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A Hidden High-Tech Hot Spot

Cultural and business connections have helped Taiwanese immigrants quietly create a multibillion-dollar computer industry centered in the San Gabriel Valley.

December 18, 1996|VICKI TORRES | TIMES STAFF WRITER

Behind the glitzy strip malls of the San Gabriel Valley, with their giant neon signs in Chinese and bustling throngs of shoppers, lies a network of booming yet little-noticed companies in quiet industrial neighborhoods.

Here, nondescript low-slung warehouses are strewn about like giant building blocks. But instead of ABCs, they carry names like CTX, AANEX and SOYO.

This is the heart of Southern California's Taiwanese American computer industry. From Irvine to Ventura, immigrants have established hundreds of small, nimble companies that one day might sell parts by catalog and the next, put together whole computer systems. Their thousands of workers assemble finished parts and equipment imported from Asian manufacturers and repackage them for sale nationwide and around the world.

In an era of increasing hostility toward immigrants, they are contributing to the state's economic recovery. Commercial and industrial real estate sales have skyrocketed in the San Gabriel Valley. And with their ties to Asian corporations, they are a conduit for vital Pacific Rim trade.

Just as Asian toy company owners in downtown Los Angeles' Toytown resell goods manufactured in China, the computer mini-moguls resell computer hardware built elsewhere. But with annual worldwide sales estimated at $3 billion, Southern California's Taiwanese American computer companies have far outstripped the better known $1-billion local toy industry.

Hard figures are unavailable, but computer industry analysts say a substantial number of computers and parts sold in the United States pass through the Southern California companies. The Taiwanese American firms undercut U.S. manufacturers like Compaq or Dell, resellers like Merisel or Ameriquest, and retailers like ComputerLand or Fry's Electronics.

"They are a growing part of the distribution chain for individual consumers as well as the small-business market, with prices 15% to 20% lower than [name brands]," said Van Baker of Dataquest, a San Jose-based market research firm.

An increasing number of retail shops slap their own labels on computers acquired from the Taiwanese independents, he added.

A typical San Gabriel Valley company often will specialize in importing one or two computer parts but also might assemble and sell whole systems. Some eventually turn into manufacturers themselves, designing products and contracting with Taiwan factories.

Southern California is part of a "golden triangle," said Paul Wang, co-owner of MAG Innovision Co., a Santa Ana computer firm with $700 million in annual sales. That triangle links computer design firms in Northern California's Silicon Valley, overseas Taiwan manufacturers and assembly and distribution companies here. Linked by Taiwan, the computer companies in Northern and Southern California operate at different ends of the industry.

"They are engineers over there. Here, we are businessmen," said Hank Tao, president of EKM Computer in Buena Park.

The distributors here are a close-knit band of entrepreneurs, largely unknown by most in the electronics and computer industries. Drawn by the concentration of Asians in the San Gabriel Valley, they cluster mainly in Walnut and the city of Industry.

"It's like, at the back door is another company," said Philip Chen, president of the Chinese Computer Assn., an organization of computer professionals.

The companies wheel and deal in "peripherals," parts like scanners, motherboards, graphics boards, monitors, power sources and networking cards.

By clustering, the firms can respond quickly to customer desires, obtaining parts from another company when they need to assemble an entire computer and avoiding costly inventories.

"If you store a lot of inventory, say a CD-ROM drive, and that drops in price from $200 to $50 in five months, you've lost money," Chen said.

These energetic companies range from tiny 10-person start-ups to global firms like ViewSonic, which has 350 employees in seven countries. There are more than 800 Taiwanese American firms in Southern California, said Johnny Tsai, president of the Max Group Corp. and head of the Southern California Chinese Computer Assn., which represents 300 business owners.

The network stretches beyond the San Gabriel Valley to a smattering of companies in Ventura County's growing technology corridor along the Ventura Freeway. In Rancho Conejo, Newbury Park and Thousand Oaks, Asians make up about 15% of the business owners. Other companies work out of Orange County, spread thinly in Tustin, Irvine and Santa Ana.

But the preferred locale is the San Gabriel Valley, with its dense cluster of about 500 firms.

"If a company is making money, they move to the city of Industry," Chen said.

Among the valley's draws are its low-crime areas and plethora of warehouses with loading docks and security devices, a must in an industry in which a suitcase of chips can easily go for $250,000.

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