Jan 062010
 
Hewlett-Packard United States offices in Harri...
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For years, the process remained relatively static: PC makers like Hewlett-Packard and Apple, with well-staffed research labs and design departments, would dream up their next product and then hire a Chinese or Taiwanese fabricator to manufacture the largest number of units at the lowest possible cost.

But lately, this traditional division of labor has been upended. Many of those Asian companies have moved well beyond manufacturing to seize greater control over the look and feel of tomorrow’s personal computers, smartphones and even Web sites.

The investment arms of large Taiwanese and Chinese manufacturers have created an investment network in Silicon Valley operating under the radar that pumps money into a variety of chip, software and services companies to gain the latest technology. As a result, some Asian manufacturers have proved more willing than entrenched Silicon Valley venture capitalists to back some risky endeavors.

“In the past, the manufacturers would sneak around and get inside information on technology by investing in these companies,” said K. Bobby Chao, the managing partner at DFJ DragonFund China, a business that invests in technology companies in China and the United States. “Now, they’re more involved, more visible and charging after more complex maneuvers.”

As manufacturing of electronics in the United States began moving offshore decades ago, some feared the American economy would suffer. But the American companies, as well as economists and policy makers, said that as long as the high-value jobs like research and design remained in the United States, there was little danger.

Asian investments in Silicon Valley present some risks for America’s top technology companies, which could lose their connection to top innovations.

Asian manufacturers like Foxconn or Quanta, as a result, could wrestle away the edge in research and design.

“The manufacturers have gotten more competitive as it relates to innovation, and in some instances they’re already competing directly with their customers,” said Patrick Moorhead, a vice president at Advance Micro Devices, a major PC chip maker.

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