He says Taiwan firms are good at finding partners and mass producing new breakthroughs in hardware components.

Software remains Taiwan's biggest obstacle, because local developers have always prioritized the production of hardware for other parts of the world. Jamie Lin, co-founder of the Taipei-based venture capital firm appWorks Ventures, sees little progress until software matures.

"In the end, I think it's really about all these tablet makers trying to differentiate their products, because Apple is holding tight to their iOS [operating] system and it's not going to license it to anybody else," Jamie Lin noted.  "If they want to compete with all the other tablet makers, in terms of their product, a lot of it would come from the software, or the customized user experience. If they have the ability to build that user interface on top of their tablets, right now we're not seeing it yet."

This year two top government-funded technology research institutes focused on Taiwan's global competitiveness announced they are focusing on designing new software, starting with tablet applications. Taiwanese PC brands will be able to license the institute's applications to make their devices more competitive