There was a time when Taiwan made cheap bicycles. That was four decades ago, when it was one of the country's main exports. Today, Taiwan takes in more than US$16 billion in revenue from bicycles and it is the home to Giant Bicycle, one of the world's leading bicycle makers.

Taiwan is better known for being a technology manufacturing powerhouse, but the country's high-tech leaders want to use the same tactic Taiwanese bicycles manufacturers used to re-invent itself as a technology innovator.

The country once had a reputation for producing cheap computer goods. That too was a long time ago. Today, the country's high-tech vendors would rather be known for offering affordable computing solutions, said Michael Kuo, CEO of Avermedia, one of the up-and-coming players in Taiwan's high-tech makeover.

Similar to Taiwan's bicycle industry, its computing industry is going through a major transitional period. The high-tech industry has been the main engine of Taiwan's economic growth since the 1980s. However, that growth was predominantly in the manufacturing sector, which has moved in rapid fashion to China, Taiwan's not so cozy neighbor. High labor costs are the primary reason for more than 85 per cent of Taiwan's high-tech manufacturing moving to China.

According to Dr. Ing. Liang-Han Hsieh, general director of Industrial Technology Research Institute in Hsinchu, Taiwan, the country's high-tech sector is facing a transition and re-organization. "It's time we changed the old paradigm from industrial research to a knowledge-based research...and set up our own brand names," he said.

The information communication technology sector has shifted production to China and to other areas, such as India and South America, that have a large population base that can support the research done in Taiwan.

"Taiwan is a small island and if we continued to do no-name products we would be squeezed by the cost challenges and so we have turned to developing more higher value segments," Hsieh said.

To turn around the bicycle industry, the Taiwanese government provided manufacturers with government assistance. From there they changed from producing $50 bicycles to more high-value city bikes and mountain bikes along with touring and racing bikes. In the future, Taiwan bike makers will produce a fuel cell battery that will be integrated into a bicycle.

The government of Taiwan will do the same for its high-tech industry. The newly elected president, Ma Ying-Jeou, has vowed to improve political relations with China and will be putting forth more incentives to stimulate foreign investment in Taiwanese computing in an attempt to further this transition from a manufacturing to a knowledge-based innovation model.

Taiwanese manufacturers produce more than 80 per cent of the world's notebooks and that production is now all built in China or South East Asia. "We are changing from an OEM model to developing our own products with our own designs and our own brand names," Hsieh said.

Taiwan is in patent development mode. They are fourth in the world, but Hsieh said it is not about quantity, but rather quality.

Under his supervision, the Industrial Technology Research Institute has changed and is now focused on differentiation and integration. "We used to have 500 projects and that is now down to 50. We do not do any more me-too products, but pioneering products so that we can lead," he said.