On my last trip to Taiwan, I had a nice discussion with a highly successful local VC on the value of hardware and software. Taiwan is one of those hidden gems in IT: it is producing and manufacturing a lot of hardware for other companies at a total cost that is even hardly matched by any other country. Asus is a pure Taiwanese company and Apple has its iPhone produced here–well, actually at one of their plants in China but run by FoxConn which is a Taiwanese company.

What is so interesting is the fact that even though these companies are providing something extremely valuable to all highly developed and industrialized countries, they are still not the one given most recognition in the marketplace. We were wondering if that was stemming from the fact that Taiwan is focusing on hardware rather than software.

People value the physical goods, the feeling of holding something in their hands of value. But even before the fall of the Motorola Razr, people realized that there is more to tech than just function. Apple exploited this trend with its successful iPhones and iPods: although they were technologically not the best or stuffed with the latest technology, Apple designed them in a way so that normal people were able to use them without having to read yellow-pages-sized manuals.

The trend that technology is becoming more and more accessible by people who are not well versed in this field is more prevalent in business but has reached out to personal homes by now. With the need to drive down costs and the lack of affordable and available specialists in IT, companies are asking for easy-to-use tools in almost all fields. I do not see an end to this trend as most of us will become used to the ease of using rather complex technology more and more. And people adapt this to their personal homes and vice-versa.

We hence concluded that in today’s IT hardware market, most of the value comes from software that is bundled with the hardware and not from the hardware alone. User experience (UX), usability (UA), and user interaction (UI) are three emerging fields that are gaining traction as more and more people realize this trend.

I am sure that Taiwan will continue to prosper and defend its position in the world. But I am also sure that design and conception of software will remain an asset in other countries and have more impact on product success or failure.