TAIPEI, Taiwan (AP) -- Taiwanese companies have long viewed tech giant Samsung as a major threat and the battle has recently appeared to tilt in favor of the South Korean rival as Taiwan's smartphone, memory chip and display panel makers suffered sagging exports.
The sales erosion has been driven by competition, some of it from South Korea, and a weak global economy but has also spawned fears on this export-reliant island of 23 million that Samsung has deliberately targeted Taiwanese firms as part of a campaign to undermine their competitiveness in markets around the world.
Business Today, Taiwan's top business magazine, gave voice to those fears last month with an extensive cover story accusing Samsung Electronics of launching a "Kill Taiwan" effort and targeting some of the island's leading high-tech companies including Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker.
Adding fuel to the fire, Taiwan's Fair Trade Commission recently launched an investigation into allegations that Samsung planted unflattering comments about Taiwanese consumer electronics on the Internet as a way of undermining their appeal to customers.
While Taiwanese companies are facing a challenge from Samsung, industry analysts such as John Brebeck, a Taipei-based adviser with technology development firm Quantum International Corp., says perceptions here that the South Korean company is setting out to crush Taiwan's lucrative technology industry miss the point.
Samsung is trying to make inroads in specific areas where it sees a big profit potential and these areas are also where Taiwanese companies have a major stake, he said. "It's not Taiwan as much as it's industry sectors that's motivating Samsung."
Samsung Electronics spokeswoman Jee Hae-Ryoung said business strategies like "Kill Taiwan" do not exist at Samsung.
That's all little comfort for Taiwan's technology industry, which knows it must remain nimble and innovative to avoid the downward spiral of famous Japanese companies such as Sony Corp. which were outrun by competitors including Samsung. Taiwan's high tech exports totaled $98 billion last year, accounting for about 20 percent of the island's GDP.
Fearing they will lose more ground, a number of Taiwanese manufacturers are carving out alliances with high-tech companies in Japan and the United States that are also facing off against Samsung, in an effort to safeguard market share and give a boost to Taiwan's economy. A noted and longtime Taiwanese collaborator is Apple Inc., which was replaced last year by Samsung as the top smartphone maker in the world.
For its part, the Taiwan government is pressing the island's tech companies to work more closely with local component suppliers in an effort to achieve the kind of business integration that has helped to make Samsung such a formidable rival.
"We hope the tech companies can work together with their suppliers during the early product developing process, rather than wait till the new components are developed," said Stephen Su, a marketing analyst with Taiwan's Industrial Technology Research Institute, a state-funded institute that develops cutting-edge technologies and transfers them to the private sector.
Su said a major pilot project in the integration effort involves smartphone maker HTC Corp., which is trying to use processors made by local chip designers in its new handsets.
Until last year, HTC was a top global smartphone maker, cashing in on its status as the first company to make handsets using Google's Android operation system. Now, however, it is struggling as Samsung and Apple smartphones dominate.
Aside from smartphones, another emerging battlefield in the Taiwan-Samsung rivalry is the semiconductor industry, long a Taiwanese stronghold.
With its seemingly unlimited supply of capital, Samsung has deftly moved from making memory chips that store data to more profitable logic chips that run as the brain of computers.
It is also ramping up its expansion into the foundry business that fabricates chips, posing a direct challenge to TSMC, which provides application chips to companies such as Apple and Qualcomm Inc.
TSMC founder Morris Chang has called Samsung a "formidable rival" but says his company is well prepared to meet the challenge.
In the past year, TSMC has significantly increased its capital spending to move more aggressively into the cutting-edge technologies of 20 and 16 nanometers that can make smaller chips which run faster at lower power.
The new technologies will enable TSMC to make the application processors that will run new iPhones and iPads. Apple currently gets such chips from its smartphone and tablet rival Samsung. But analysts say that Apple's transition will be complicated, because Samsung is involved in part of the processors' design, in addition to fabricating the wafers that foundries normally handle.