Jonney Shih, the chairman of Asustek Computer, has epitomized the Taiwanese electronics engineer for a generation: a slender figure in rumpled, baggy trousers, he once helped Intel solve heat problems in its Pentium 4 microprocessors.
So it has been a surprise over the last several years to see Mr. Shih, now 60, reinvent himself with snug-cut Italian suits, innovative designs for tablet and notebook computers and scathing criticisms of Taiwan's test-obsessed, engineering-oriented educational system.
"I don't think the Taiwanese got very good training to drive the mentality of innovation," he said during an interview at Asus's headquarters here on the outskirts of Taipei. (Mr. Shih also demonstrated his flexibility in the interview, assuming the lotus position while wearing a dark blue Armani suit with a sky-blue Armani tie.)
Fostering innovation has become a mantra among corporate leaders and government officials alike in Taiwan this year because the island's huge consumer electronics industry has run into serious trouble.
Worldwide sales of PCs, for which Taiwanese companies control over 90 percent of the final design and manufacturing, are declining steadily. Sales of smartphones, for which Taiwanese companies control less than a fifth of the market, are rising briskly. Tablets based on the Android operating system, which most Taiwanese companies, with the exception of Asus, have been slow to embrace, are also on the same upward trajectory.
"Outside of Asus, all the others are struggling," said Helen Chiang, a Taiwan electronics specialist at the IDC research firm.
Foxconn and Acer have each reported that sales in the first quarter dropped 19 percent from a year ago. HTC's sales plunged 37 percent, although that was partly because the company began shipping the annually improved version of its best-known smartphone in late March instead of February. At Quanta, a 70,000-employee contract designer and manufacturer of notebook computers, sales have shown double-digit percentage drops from year-earlier levels for 14 consecutive months.
(Read More: Facebook Can't Save HTC as Earnings Miss: Analyst)
Foreign rivals have proved more nimble. In South Korea, Samsung is expanding rapidly in smartphones, tablet computers and other sectors. After embracing the Android operating system early, the company has built on its huge economies of scale in the mass production of components, like display screens and microprocessors.
In China, Lenovo and many smaller manufacturers are relying on labor that, while no longer cheap, is still less expensive than in Taiwan. That helped make Lenovo the only one among the top five PC makers worldwide to eke out a gain in shipments in the first quarter — although by only a tenth of a percent.
And in the United States, Apple, Google and Amazon have shown themselves adept at producing breakthrough consumer products, while pending legislation would allow them to import more foreign engineers at a lower cost than hiring and training domestic engineers.
As notebooks and other Windows-based PCs have lost ground, first to Apple tablets and now to Android-based designs, even Microsoft has been indicating dissatisfaction with the pace of PC innovation in Taiwan. Despite a longtime aversion to hardware, Microsoft recently introduced its own Surface tablet.
"The Surface tablet is a pretty strong signal to the whole Taiwan PC ecosystem that they're not innovating enough," said Bill Whyman, a senior managing director at the ISI research firm.
One exception to Taiwan's difficulties is Asus. Its many new Android-based tablets, including one that it has branded with Google, allowed it to surpass Amazon in the first quarter of this year to become the third-largest player in the global tablet computer market, behind Apple and Samsung, according to IDC.
And some of its designs are downright clever. One new model, the PadFone, lets the user slide a cellphone into the back, turning the tablet into an oversize cellphone. Another tablet, the Transformer, features a detachable keyboard with a wireless connection and a two-sided display panel that can show a movie on one side to entertain children or guests while the other side is a regular computer display for the owner.
Those innovations have helped keep Asus's sales growing, up 16 percent in the first quarter from a year ago. That was even as worldwide PC shipments fell 11.2 percent, according to Gartner, another research firm.
Taiwan's strengths and weaknesses in pursuing broader innovation echo the challenges of many countries that, for varying reasons, seek to foster the growth of industries based on creativity. The United States and Europe have long worried that their businesses and universities come up with many new ideas but then fail to commercialize them. Mainland China has fretted that its businesses and universities are too slow to come up with original ideas.
That Taiwan needs to look to 60-year-olds like Mr. Shih for innovation is a concern for government officials. As economic growth has stalled in Taiwan and new factories have shifted to mainland China, young people have become more interested in civil service jobs and academia instead of industry, government and industry officials say.
One worry is that people with new ideas at universities and government laboratories are not commercializing them. "Our teams think the problem here is those inventors didn't pursue it, to push their inventions into the market," said C. Y. Cyrus Chu, the official who oversees the National Science Council. "Youngsters here are afraid to fail — we are not ready to face failure."
The government has started a program of grants and advice for inventors to help them develop business plans and seek venture capital.