2019/12/4 下午9:57 Published by the by Published Commerce Commerce In Taipei American Chamber Of NT$150 December 2019 | Vol. 49 | Issue 12 | Issue 49 Vol. | 2019 December 的可能性有多大？ 台灣成為跨國企業亞太總部 What are the Chances? the are What Taiwan as Regional Hub: Hub: as Regional Taiwan SPECIAL REPORT 2020 ECONOMIC FORECAST BUSINESS TAIWAN AUTOMOTIVE SECTOR Read TOPICS Online at topics.amcham.com.tw Online at TOPICS Read 號 執 照 登 記 為 雜 誌 交 寄 THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI TAIWAN BUSINESS TOPICS December 2019 | Vol. 49 | Issue 12 中 華 郵 政 北 台 字 第 5000 12_2019_Cover.indd 1
AMCHAM EVENT
mentation of a Patent Linkage System for pharmaceuticals as an example. President Tsai Addresses Tsai stressed her administration’s determination to build a new economic AmCham’s 2019 AGM development model for Taiwan, one that will “transform Taiwan into Asia’s ith President Tsai Ing-wen and Angela Yu of Microsoft. They join high-end manufacturing and R&D as the keynote speaker, 2019-2021 Governors Al Chang of center, a regional financial and wealth W AmCham Taipei’s 2019 Deloitte & Touche, Albert Chang of management center, and a base for Annual General Meeting was held McKinsey, Seraphim Ma of Baker & high-quality talent.” November 19 in the newly redecorated McKenzie, Jan-Hendrik Meidinger of The meeting also included a State Grand Ballroom of Shangri-La’s Far the Grand Hyatt Taipei, and Paulus of the Chamber 2019 report by Leo Eastern Plaza. The President paid tribute Mok of Citibank. Seewald, who served as the AmCham to the Chamber’s “key role in advancing Newly elected for one-year terms Taipei chairman for most of the year. Taiwan-U.S. trade relations, and in as Supervisors were Mark Horng of He highlighted the Chamber’s recent bringing new investments to Taiwan.” Bristol-Myers Squibb, Stephen Tan of achievements, including receiving the Some 230 Chamber members and International Policy Advisory Group, 2019 Corporate Community Lead- guests attended the luncheon meeting, and Terry Tsao of SEMI Taiwan. ership Award from the Community where voting was conducted for the In her speech, President Tsai also Services Center for “exceptional lead- 2020 Board of Governors and Supervi- thanked AmCham for helping to ership, service, and commitment to sors. The six Governors elected for two- “remove many obstacles for U.S. com- Taiwan.” year terms were Mark Chen of Abbott panies investing and operating in Seewald also presented the first Laboratories, CW Chin of Applied Taiwan.” She said the government lis- annual Outstanding Committee Co- Materials Taiwan, Timothy Shields of tens closely to the suggestions of chair Awards to Joyce Lee of the Public Cigna Taiwan, Gina Tsai of Airbnb, AmCham members and responds to Health Committee and Dylan Tyson of Fupei Wang of Ogilvy Public Relations, their concerns, citing the recent imple- the Insurance Committee.
AmCham Taipei President Willilam Foreman presents Outstanding Board members pose with President Tsai, other Taiwan government Committee Co-chair Awards to Joyce Lee and Dylan Tyson. officials, and AIT Director Christensen.
TAIWAN BUSINESS TOPICS • DECEMBER 2019 3
AGM.indd 3 2019/12/4 下午9:58 CONTENTS NEWS AND VIEWS 6 President’s View Reflecting on a year with more DECEMBER 2019 VOLUME 49, NUMBER 12 boom than doom and gloom 一○八年十二月號 By William Foreman 7 Editorial Publisher Gaining Prominence in the Region William Foreman 提升台灣在亞太地區的重要性 Editor-in-Chief Don Shapiro 8 Taiwan Briefs Deputy Editor Jeremy Olivier By Jeremy Olivier Art Director/ / 12 Issues Production Coordinator Katia Chen Starting the Review of 2019 White Manager, Publications Sales & Marketing Paper Issues Caroline Lee 開始追蹤《2019年白皮書》議題處理 Translation Kevin Chen, Yichun Chen, Charlize Hung 進度 By Don Shapiro
American Chamber of Commerce in Taipei COVER SECTION 129 MinSheng East Road, Section 3, 撰文／李可珍 7F, Suite 706, Taipei 10596, Taiwan By Jane Rickards However, some lingering issues P.O. Box 17-277, Taipei, 10419 Taiwan require creative solutions if it is Tel: 2718-8226 Fax: 2718-8182 e-mail: [email protected] to compete on the same level website: http://www.amcham.com.tw as some of its neighbors. 05 0 22 For Some Companies, 2718-8226 2718-8182 Taiwan is Already a Taiwan Business Topics is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are Regional Hub independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. 24 Making a Hub in Wind © Copyright 2019 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original Power and Technology material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. R&D 使台灣成為風力發電與科技研 108 66 發重鎮 5000 ISSN 1818-1961 Two industrial sectors appear particularly promising for
Chairman: C.W. Chin Taiwan to develop as a Vice Chairman: Albert Chang regional center for the Asia Secretary: Fupei Wang 17 Taiwan as Regional Hub: Treasurer: Al Chang Pacific. What are the Chances? 2018-2019 Governors: Anita Chen, C.W. Chin, Daniel Tseng, Fupei Wang. 台灣成為跨國企業亞太總部的
2019-2020 Governors: 可能性有多大？ Al Chang, Albert Chang, Seraphim Ma, Jan-Hendrik Meidinger, Paulus Mok. As a center of operations for
2019 Supervisors: Vincent Shih, Terry Tsao, Dylan Tyson. local and foreign businesses
COMMITTEES: across numerous industries, Agro-Chemical/ Melody Wang; Asset Management/ Eric Taiwan has a lot to offer. Lin, Angela Yang, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Mandy Huang, Eric Jai, C.P. Liu; Chemical Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Shirley Chen, Abigail Lin; Digital Economy/ Max Chen, Renee Chou, Tai Chi Chuan; Energy/ Randy Tsai; Human BACKGROUNDER Resources/ Christine Chen, Carmen Law, David Tsai; Infrastructure/ Wayne Chin, Paul Lee; Insurance/ KT Lim, Mandy Shih, Linda Tsou; Intellectual Property & Licensing/ 28 Smart Manufacturing Jason Chen, Peter Dernbach, Vincent Shih; Marketing & Distribution/ Wei Hsiang; Medical Devices/ Louis Ko, Gains Ground in Taiwan Jeffrey Wang, Joanne Yao; Pharmaceutical/ Justin Chin, Rie Nakajima, Shuhei Sekiguchi; Public Health/ Joyce Faced with rising labor costs, Lee, Sophia Lee, Tim Shields; Real Estate/ Tony Chao; Taiwanese companies are increas- Retail/ Ceasar Chen, Mark Chen, Peggy Liao; Sustainable Development Goals/ Kenny Jeng, Lume Liao, Cosmas ingly utilizing the latest sophisti- Lu, Fupei Wang, Kernel Wang; Tax/ Heidi Liu, Cheli Liaw; Technology/ Cynthia Chyn, Stella Lai, Angela Yu; cated technologies to go beyond Telecommunications & Media/ Thomas Ee, David Shin, conventional automation to Joanne Tsai; Transportation & Logistics/ (tba); Travel & Tourism/ Gina Tsai, Jason Yeh. embrace Industry 4.0. By Philip Liu
4 TAIWAN BUSINESS TOPICS • DECEMBER 2019
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TAIWAN BUSINESS 31 The Auto Industry is in Low Gear (But So Far Not in Reverse) While global auto markets faced significant setbacks and weak sales growth this year, Taiwan appears to have fared relatively well. However, challenges for domestic automakers con- tinue to intensify as consumers increasingly choose imported vehicles. By Jeremy Olivier
EXECUTIVE SUITE 42 Meet Brenda Tang of United Airlines By Jeremy Olivier
AMCHAM EVENTS SPECIAL REPORT 3 Annual General Meeting 35 2020 Taiwan Forecast: 16 Liver Health Forum Thriving Despite Trade War Dislocations SPONSORED CONTENT Next year, Taiwan’s economy will benefit from a steady flow of 14 Leich Capital Management capital repatriation as local man- 44 Seeing Taiwan ufacturers move capacity home The Charms of Rustic Tainan from China. By Matthew Fulco BEHIND THE NEWS 38 Modest Growth Ahead for 39 Taiwan’s Deepening Chipmakers in 2020 Diplomatic Predicament The semiconductor industry’s Left with just 15 diplomatic concentration at home provides allies, Taiwan now looks to safe- it with some insulation from the guard its most vital remaining direct effects of the U.S.-China relationships while strengthening trade war. unofficial ties with key democra- By Matthew Fulco cies. By Matthew Fulco
TAIWAN BUSINESS TOPICS • DECEMBER 2019 5
12 contents.indd 5 2019/12/4 下午10:06 PRESIDENT'S VIEW
Reflecting on a year with more boom than doom and gloom
began this year writing about gloom and street from our hotel. Leo brought a work-hard- doom. Global volatility and the U.S.-China play-hard spirit to his role that was instrumental Itrade war had me deeply worried about in helping us achieve so much and have a lot of 2019. I thought my biggest challenge was to just fun while doing it. stay positive. I’ll never forget the huge group of members For sure, there’s still plenty of turbulence, who showed up for Amy Chang’s farewell Happy upheaval, and uncertainty in the world. But Hour celebration. Amy touched so many people looking back on the past 12 months, I’ve got to during her many years leading our Government say 2019 was a great year overall for AmCham Affairs team, and it was wonderful to see them all Taipei. turn out to bid her a happy retirement. Here are just a few things that excite me and Another big crowd turned out for Don Sha- leave me hopeful for the coming year: piro, our senior director and TOPICS editor-in- • Our membership has grown, with several of chief, when he was awarded the Friendship Medal the world’s most exciting, innovative, and of Diplomacy for the 50 years he spent sharing well-known companies joining our commu- Taiwan’s story with the world. Presiding over the nity. This strengthens our position as a main event, Foreign Minister Joseph Wu told the audi- driver of innovation on Taiwan. ence that the doctoral dissertation he wrote about • We created a NextGen Leaders Program Taiwan’s democratization was full of citations to that will help cultivate and inspire high- news stories written by Don. potential young professionals. Demand for Although there was some gloom and doom the program, which begins in January, was this year, I don’t remember too much of it. Most overwhelming. Taiwan’s future success will of it is crowded out in my mind by the many greatly depend on whether it can develop memories that made 2019 one of the most ful- and retain talent. AmCham will play a key filling years in my career – and I hope in role in this vital endeavor. AmCham’s history. • Our industry committees were energized with 25 new co-chairs who have volun- teered to help lead our advocacy agenda. We also launched two new committees: Defense and Digital Economy. And our Pri- vate Equity Committee has been reactivated. Industry committees are AmCham’s back- bone, and it’s stronger than ever, thanks to the dedication of our members. My favorite memories from 2019 are too many to list here. They include celebrating our CEO Mission’s first full day in Washington, eating William Foreman raw oysters while rehashing all the meetings with President, former Chairman Leo Seewald at a bar across the American Chamber of Commerce in Taipei
6 TAIWAN BUSINESS TOPICS • DECEMBER 2019
12 presidents view.indd 6 2019/12/5 下午3:50 E D I T O R I A L Gaining Prominence in the Region
t a time when the collision between the U.S. and China is and more attractive compared to neighboring countries. shaking up the established order in the conduct of world However, various factors have held Taiwan back from Atrade, it’s natural to wonder whether an opportunity is taking a more prominent role in the region. Some of these are arising for Taiwan to achieve its long-held aspiration of taking rather intractable, such as China’s incessant efforts to isolate on a role as a regional hub. In exploring that question, the cover Taiwan diplomatically. In addition, Taiwan’s calcified financial- story in this issue of Taiwan Business TOPICS concludes that services sector lessens its chances of capturing businesses that the answer depends in large part on the definition of “hub.” may decide to desert turbulence-ridden Hong Kong (although From one point of view, Taiwan is regarded as already well Taiwan may be suitable for certain back-office operations). on the way to becoming a regional hub in two industry sectors. At the same time, there is much that the Taiwan govern- One is offshore wind power. Taiwan’s excellent location for ment can do to raise this country’s attractiveness to companies harnessing wind energy from offshore turbines and the govern- as a potential regional operations center. One initiative that ment’s determination to develop the industry to meet renewable has already started is the program to develop Taiwan into a energy targets are attracting world-class developers. These bilingual nation by 2030. Increasing the English proficiency companies are viewing Taiwan not only as a good market in of candidates for employment would help alleviate one of this itself, but also as a base for expansion elsewhere in the region. society’s current shortcomings for multinationals. The second potential hub is for high-tech research and The government also appears to be making a serious effort development, including the internet of things, artificial intel- to improve the regulatory system, eliminating unclear, unrea- ligence, and the interconnectivity of these technologies with sonable, and inconsistent laws and regulations – often in 5G. Building on Taiwan’s prowess as a manufacturing center response to suggestions raised in AmCham Taipei’s Taiwan for electronic and computer products – and encouraged by the White Paper. Taking up one of those recommendations, it has strong IPR protection that Taiwan provides – local and leading adopted a 60-day notice and comment period for new regu- multinational companies are continuing to set up facilities on lations, which should help enhance communications with the island to engage in cutting-edge R&D. stakeholders – though it is still too early to tell how well the On the other hand, Taiwan appears no closer to its onetime system is working. ambition of becoming an overall Asia Pacific Regional Oper- Also still unknown is the ultimate effectiveness of the ating Center. No one doubts that Taiwan possesses many of the government’s program to remove obstacles to investment necessary attributes. Among them are a central location within by tackling the “Five Shortages” of land, electricity, water, the region, well-educated and industrious workforce, good manpower, and specialized talent. engineering and technical talent, and appealing living condi- But these efforts are all on the right track. If successful, they tions, including a safe and stable environment. In recent years, should greatly increase the chances for Taiwan to be a more Taiwan’s costs for office space and salaries have looked more active player within the regional economy.
台灣 亞太 的 性
國與中國的衝突打破既有的國際貿易秩序， 在這 具有吸引力。 個時候，各界難免好奇台灣長久以來想要成為區域 但有多項因素使得台灣在區域內無法扮演更突出的角色。 美樞紐的願望，是否有更大的實現機會。本期Taiwan 有些問題相當棘手，例如中國不斷試圖在外交上孤立台灣， Business TOPICS以封面故事探討這個議題所做成的結論 此外，雖然有些企業可能決定撤離局勢動盪不安的香港，但 是：答案有很大一部分要看「樞紐」的定義是什麼。 台灣金融服務業制度僵化，使得台灣吸引這些企業的機會為 從某方面來看，台灣在兩項產業的發展已朝區域樞紐之路 之降低（不過台灣可能適合若干後勤作業）。 邁進。其中一個是離岸風電產業。台灣外海有極佳的風場， 同時，台灣政府可以做很多事，提高台灣成為企業區域營 可用離岸風力發電機產生電力，而且政府決心發展這項產 運中心的吸引力。一項已經展開的計畫是要在2030年以前使 業，以達成再生能源發電的目標，這兩項因素吸引了世界級 台灣成為雙語國家。提高求職者的英文程度，有助於改善目 的風電廠商前來投資。這些企業不僅視台灣本身為良好的市 前跨國企業在台灣營運的一項痛點。 場，也把台灣當做向區域內其他國家拓展的基地。 政府似乎也在努力設法改善法規制度，刪除不清楚、不合 另一個可能發展成為區域樞紐的產業是高科技研發，包括 理與前後不一致的法律與規定。政府這些作為，往往是回應 物聯網、人工智慧以及串聯上述科技的5G技術。台灣原本在 台北市美國商會在《台灣白皮書》中所提出的建議。根據商 製造業與電子和電腦產品的生產就占有很大優勢，而且大力 會的建議，政府已將新法規的公告與評論期延長為60天，這 保護智慧財產權，本地與重要跨國企業持續在台灣設廠，進 應該有助於與利益相關各方的溝通，但目前還不清楚這個制 行尖端科技的研發。 度運作的狀況。 然而，台灣成為亞太營運中心的雄心壯志，似乎沒有進 政府要排除構成投資障礙的土地、電力、水、人力與特 展。台灣具有許多必要條件，這點毋庸置疑，其中包括位在 殊人才可能不足的「五缺」問題，但最終是否有效，尚待釐 亞太地區的中心位置、勞動人口受過良好教育而且工作努 清。 力、有好的工程與技術人才、以及安全穩定的生活條件。近 但這些努力都已走上正軌，如果能夠成功，應可大幅提升 年來，比起鄰近國家，台灣的辦公室租金與薪資水準越來越 台灣在區域經濟扮演更重要角色的機會。
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— BY JEREMY OLIVIER —
MACROECONOMICS DGBAS also noted that the number of workers facing a job loss due to busi- RECORD RETAIL ness closures or downsizing fell by 3,000 CONSUMPTION IN Q3 the same month, a sign of Taiwan’s Taiwanese consumers increased economic resilience amid global uncer- their retail purchases last month, tainty over U.S.-China trade tensions. defying a sluggish economy and unfa- The MOEA on November 20 vorable trade conditions. Retail sales reported that export orders, a lead- for October rose 4.2% year-on-year to ing economic indicator, fell yet again NT$340.7 billion (US$11.2 billion), a in October, completing a full year of record-breaking figure for that month, continuous decline. Export orders apparently encouraged by the recent dropped 3.5% year-on-year, affecting boom in Taiwan and U.S. stock markets, almost all of Taiwan’s major industries. department store anniversary sales, an This downward trend is not likely to extended weekend holiday, and higher correct by year’s end, which will mean a wages. It was the eighth consecutive decrease in export orders for the whole monthly increase in retail sales. The of 2019. automobile and motorcycle sector expe- rienced the highest sales growth, rising DOMESTIC 17.4% from a year earlier. President Tsai Ing-wen chose former Premier William Lai as her running The wholesale trade in Octo- TSAI, HAN ANNOUNCE mate for the 2020 elections. ber decreased by 1.3% year-on-year RUNNING MATES PHOTO: MARTTI CHEN to NT$896.2 billion, the Ministry of President Tsai Ing-wen, who is up for Economic Affairs (MOEA) reported, re-election in January, on November 17 Party (KMT) presidential candidate and while sales of food and beverage services announced that she had chosen former current Kaohsiung Mayor Han Kuo-yu increased 4.3% from October last year. premier William Lai as her vice-presi- announced on November 11 that his Taiwan’s jobless rate declined a dential running mate on the Democratic running mate will be Simon Chang, miniscule .03 percentage points in Progressive Party (DPP) ticket. Lai also a blue-leaning independent who had October to 3.77%, according to the previously served in Taiwan’s legisla- served as premier under former President Directorate General of Budgeting, ture from 1999 to 2010 and as Mayor Ma Ying-jeou from February to May Accounting and Statistics (DGBAS), of Tainan from 2010 to 2017. He ran 2016. Chang also has extensive private- which described the drop as indicat- unsuccessfully against Tsai in the DPP sector experience, including a 10-year ing that the job market remains stable. presidential primaries earlier this year. stint at Taiwanese computer and elec- Given Lai’s outspoken support of tronics producer Acer and another two TAIWAN STOCK EXCHANGE PERFORMANCE Taiwanese independence, his nomina- years working for Google. His well- tion is perceived by some as an attempt rounded resume and stated aversion to THE LINE SHOWS CHANGES IN TRADE VALUE AND THE SHADED AREA CHANGES IN THE TAIEX INDEX. by Tsai to court deep-green voters. The partisan politics are seen by some as a POINTS NT$ BILLION day after his nomination, Lai stated in counterbalance to the bombastic rhetori- 13000 225000 a Facebook post that he is a “realistic cal style employed by Han. 12000 200000 worker for Taiwan independence” and 11000 175000 that Taiwan is a sovereign nation called 10000 150000 KMT, DPP RELEASE AT-LARGE 9000 125000 the Republic of China. Tsai has echoed LEGISLATOR LISTS 8000 100000 this statement, expressing on November Both of Taiwan’s major political 7000 75000 20 that “the Republic of China, Taiwan, parties in mid-November released their 6000 50000 is a free and sovereign nation, and that legislator-at-large lists for the 2020 elec- 5000 25000 people have the right to vote, and the tions. The KMT’s initial list garnered 4000 0 freedom to choose from among political significant criticism for its roster of O parties and presidential candidates.” mainly older, conservative candidates,
DATA SOURCE: TWSE Meanwhile, Chinese Nationalist several of whom have espoused pro-
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unification views. One such candidate ECONOMIC INDICATORS
was Chiu Yi, a former KMT legislator US$ billion US$ billion who, at a cross-Strait forum in China’s Current Account Balance (Q3 2019)p 12.48 14.04 Fujian Province in March, stated that Foreign Trade Balance (Jan.-Oct.) 36.6 39.8 Taiwanese “separatists” who oppose New Export Orders (Oct.) 47.3 49 the “one country, two systems” formula Foreign Exchange Reserves (end Oct.) 472 460 stand to be “decapitated” in the event of annexation by China. Unemployment (Sep.) 3.80% 3.76% Another candidate, Wu Sz-huai, is Discount Rate (Oct.) 1.375% 1.375% a retired lieutenant general and anti- Economic Growth Rate Q2 2019p 2.4% 3.29% pension reform activist, who in 2016 Annual Change in Industrial Output (Sep.)p -0.75% 1.66% appeared at an event held at the Great Annual Change in Industrial Output (Jan.-Sep.)p -1.21% Hall of the People in Beijing commem- Annual Change in Consumer Price Index (Sep.) 0.4% 1.72% orating the 150th birthday of Sun Yat- Annual Change in Consumer Price Index (Jan.-Sep.) 0.51% sen. During that event, Xi Jinping gave P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT a speech warning against “separatism,” and Wu was filmed standing during the Chinese national anthem. Responding to the overwhelming crit- dates made in into the top 15 on the After the list was issued, a number of icism, KMT Chairman Wu Den-yih on list, one of whom was subsequently KMT politicians expressed concern about November 16 convened an extraordi- removed. its composition, including Vice Presiden- nary meeting of party representatives to The indigenous candidate who was tial candidate Simon Chang, who said revise the list. Chiu Yi was dropped from removed from the list is Tuhi Martukaw, that the list “lacks diversity and could the slate, while Wu Sz-huai and a few a TV host of Puyuma origin. She cited make the elections more difficult for other contentious candidates remained. concerns regarding her involvement in district legislative candidates.” Legislator The DPP on November 14 issued its a foundation established by Premier Su Jason Hsu criticized the lack of younger own at-large legislator list. It included Tseng-chang, her past experience as an nominees on the list, saying that the a diverse range of candidates, includ- assistant to a KMT legislator, and the choices reflected the party leadership’s ing Hung Shen-han, deputy secretary- spread of an unverified accusation that desire to lock down the support of more general of the Green Action Alliance, she had been involved in a fraud case. conservative factions. He and others and Nantou City Counselor and Malay- opined that the list would sap support for sian immigrant Lo Mei-ling. However, JAMES SOONG ENTERS the KMT in the upcoming elections. only two indigenous Taiwanese candi- PRESIDENTIAL RACE People’s First Party (PFP) founder James Soong on November 18 regis- tered as his party’s presidential candidate at the Central Election Commission. His running mate will be former United Communications Group chairwoman Sandra Yu. In light of the contro- versy surrounding the KMT’s at-large legislator list and Han Kuo-yu’s poor performance in recent polls, Soong’s candidacy is viewed as likely to draw votes away from the Han campaign in favor of Tsai. Soong, who from 1994 to 1998 served as the only elected governor of Taiwan Province, a now-abolished position, has run in every presiden- tial election since he founded the PFP in James Soong and his running mate, Sandra Yu, registered as the People First Party's presidential and vice-presidential candidates in mid-November. 2000. A recent poll by the Apple Daily PHOTO: MARTTI CHEN
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shows that Soong has the support of reported that a man claiming to be a figures in Wang Liqiang’s allegations, around 8% of voters. former Chinese intelligence agent had China Innovation Investment Limited defected to Australian authorities in (CIIL) Executive Director Xiang Xin, MEDAL FOR TOPICS October, requesting asylum there. Wang and Kung Chin, a director of CIIL, EDITOR-IN-CHIEF Liqiang, 23, whose wife and young child were detained at Taiwan Taoyuan Inter- Foreign Minister Joseph Wu on currently live in Australia, claims to have national Airport while trying to leave November 8 conferred a Friendship taken part in several espionage activ- the island. Wang claimed that he had Medal of Diplomacy on AmCham ities. These include funneling money worked for five years infiltrating groups Taipei Senior Director Don Shapiro at from the Chinese government to the elec- critical of China in Hong Kong and a ceremony at the Ministry. He praised tion campaign of then Kaohsiung City Taiwan under Xiang’s direction. The two Shapiro’s “remarkable contributions mayoral candidate Han Kuo-yu and executives remain in Taiwan for further over the years in strengthening relations participating in the kidnapping of five questioning. between Taiwan and the United States.” Hong Kong booksellers in 2015, as well Responding to the stunning news Wu cited Shapiro’s reporting for the as political interference operations in reports, Shanghai police released a New York Times and Time magazine on Hong Kong and Australia. report indicating that Wang had been Taiwan’s democratic development in the A day later, a number of media investigated and found guilty of fraud 1970s, 80s, and 90s, as well as his role outfits reported on claims that a Chinese multiple times in China. English- for the past 18 years as editor-in-chief spy ring operating in Australia had language party mouthpiece the Global of AmCham’s Taiwan Business TOPICS attempted to plant a candidate in the Times on November 27 released footage magazine and annual Taiwan White country’s parliament. According to the from October 2016 showing a man iden- Paper. Shapiro first came to Taiwan in allegations, Liberal Party member and tified as Wang confessing to fraud and October 1969 under a fellowship from luxury car dealer Bo “Nick” Zhao had asking the court for leniency. Columbia University’s Graduate School been offered AUS$1 million by Chinese of Journalism and Weatherhead East intelligence operatives to pay for his MP CROSS-STRAIT Asian Institute. election campaign. Zhao was found dead in a Melbourne motel room this March CHINESE CARRIER SAILS INTERNATIONAL after having disclosed the plot to Austra- THROUGH TAIWAN STRAIT lia’s intelligence organization, ASIO, and The PLA Navy on November 17 CHINESE DEFECTOR MAKES identifying the man who had approached sailed a carrier group led by its domesti- ESPIONAGE CLAIMS him about the deal. cally-built “Type 001A” aircraft carrier Australian media on November 23 On November 24, two of the key through the Taiwan Strait, the same day that incumbent presidential candidate Tsai Ing-wen picked William Lai as her running mate. While China claimed that the purpose of the voyage was “scien- tific research tests and routine training,” Foreign Minister Joseph Wu slammed it as an attempt by China to further inter- vene in the upcoming elections. According to Taiwan’s defense minis- try, Taiwan scrambled ships to monitor the movements of the fleet, which was also trailed by U.S. and Japanese vessels.
TAIWANESE CYCLIST CLAIMS DETAINMENT IN CHINA A Taiwanese tourist reported being detained by soldiers in China’s Inner Mongolia Autonomous Region on March AmCham Taipei Senior Director and TOPICS Editor-in-Chief Don Shapiro shakes hands with Foreign Minister Joseph Wu at the conferment ceremony for the 31 this year while he was on a cycling Friendship Medal of Diplomacy. PHOTO: MOFA trip through the area. Tsao Yao-wen
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posted on Facebook that he was arrested, TAIWAN'S JAN. - OCT. 2019 TRADE FIGURES interrogated, and held in custody on (YEAR-ON-YEAR COMPARISON) the border of China and Mongolia for four days. He says the arresting soldiers /China apan ASEA TOTA confiscated his identification and travel 114.9 278 107.6 documents, and forced him to show them 271.3 48.6 48 238
all location history, chat data, and bank 45.1 45.8 234.6 37.1 35.7 28.8 information on his cell phone. He notes 28.9 19.3 19 that his captors asked him questions related to Taiwanese intelligence opera- 2019 2018 2019 2018 2019 2018 tions and where detained Chinese spies .S.A Europe were being held in Taiwan. 38 32.3 29.1 28.4 29.1 27.3
Tsao says that when it became clear to 26.1 24.8 his captors that he was merely a tourist, he was let go, but was forced to sign an 2019 2018 2019 2018 2019 2018 affidavit stating that he had voluntarily T: S Billion Exports mports cooperated with the interrogation. SO RCE: BOFT/MOEA
BUSINESS Formosa 1 reflects the determination lines. The U.S. company’s applica- OFFSHORE WIND ENTERS of Taiwan’s local and foreign play- tion was submitted through a separate COMMERCIAL STAGE ers to develop the local offshore wind government program designed to attract President Tsai Ing-wen attended the power sector. She also announced plans foreign investment. inauguration of Taiwan’s first commer- for development of a further 10GW of cial-scale offshore wind farm, Formosa offshore wind capacity between 2026 EMPLOYMENT STATUS 1, on November 12 in a ceremony at and 2035. GUIDELINES ISSUED the Longfeng Fishing Harbor in Miaoli. The Ministry of Labor on Novem- Located between two and six kilome- SUPERMICRO, INNOLUX ber 19 issued a set of non-legally-binding ters off the coast of Miaoli, the NT$18.7 INVESTMENTS APPROVED guidelines for businesses aimed at clar- billion (over US$623 million), 128-mega- Two firms taking advantage of recent ifying the designation of workers as watt (MW) project is designed to government incentive programs have employees or contractors. The new generate 53.9 million kilowatt-hours been approved to invest large amounts in guidelines define these terms based on annually, enough to power 128,000 Taiwan. the level of a worker’s subordination in households. Taiwanese flat-panel maker Inno- the company. Factors include whether the The initial stage of Formosa 1, lux Corp. applied to invest NT$70 individual can choose when to work, can which has been generating power since billion (US$2.29 billion) as part of a refuse assignments or shifts, and are held 2017, consisted of two 4-MW turbines. government program designed to encour- responsible for violations of company Construction of Phase 2 was completed age the return of Taiwanese businesses policy. Other determinants include the this October and consists of twenty from China. It is the largest proposed level of workers’ involvement in the 6-MW turbines. investment among the more than 150 company, and whether they must cooper- The project is a joint venture between applications submitted since the program ate with others in the company in order Danish power utility and global wind started earlier this year. The company’s to complete assignments or tasks. power developer Ørsted A/S (35% owner- plan to build a “zero touch” facility in The MOL’s guidelines come on the ship), Japanese power utility JERA Taiwan is explained in further detail in heels of a series of severe incidents (32.5%), Australian investment firm the Backgrounder section of this issue. involving food delivery drivers who were Macquarie’s Green Investment Group San Jose, California-based ICT uninsured due to being classified by the (25%), and local manufacturing firm company SuperMicro was approved to company as contractors, rather than Swancor (7.5%). It is the first of Taiwan’s invest NT$10 billion (US$328 million) employees. Under Taiwan’s labor laws, planned 5.6 gigawatts (GW) of offshore to establish an R&D center for advanced employees are guaranteed health and wind capacity to be completed by 2025. servers, as well as to expand its logistics labor insurance, which cover injury and At the ceremony, Tsai said that center and launch automated assembly death on the job.
TAIWAN BUSINESS TOPICS • DECEMBER 2019 11
12_Briefs.indd 11 2019/12/4 下午10:09 ISSUES
Starting the Review of 2019 White Paper Issues
AmCham committees have the chance to interact with the appropriate government agencies.
hen AmCham Taipei released its 2017 Taiwan White Paper, it expressed regret that not a single one of the 80 issues cited W in the previous year’s edition as detriments to the investment climate had been completely resolved. Fortunately, AmCham’s concern was shared by the government. President Tsai Ing-wen instructed the National Development Council to work more closely with the Chamber on tackling the issues, and the 台 國 NDC set up a schedule of quarterly meetings with AmCham committees 台灣 to review the progress of White Paper items. The meetings, and the personal attention given the issues by NDC Minister Chen Mei-ling, have made a big difference. In 2018, a record 0 11 of the 83 issues were rated as fully resolved and another 21 marked 0 as showing substantial progress. This year’s level – 8 resolved and 15 making good progress out of 71 issues – was a bit lower, but still quite positive compared to most previous years. Now the review process has begun for the current round of White Paper suggestions – those included in the 2019 edition released at the end of May. The initial quarterly meeting was held at the NDC on November 26, with Minister Chen presiding. Over a total of three hours, seven AmCham committees raised their priority issues and received responses from representatives of the relevant government 0 agencies. The remaining committees will have their chance at two more sessions scheduled for December 5 and 19. Some of the key topics covered at the first meeting included: Medical Devices. One of the committee’s prime objectives is to 5 streamline the licensing approval and reimbursement-pricing process for new medical technologies and innovative medical devices. Time- to-market is particularly important for medical devices because the 5 constant development of new technologies can quickly make existing 0 products obsolete. Due to the prolonged regulatory process, however, new products are often launched in Taiwan long after they have been introduced in other markets. The delay is frustrating for doctors and deprives patients of 5 access to the latest treatments. During the discussion, the idea was raised of borrowing the “sandbox” concept from the financial-services sector, providing greater pricing flexibility to facilitate the entry of products into the market, for example through full or partial self-pay. After surgeons gain experience with the new technology and its market acceptance has been tested, the National Health Insurance Administration could more easily set a reim- bursement price. The meeting also helped clarify with the Customs Administration how Country of Origin regulations on imported medical devices should be handled, given that a device may contain parts and components from
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numerous countries and undergo final assembly in yet another. Pharmaceuticals. Besides thanking the government for launching a Patent Linkage system for pharmaceuticals and congratulating the National Health Insurance Administration for the high public approval rating it received in a recent survey, the committee urged the authorities to ensure that sufficient budget is available for new, innova- tive drugs to meet patients’ needs. Public Health. The committee has pledged to support the govern- ment’s goal of eliminating Hepatitis C in Taiwan by 2025. It has also encouraged the government to strengthen the national vaccina- tion program against various diseases and to strengthen measures to prevent osteoporosis in Taiwan’s rapidly aging population. The AmCham attendees came away feeling optimistic that the vaccination budget could be further expanded and that osteoporosis- awareness measures can be adopted under the long-term care program that the government is promoting. 0 5 Cosmetics. New legislation requires each cosmetics product to undergo an evaluation by a qualified Safety Assessor, which for imported products could be personnel in another country. The industry representatives felt assured that the training courses will be offered in both Mandarin and English, both on- and off-line, and will be designed to be meaningful, not just specifying the number of hours of instruction. Retail. The committee urged that Taiwan’s regulations on dietary supplements be aligned with international standards and that a mech- anism be adopted to try to prevent inconsistent interpretations by different government agencies. Regarding a White Paper issue on the methodology for labeling imported alcoholic beverages to maintain traceability in case of prob- lems, the committee reported that a consensus had been reached with the National Treasury Agency, but that it was yet to be determined how well the system would work in practice. Chiropractic. Taiwan and South Korea are the only two coun- tries in the world that have made no provision for acceptance of the chiropractic profession as a contributor to national healthcare. The major obstacle has been opposition from the Taiwan Medical Associ- ation, which has taken a protectionist stance. The chiropractic doctor members of AmCham urged the NDC to make another effort to find a breakthrough, and it appeared that further discussion would take place in 2020. 0 0 Tobacco. The industry constantly cautions against steep increases in cigarette taxes as a means of discouraging smoking, noting that the usual impact is to increase the smuggling of cheap, untaxed ciga- rettes into the market. Minister Chen said there is currently no plan to increase taxes on tobacco products. AmCham President William Foreman praised the positive inter- action at the meeting. “This was an excellent beginning for the next cycle of communication with the government,” he told TOPICS. “I feel confident that we can make a lot of progress on the issues in the coming months.” — By Don Shapiro
TAIWAN BUSINESS TOPICS • DECEMBER 2019 13
12 issues.indd 13 2019/12/4 下午10:10 ADVERTORIAL Getting Good Returns with Leich Capital Management 與立富資本管理一起獲得長期高報酬
s the U.S.-China trade war con- two decades ago, while working as a tinues, an air of uncertainty CPA in Taipei. “Back then, Taiwan did A hangs over the global finan- not have the capacity to provide CFA cial-services sector. The precariousness (Chartered Financial Analyst) licenses, of the situation caused stock markets to so Taiwanese looking to invest abroad assisting Taiwanese investors build perform very poorly last year. The Dow had to consult their personal accoun- their portfolios in 2005. Between then Jones Industrial Average’s annual return tants about how to develop their and the formal establishment of the for 2018 was -5.63%, while the S&P overseas assets,” he says. arbitrage fund in 2014, it managed to 500 returned -6.24%, the first decline In 1995, Lin boarded a plane from gain clients a cumulative 302.45% in for the two indexes after three robust Taipei to Chicago and New York, returns. Over the years, the company years. Taiwan’s TAIEX fared even looking to understand more about the has built up an impressive roster of worse, dropping 8.6% for the year. U.S.’s investment environment and to individual and corporate clients, whom Given such dismal performance, help his clients by researching prom- it assists with a broad range of capital Taiwanese investors may have felt ising long-term financial products. In market, financial consulting, and wealth some trepidation as 2019 approached Chicago, the bulk of the investment management services. and analysts began forecasting another activity centers on futures trading. Lin Lin says the secret to Leich’s solid year under the shadow of global trade was particularly impressed with the performance throughout the years is tensions. work of Chicago’s CTAs (commodity quite simple. “We focus mainly on However, those with investment trading advisors), since investing in agricultural commodities – coffee, soy- portfolios managed by the capable team commodities futures was still virtually beans, wheat, corn, cocoa – natural at Leich Capital Management Ltd. were unheard of in Taiwan at that point. products which, unlike the stock value likely less concerned. Despite the rough After returning home, Lin began of companies, aren’t so easily impacted going for major stock markets in 2018, getting involved in Taiwan’s newly by the volatility of the stock market,” Leich’s clients enjoyed an 8.8% return established futures market. “I started he explains. on their investments. This was no acci- using the methods I learned from the Lin disagrees with the conventional dent; since the Leich arbitrage fund was traders and brokers in Chicago to assist thinking that commodities are more vol- established in August 2015, it has devel- my clients back in Taiwan,” he says. atile and thus riskier investments, letting oped a track record of strong returns, “Over the years, I began to cultivate an Leich’s consistently impressive rates of with a peak of 11.04% in 2017. operations team, and also asked con- return speak for themselves. But he adds Mark Lin, Leich’s CEO, knows tacts in the U.S. to assist us.” that his trading team’s extensive expe- his client’s needs well. Lin began his The team that eventually became rience and concurrent use of actuals foray into international finance over Leich Capital Management started and options have been instrumental in reaping big rewards for clients. Lin refers to one of the major trade- war-related incidents this year, when on May 31, China’s Ministry of Com- merce issued its “unreliable entity list” in response to the increase in U.S. tariffs on Chinese goods. “Once this list was issued, it caused panic among many U.S. enterprises and that same day, the Dow Jones fell 350 points. Global stock markets lost US$5 trillion in value for the month of May,” Lin says. Leich’s arbitrage fund also took a dip, but
14 TAIWAN BUSINESS TOPICS • DECEMBER 2019
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began climbing back up in June, and the an election year, and historically the tors to take going into 2020? “If they’re company reported a 4.22% return for party in power will do its utmost to buying Taiwan stocks, I recommend September. enact policies to boost stock market that they focus on the petrochemical Overall, stock markets have made performance to try to ensure a smooth sector, as well as construction and prop- huge rebounds this year and Taiwan’s electoral victory,” he observes. erty development,” says Lin. “Unlike markets have done particularly well. “I think most stocks in Taiwan will tech companies, these are less heavily With many Taiwanese firms repatriating continue to rise, but not to the level affected by the trade war.” manufacturing operations from China some are predicting,” Lin adds. “Stock As for the future, Lin and his team to Taiwan, analysts tend to be taking markets are fragile and any number of are dedicating themselves to maintaining an optimistic view of the outlook for things – the results of the Taiwan elec- their stellar investment record and guar- the coming year. The TAIEX as of early tions, actions taken by either side in the anteeing client satisfaction, regardless of November was up 19% for the year, trade war, and especially the U.S. elec- the direction markets take. “Our clients’ with the upward momentum showing tion next November – could once again success is our success,” Lin says. “So, no signs of slowing. cause panic and turmoil,” he says. we will continue to focus on helping In spite of the positive signs, Lin In light of this possibility, what is them meet their investment targets. remains cautious. “Taiwan is entering the most practical approach for inves- That’s our most important objective.”
美中貿易 持續延 ，一 不 定的 全 的金融服務業。局勢不穩定 致 年 市 現 ， 工業 20 年的 年 為 5 63 ，標準 500 年 為 6 2 ，兩個 在 年 上 後 度 而台灣 權 現更 ，全年 6 。 有 於 市 現如此 ， 20 年 來，台灣投資人 、 、可可 ，這些天然產品與公 的 不 多 已 不安，分 也開 根據全 貿易 同，不 易受 市 動所 。」 局勢來 一年度的 市 現。 行長不同 會 動的商品，投資風 就高 的 然而，手中持有的投資 合交 立 資本 理公 英 ，這從立 資本一 的高 中可以看得出來。但他 理的投資人可能就沒 麼 心了。就 20 年 要 市 ，立 資本 理是經 的交易 ，現 和 現都不 理想，立 資本所 理的 能 得 的 權 行成功為 來 的 。 投資 ，這 然。立 利基金（ ei i a e 行長提 關於 年貿易 的重大事件之一，就是5 3 un ） 20 5年 成立以來，已 續五年的高 中國商務部為回應美國 中國商品 關 而發 的 不 效， 在20 年達 0 高 。 可 實 。 ：「這 一發 ，就引發美國企 立 資本 理公 行長 了 的 求。 業極度 ，當天 350點。 是5 ，全 多年前， 生在台北從事會計 業期 開 足 市的市 就 發了5 美 。」立 利基金也 ，但 國際金融 域。他 ：「在以前，台灣沒有人持有特許金融 在6 開 回升， 公 告的 是 22 。 分 （C ） ，因此，想要 海外投資的台灣人通 而 ， 年 市已出現大 ，台灣 市 現 外 會 人會計 如 海外 大金融資產。」 。 許多台灣公 將生產作業從中國 回台灣，分 5年， 行長 程從台北 紐 及 ， 望進 年前 持 的 度。 ， 權 全年 一 了 美國的投資 ，同時研 有前 的長期金融商品 上 了 ，上升 勢沒有 的 。 以 助 。在 ，大部分投資活動都 中在期 交易 雖然各 都 極 ， 然保持 。他 ：「台 上。 商品交易 問（CT ）的工作 特 灣正 年，從 經 來看， 政 會 所能制 政 ，因為在當時投資商品期 這件事 台灣來 根本前所 提高 市 現， 保 利當 。」 。 ：「 為台灣大多 會 續上 ，但不會 回國後， 開 足台灣 成立的期 市場。他 ： 達部分人 所 期的水準。」他 ：「 市場除了 「 開 應用在 從交易商和經理人 來的方法 之外還會受 許多全 事件的 ，比如台灣大 結果、貿 助台灣的 。這些年， 也 出一 經營 ，也 易 雙方 的行動， 其還有 年 一 的美國大 都 會要求美國的 口提 助。」 有可能再 引起 市動盪。」 最終 成紐 立 資本 理公 ，於2005年開 基於上述可能 ，投資人在2020年應 什麼 的實際作 助台灣投資人建立投資 合。從 時起 20 年 利基 為 ：「如果投資人要 台灣 ， 會建議 金正 成立中 ，立 想方設法成功為 的 為 在 化產業、建 及 地產開發 。這些企業與科技產 302 5 。多年來，公 所 展的個人 和企業 人 業最大的不同點，就是受 貿易 的 比 。」 ，立 為 提 大 的投資 、財務 和財 關於 來，無論市場走向如 ， 與其 業 會持續致 理服務。 力於 持 出色的投資 效，來 。 ：「 ，立 資本 理多年來能 現如此出色的 很 的成功來 的成功。因此， 將 續努力 助 。他 ：「 要關 於投資 產品 、大 、 達成投資目標，這就是 最重要的使 。」
TAIWAN BUSINESS TOPICS • DECEMBER 2019 15
Leich adv.indd 15 2019/12/4 下午10:11 AMCHAM EVENT
Liver Health Takes Center Stage at Annual Forum
he second annual U.S.-Taiwan Taiwan as a regional leader in liver the Gastroenterology & Hepatology Liver Health Forum, held health and noting that cooperation on Division at Taipei Veterans General T November 15, 2019 at the this area is one of the great innovative Hospital. Shangri-La’s Far Eastern Plaza Hotel, efforts between the U.S. and Taiwan. Director General Lee Po-Chang of was a collaboration between AmCham In the lead-off presentation, Min- the National Health Insurance Asso- Taipei and the American Institute in ister of Health and Welfare Chen ciation spoke on NHI coverage for Taiwan (AIT) as part of its AIT@40 Shih-Chung shared slides illustrating Taiwan’s national virus prevention and campaign. Taiwan’s success in decreasing the prev- treatment programs, which reached The campaign’s theme for November alence of Hepatitis B, as well as the nearly 40% in 2018. He and other was Innovation and Entrepreneurship government’s push to eradicate Hep- speakers emphasized that coopera- Month, a fitting background for the atitis C in Taiwan in advance of the tion among physicians, the NHIA, and forum, where a series of presenters and World Health Organization’s 2030 industry have contributed to Taiwan’s panelists discussed Taiwan’s continuing target. Dr. Chen Ding-Shinn of Aca- leading position in the treatment of work towards becoming a “Liver demia Sinica elaborated on this plan, HCC liver cancer. Health Center of Excellence in Asia.” noting that Taiwan is in a good position The first panel, moderated by Gen- As with last year’s event, opening to meet this WHO Sustainable Devel- eral Manager Ramanathan Velayutham remarks were provided by Vice Presi- opment Goal by 2025. Dr. Pwu Raoh- of Abbvie International Taiwan, dis- dent Chen Chien-jen. An epidemiologist Fang, MOHW’s National Hepatitis C cussed how Taiwan can reasonably by training whose past research focused Program Office Director, noted that achieve its goal of eliminating Hep- on the control of Hepatitis B, Chen public health precision and integrated, atitis C on the island by 2025. Two briefed the audience on the history of localized prevention and treatment other panel discussions rounded out liver health progress and Hepatitis B approaches will be needed to meet the the forum, moderated by Gilead Sci- management and treatment in Taiwan. objective. ences General Manager Pongo Peng and He pointed to the substantially reduced Other presenters included Dr. Yeh Bristol-Myers Squibb General Manager risk of cirrhosis, Hepatitis C, and liver Yen-Po, director of Changhua Coun- Mark Horng, respectively. cancer in children immunized against ty’s Department of Health; Dr. Kao Besides the presenters and modera- Hepatitis B. Jia-Horng, president of the Taiwan tors, panelists included Dr. Wang Ying- AIT Acting Director Raymond Association for the Study of the Liver; wei, Director-General of MOHW’s Greene also gave brief remarks, praising and Dr. Huang Yi-Hsiang, chief of Health Promotion Administration; Dr. Chien Rong-Nan, vice superintendent of Chang Gung Memorial Hospital’s Linkou branch; Dr. Yang Pei-Ming, CEO of the Good Liver Foundation; Dr. Lin Shi-Ming, chairman of the Taiwan Liver Cancer Association; and Merck Sharp & Dohme (MSD) Man- aging Director Rie Nakajima. AmCham Taipei President William Foreman pro- vided closing remarks. Platinum sponsors for this year’s forum were Abbvie, Bristol-Myers Squibb, and Gilead. MSD was a silver Vice President Chen Chien-jen, left, and AIT Deputy Director Raymond Greene were among sponsor. the speakers at the Forum.
16 TAIWAN BUSINESS TOPICS • DECEMBER 2019
liver forum.indd 16 2019/12/4 下午10:11 COVER STORY
Taiwan as Regional Hub: What are the Chances? 台灣成為跨國企業亞太總部 的可能性有多大？
TAIWAN BUSINESS TOPICS • DECEMBER 2019 17
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TAIWAN AS REGIONAL HUB
ack in the 1990s, the idea of as Shanghai have risen to prominence. Taiwan becoming a regional Still, Taiwan can offer some key B operations hub for a variety benefits for businesses that set up a of industries was a popular topic of base here, including relatively low As a center of operations discussion. The plan never made much personnel costs and operating expenses for local and foreign busi- headway, however, in part because of – without a compromise on quality – as the lack of direct flights connecting well as comfortable living conditions. nesses across numerous Taiwan with mainland Chinese cities. Because of Taiwan’s positive attri- industries, Taiwan has a Now that the U.S.-China trade war butes, it is now poised to become – if lot to offer. However, some and unrest in Hong Kong are caus- it is not already – a regional hub for ing many multinational businesses to two industries in particular: namely, lingering issues require rethink their operational strategies in wind power and high-end technology creative solutions if it is to the Asia Pacific, the notion of Taiwan research and development. These are compete on the same level serving as a hub is again receiving discussed in more detail in the accom- some attention. panying story in this section. as some of its neighbors. Even before the recent turn of In vying to be a regional hub, events, some major individual compa- Taiwan has a number of advantages, nies had decided to locate their regional but also some notable shortcomings. 在許多產業別，台灣做為本國 headquarters in Taiwan. But largely Although it has greatly improved its 與外國企業的營運中心享有許 due to political factors, the chance that standing in recent years in international 多優勢，但如果要跟部分鄰國 Taiwan could realize its former dream competitiveness surveys, it has still been of becoming a full-fledged “Asia-Pacific unable to break into the top tier along- 並駕齊驅，台灣有若干長期問 Regional Operations Center” – or a side Singapore and Hong Kong. 題需要找出有創意的解決方 general regional hub – still seems as In the World Economic Forum’s 法。 remote as ever. Global Competitiveness Report Twenty-some years ago, the Taiwan 2019, for example, Singapore took economy was riding high as one of the first place, with the U.S. second, and four “Asian Tigers,” recording growth Hong Kong third. Taiwan came in at a rates that were among the world’s high- respectable – but second tier – No. 12, BY JANE RICKARDS est. Since then, Taiwan’s compara- ahead of South Korea at No. 13 and tive advantage for the role of regional Australia at No. 16. hub – in the sense of a leading center Altogether 141 economies were of commercial activity – has receded in assessed in 12 categories that included many respects as other locations such infrastructure, macroeconomic stability,
0 0 0 0
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and health. Taiwan’s best score – rank- ing No. 4 in the world – was in the cate- gory of “innovation.” The only countries rated higher for innovation were the U.S., Germany, and Switzerland. Meanwhile, on the World Bank’s Doing Business 2020 survey, which eval- uates the ease of doing business in 190 economies, Taiwan ranked No. 15, compared to Singapore at No. 2, Hong Kong at No. 3 and Malaysia at No. 12, showing Taiwan could use a lighter regu- latory touch if it wants to catch up to its neighbors. Compared with regional rivals, upmarket Xinyi District to be US$545, comprehensive set of services, including Taiwan is a distinct bargain in terms compared to a whopping US$2,060 in Chinese medicine, dental care, and hospi- of operating and living expenses. This Hong Kong, US$964 in Beijing, US$928 talization. Co-payment for dental care year the annual Cost of Living Survey in Tokyo, and US$820 in Singapore. can be as low as NT$50 (US$1.64). by Mercer, the U.S. human resources (Surprisingly, however, Seoul was cheaper A key advantage for Taiwan is its consulting firm, rated Hong Kong as the at US$457.) geographic position in the center of Asia, world’s costliest city, followed by Tokyo Chao also notes that while prop- with most of the key business cities in and Singapore. Shanghai came in 6th erty prices in Taipei are comparable to the region about a two- to three-hour place and Beijing 8th. The survey consid- those in Shanghai, the cost of renting a flight away. ered the prices of items such as hous- place to live is much lower than in Tokyo, Expats often rave about the friendli- ing, food, and utilities for expatriates; Shanghai, and Singapore. Monthly rent ness of the Taiwanese people. They also it found that Taipei had dropped eight for expatriate accommodations in Hong appreciate that Taipei and the other cities places to an inexpensive No. 35. Kong would be about double the Taipei do not feel like a concrete jungle, since Tony Chao, Taiwan Country Head level, Chao estimates, while rents in Taipei both mountain getaways and seashore for real estate consultant Jones, Lang are about a third that of Shanghai’s. beaches are conveniently close. Transport La Salle, notes that office and residen- Electricity and water are also rela- links, including Taipei’s network of Mass tial rents in Taiwan are relatively cheap tively inexpensive in Taiwan, as is the Rapid Transit lines and the High Speed for the region. A recent report from the excellent medical care. Enrollment in Rail running the length of the island, are company found the average Grade A the National Health Insurance system is well-maintained and easy to use. rent per square meter per annum in the compulsory for all residents and offers a Not all is well with the infrastruc-
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ture, though. After the recent collapse September was NT$51,657 (US$1,692) cil stresses the government’s efforts to of a bridge in the northeastern county for full-time workers once bonuses ease regulations regarding the hiring of of Yilan, killing several migrant work- and other irregular payments were foreign workers. For example, it early ers, it was reported that nearly a quarter accounted for. In contrast, the gross aver- last year launched an Employment Gold of the island’s 4,025 bridges had not been age monthly income in Singapore is the Card aimed at attracting skilled foreign properly maintained. Air quality is also equivalent of US$3,247, according to the specialists. Recognizing that such special- a continuing problem, due mainly to the Singaporean government. ists are often self-employed, the program large number of coal-fired power plants, Economist Yeh Chi-jen of the Taiwan does not tie residence rights to work although it is still significantly better than Institute of Economic Research notes that for a specified employer. But any such many other locations in the region. a Taiwanese associate professor makes measures cannot be fully effective if sala- Mercer’s 2019 Quality of Living about NT$80,000 a month. He estimates ries are not regionally competitive. Ranking ranked Taipei as the 9th most that a Singaporean university would offer One of the prime characteristics livable city in Asia and 84th most livable around three times more. companies are certain to seek in a regional in the world. It assessed such factors as For foreign businesses hoping to set hub is the availability of sufficient person- the availability of housing, recreational up shop in Taiwan, a lower payroll can nel fluent in English, the international facilities, consumer goods, and public be a plus. But it is a minus if Taiwan language of commerce. services, as well as the political and natu- wants to attract the best and brightest In an indication that Taiwan is lagging ral environment, all with expatriates in from around the world to contribute their in this respect but is determined to mind. Vienna topped the list, with Singa- talent to the economy. improve, the government late last year pore at No. 25 in the lead among Asian Stagnating salaries have led to a brain announced the “2030 Bilingual Nation cities, closely followed by Tokyo and drain, with about 736,000 people – Development Blueprint” with a goal of Kobe. Among mainland Chinese cities, often high earners – working overseas in creating an English-friendly environment Shanghai was deemed most livable with a 2017, according to the Mainland Affairs within a decade. The program will make ranking of 103. Council. English learning more immersive by incor- Wang Jiann-chyuan, vice president of porating the language into instruction in Some downsides remain the Chung-Hua Institution for Economic the schools in a broad range of subjects, Research, says that it could even be hard even physical education. So far 67 elemen- Among the negatives impeding for Taiwan to attract blue-collar labor tary and high schools in around 20 cities Taiwan’s ability to act as a hub include from ASEAN nations in the future, as have taken part in these programs, while salary levels that have stayed roughly “the wage differential between ASEAN teaching in English is also being encour- flat for around two decades, while they and Taiwan is probably very close.” aged at the university level. have grown in nearly every other part Consequently, Wang suggests that Taiwan Starting next year, several local banks of Asia, particularly in Hong Kong and will probably need to follow Japan’s will launch pilot bilingual branches, Singapore. According to the Director- example and utilize more automation in and the Ministry of Justice has begun ate General of Budget, Accounting and its factories. providing the main points of indictments Statistics, the average monthly income in The National Development Coun- in English when foreigners or foreign
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companies are charged with legal infrac- tions in major cases. Many observers find the government’s plan to be admirable but perhaps unre- alistically ambitious. Nicholas Chen, managing partner of the Pamir Law Group, notes that Singapore, even with its British colonial influence, took 20 years to establish an English bilingual policy. When Taiwanese government agencies provide an English-language website, he observes, it is usually outdated and not user friendly. “English is the lingua franca, and if it isn’t adopted at the front end – the The Taipei City government's kickoff for a program to incorporate more English into government – foreigners are unable to the curriculum in the city's schools. access critical information to determine PHOTO: TAIPEI CITY GOVERNMENT if Taiwan is a potential place to relocate to,” says Nicholas Chen. In comparison, US$27,007, according to data on the pore, faces steeper government expenses he adds, the website of China’s Ministry school’s website, just slightly lower than than these megacities. It is unlikely that of Commerce is internationally focused, the tuition and faculty fees for the Singa- Taiwan could meet its budgetary needs with multilingual support not only in pore American School of US$32,322. with an income tax rate similar to that of English, but also in French, Russian, Taiwan’s stagnant salaries also place a its two rivals. Spanish, and German. big question mark over whether Taiwan Arthur Chen, a tax partner with Another consideration for multina- can hire the best professionally trained Deloitte Taiwan, also notes that Singa- tional companies is the availability of foreign English teachers at its public pore and Hong Kong only tax income schooling for the children in expat fami- schools, given that other countries in the earned in their own territory, both for lies. Local schools are usually out of the region are also hiring. individual and corporate tax. In contrast, question because so much of the curric- In addition, Taiwan’s tax regime Taiwan has a global taxation regime. ulum is taught in Mandarin. “The inter- is not as attractive as those of Hong In principle, if expats receive dividends national schools have Western, English- Kong and Singapore. The maximum from shares purchased and distributed taught curriculums, but the criteria to get personal income tax rate in Taiwan is in their home country, they still need to in is tough, plus they can be expensive,” 40%, compared to Singapore’s 22% and pay tax to the Taiwanese authorities. “I Nicholas Chen notes. Hong Kong’s 17%. Taiwan, which needs don’t know how we can make it compet- For instance, grades 9-12 at the to administer a much larger and more itive unless we change from global taxa- Taipei American School cost an annual diverse area than Hong Kong or Singa- tion to residential basis taxation,”
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Arthur Chen says. or inconsistent interpretations of rules Still, Taiwan is a party to the World He also points to quirky tax regula- from different government agencies. Trade Organization’s Information Tech- tions that are inconsistent with interna- Another question hanging over nology Agreement (ITA), which elimi- tional tax principles. For example, foreign Taiwan’s suitability as a hub is the nates tariffs on a wide range of the tech- companies without a branch in Taiwan always sensitive, increasingly challeng- nology products that are a major pillar and whose executives have never visited ing cross-Strait relationship. Beijing cut of the Taiwanese economy. CIER’s Wang the island can still find themselves with off official communications with the Tsai considers the ITA provision to be one of a Taiwan tax obligation in the form of a Ing-wen administration when President the reasons why Taiwan could be success- 20% withholding tax on what is deemed Tsai declined to accept any version of a ful as a technology R&D hub. A bilateral to be “Taiwan-sourced income” – for “One China” policy after taking office trade agreement with the U.S. could help example, on the sale of R&D services to in 2016. Recently Beijing has stepped Taiwan further capitalize on its strengths a Taiwanese company, even if the services up pressure on multinational companies and mitigate against economic isolation, were not performed in Taiwan. operating in Taiwan to refer to the island economists say. “Taxation in Taiwan is not neces- as a part of China. Yet another of Taiwan’s assets is its sarily aligned with international prac- Chinese influence has also excluded free and democratic political system. tices,” Arthur Chen says, and as a result Taiwan from nearly all of the world’s “The key advantage Taiwan has is that “multinationals hesitate when considering network of free trade agreements. It will it is one of the only completely free soci- Taiwan as a multinational jurisdiction.” undoubtedly also keep Taiwan out of eties in Asia in a region that is going In a similar vein, foreign companies what could become the world’s biggest backwards,” says Hsieh Chang-tai, an have complained about instances in which trade agreement – the China-backed, economics professor at the University of Taiwan’s regulatory practices deviate from 15-member Regional Comprehensive Chicago. “That is a huge plus for Taiwan. accepted international ones. Problems can Economic Partnership, which is slated to The question is how to build on that in also arise due to bureaucratic vagueness be signed next year. terms of making a living.”
For Some Companies, Taiwan is Already a Regional Hub
echtel is the U.S.’s largest private construction firm. In its open up new business opportunities for Bechtel in Taiwan. more than 120 years of operation, the company’s proj- “Gas will play an increasingly large role in Taiwan’s energy B ects have included the Hoover Dam, the Channel Tunnel, mix and is going to be a big issue for the whole region,” Freer and construction of over 30% of global Liquified Natural Gas says. “Our experience in this sector can help customers across capacity. Asia-Pacific develop new and more sustainable energy supplies.” While Bechtel has had a presence in China for many years, Bechtel has also engaged extensively in the decommission- the company closed its Shanghai regional headquarters in 2014. ing of nuclear power plants, Freer points out, something that is Local competition toughened as Chinese construction compa- important as Taiwan looks to go nuclear-free by 2025. Taiwan’s nies played catch-up and it became more difficult for outsiders oldest nuclear reactor at Chinshan has already begun the decom- to win government contracts. The company has re-opened a new missioning process, while under existing policy two more regional office this year in Taiwan, which will be the hub for all nuclear power plants across the island are scheduled to be shut of Bechtel’s operations in the Asia-Pacific region. down in the coming years. “Across Southeast and East Asia, Taiwan has the best Meanwhile, the government has sought to expand Taiwan’s medium-term prospects for us as a company,” says Richard renewable energies from about 2% to 20% of its energy port- Freer, Bechtel’s Regional President for Asia Pacific. folio by 2025. Freer notes that Bechtel can support this initia- Bechtel has operated on the island since 1979 through a tive, too. “We are also active in Taiwan in wind and solar power subsidiary, Pacific Engineers and Constructors Limited, and has generation,” he says. specialized in fossil and nuclear power, transportation commu- Freer commends Taiwan’s government procurement process nications, petroleum and environmental services. It has been for being open and transparent, something that is not always the involved in the construction of the Kuosheng and Maanshan case elsewhere in the region. “We feel that the market is open Nuclear Power Plants, the Taipei Railway Station, and the to companies like Bechtel, that the contracting environment is Taipei Mass Rapid Transit System. good, and that there’s a business environment here that we can “The energy market here is especially interesting,” adds effectively compete in,” he says. Freer. “Irrespective of what happens in the January elections, we Another selling point for Taiwan, Freer observes, is its abun- will see a transition from coal to gas.” Such a shift is expected to dance of engineering talent. Aside from a few expat employees,
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PECL’s 500-strong workforce consists of local Taiwanese. Daniel Tseng, president of Corning Display Technologies Furthermore, Taiwan’s position in the center of Asia makes it Taiwan, says Taiwan’s friendly environment and low operat- an attractive center of operations in the region. The connectiv- ing and living costs makes it a natural choice for expatriates. He ity provided by Taiwan’s two major airlines makes managing the also emphasizes the rich pool of talent in Taiwan and the high rest of the company’s regional business interests much easier. level of government support. Finally, a big plus for Bechtel is that Taiwan tends to adopt a “Our customers in Taiwan all make high-end products, and broader social outlook compared to most of its regional neigh- Corning offers them high-end glass,” Tseng says. bors. “As a company we champion diversity and the liberal Corning’s executives champion Taiwan’s strong intellectual social laws here create a good environment for us to do busi- property protection regime. Tseng notes that it is difficult for ness,” he says. competitors in other countries to uncover the company’s trade Another major U.S. company that has made Taiwan its secrets. regional hub is Corning, a producer of sophisticated glass and “The key secret is in the manufacturing process,” Tseng says. ceramics products, as well as related technologies. “Even if they know the composition of the glass, they are still Corning began doing business in Taiwan in 1971. As the unable to replicate it.” Corning therefore has been appreciative island’s Liquid Crystal Display industry developed, the company of Taiwan’s efforts to strengthen and enforce its laws to protect decided to move its LCD glass production closer to its custom- trade secrets. ers, most of which were Taiwanese panel makers. In 2000, it However, Tseng pointed out that China is offering increas- founded a subsidiary, Corning Display Technologies Taiwan, ingly plush tax breaks and subsidies to this industry, making it and began investing in manufacturing facilities in Taiwan’s more competitive and squeezing out other regional players. “We budding science parks. would encourage Taiwan’s government to strengthen and create In 2012, Corning settled on Taiwan as the base from which Taiwan’s advantages in order to attract more foreign invest- to manage its display technology business. From there, it contin- ment,” he says. ued to provide the market with advanced LCD substrates – Among other prominent multinationals that have based their specialty glass used for thin-film transistor panels. regional headquarters in Taiwan are Versum, a 2016 spin-off Corning operates various other business units in Taiwan, as of the electronic materials business of Air Products, and Synop- well as two research and technologies center. Around 80% of its sys, a supplier of equipment and software for the semiconductor Taiwan-made glass products are intended for use in large LCD industry. Versum, which serves the semiconductor and display TVs, while the other 20% are used in various ICT products, industries, has since been acquired by Merck of Germany. including smartphones. The company’s executives note that it Taiwan is an important market for both companies because has provided glass for Apple’s smartphones since the very begin- of the presence here of many of their major customers. ning of their production. — By Jane Rickards
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Making a Hub in Wind Power and Technology R&D
Two industrial sectors appear particularly promising for Taiwan to develop as a regional center for the Asia Pacific.
BY JANE RICKARDS
he best opportunities for Taiwan ized ships used to install the turbines Taiwan is currently considered the place to play a strong regional role may many miles out to sea. to be. T lie with its fast-developing capa- With that foundation, Taiwan could “When it comes to offshore wind, bility in offshore wind power and its be a regional leader in what is a rapidly Taiwan is the second most attrac- already well-established foundation as a growing industry. Power generated from tive market in the world after the E.U., high-tech R&D center. the main renewables – solar photovol- followed by Korea and Japan,” says Joél Taiwan has big expectations for wind taic and wind power – currently accounts Ciceron, director of Ostendo Projects, power, especially offshore installations for only 0.3% of global electricity gener- which offers consultancy services to wind – and not only as a means of generating ation, according to the International power developers. enough electricity to enable renewables to Energy Agency. However, offshore wind First of all, says Ciceron, Taiwan has replace nuclear power plants. The vision capacity is set to increase 15-fold over the an abundance of good sites for wind is to create a potent supporting indus- next two decades, turning it into a US$1 power. Many of the world’s top 20 sites try, covering everything from manufac- trillion business, experts say. for developing offshore wind are located ture of the needed wind-turbine compo- The technology is already well-estab- in the Taiwan Strait, which forms some- nents, towers, and submarine cables to lished in northern Europe, and multina- thing of a natural wind tunnel. marine engineering and construction of tional companies are scrambling to get The second reason is the strong the underwater foundations and special- a foothold in Asia. Within the industry, commitment from the ruling Democratic
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Progressive Party government, which tive 20-year power purchase agreements In early November, Taiwan’s first aims to make Taiwan nuclear-free by with a feed-in-tariff above European commercial offshore wind farm, Formosa 2025. benchmarks. As a result, top European 1, was inaugurated off the coast of By then, the government’s plan calls wind-power developers have been setting Miaoli County in north-central Taiwan. for renewable energy to account for up shop in Taiwan, including Denmark's The project, launched in 2013, each year 20% of Taiwan’s energy mix, up from Ørsted and Copenhagen Infrastructure will supply enough power for 128,000 the 1.9% reported in the 2019 Taipower Partners and Germany’s wpd, along with households, more than 60% of the house- Sustainability Report. The proposed 5.7 numerous foreign suppliers – 18 from the holds in Miaoli. The Formosa 1 project is Gigawatts of installed offshore wind- UK alone. a joint venture among Denmark’s Ørsted, power capacity is expected to generate A sign that Taiwan has become a hub Japan’s JERA, Australia’s Macquarie nearly NT$1 trillion (US$31.7 billion) in this sector, notes Ciceron, is a trend Capital, and Taiwan’s Swancor Holdings. in total investments and create 20,000 for companies to use it as a location to A Formosa 2 project, expected to job opportunities. It's an ambitious plan, cultivate expatriate talent. After gain- start commercial operations in 2021, will as in 2018 wind power stood at around ing experience in Taiwan’s offshore-wind supply power to approximately 380,000 0.3% of Taiwan’s energy mix, according industry, they may be moved by their households annually, while a massive to the Bureau of Energy. companies to other parts of Asia, such as Formosa 3 wind farm is under planning. Developers have been offered attrac- Japan and Korea. The government is also promot-
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ing the financing of wind-farm projects may demand too much, too quickly, to “first mover” advantage, they say, but as a new business opportunity for the the detriment of the industry’s viability. before foreign companies make massive banking industry. The idea is to encour- Ciceron notes that Taiwan is seek- investments in building local supply age international banks with offshore- ing to build a local industry from scratch, chains, they will need much more infor- wind experience to bring their exper- with no existing supply chain to provide mation about the government’s plans for tise to Taiwan, where they can collabo- support. “There’s frustration from devel- wind-power development beyond 2025. rate with local financial institutions. The opers that they’re being pushed to have Their questions will include the scope financial consortium backing Formosa 1 100% local content in wind farms, and and nature of the projects, how licenses consists of four local and seven interna- it’s not realistic,” since the higher costs will be awarded, and whether rates will tional banks, with guarantees from EKF, will erode competitiveness. be set by feed-in tariffs, which are essen- Denmark’s Export Credit Agency. At this stage in Taiwan’s wind-power tially government subsidies, or deter- “This has enabled the local financial development, it is often cheaper to import mined through auction. community to prepare for future invest- material and equipment from countries President Tsai Ing-wen appears aware ments in large-scale offshore wind proj- that already have a foundation in the of the challenge. “Although Taiwan is ects in Taiwan,” Ørsted said in a press sector, says Ciceron. “You need to find still the first mover in the green energy release last year. a way to satisfy the vision of the govern- race, other Asian countries are in hot In a recent related move, Ørsted ment without losing track of the econom- pursuit, so our green energy development raised NT$12 billion through the issu- ics,” he advises. planning can’t stop at the year 2025,” she ance of green bonds (bonds earmarked That vision is to create a strong said in remarks at the Formosa 1 inaugu- for use in environment-friendly projects) enough domestic base in wind power ration ceremony. “We have to achieve our that will be traded on Taiwan’s over-the that Taiwan will be able to take a leading green energy goals and then set higher counter market to finance its investments position in the industry’s future develop- goals, so that domestic and overseas firms in offshore wind projects in Changhua ment in the Asia Pacific. Ciceron is bull- are confident about making long-term County. It was the first time for a foreign ish about Taiwan’s prospects for achiev- investments in Taiwan.” company to issue green bonds in Taiwan ing that aim, noting that foreign players and will help the nation develop green find it hard to break into the supply chain Regional R&D center financing. in China, while Japan’s progress has While Taiwan can now clearly be been hindered by an inadequate regula- Taiwan “also has good potential to considered a nascent Asian offshore wind tory framework and the strong resistance be an Asia-Pacific R&D center,” says power hub, there are concerns about coming from Japanese fishermen. Wang Jiann-chyuan, vice president of whether this status can be sustained over Other executives stress that Taiwan’s the Chung-Hua Institution for Economic the long term. viability as a wind-power hub over the Research. Although developers generally support coming decades will depend chiefly on The economist notes that in the last policies to foster the use of local content the degree of commitment the govern- few years several of the leading U.S. tech- in equipment and the hiring of local ment signals to potential foreign partici- nology giants have chosen Taiwan to set talent, they worry that the government pants in the sector. Taiwan currently has up advanced research centers.
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Microsoft and Amazon Web Services, based Taiwanese companies that make have made investment plans for Taiwan for example, have established R&D electronic components, computers, and to the tune of NT$697.7 billion (almost centers to work on the internet of things, other high-tech devices have been scram- US$23 billion), encouraged by Taiwan- while Microsoft, Google, and IBM are bling to avoid higher tariffs, prompting ese government incentives. As a result, researching artificial intelligence applica- many of them to increase their presence according to the Taiwan Institute of tions here. in Taiwan. To cite one example, Inventec Economic Research, Taiwan will enjoy Analysts say such companies find Corp. has shifted its production of note- GDP growth of 2.45% in 2020, higher Taiwan attractive for its low operat- books for the U.S. market from China to than its regional rivals Hong Kong, South ing costs compared with such places as Taiwan. Korea, and Singapore. Japan and Korea, as well as for its supe- In some cases, only the more sophis- NDC notes that Taiwan’s exports to rior intellectual property protection ticated technologies have been brought the U.S. increased by a steep 18.7% from compared with China. Another advan- back. In others, says National Devel- January to August this year, led by prod- tage is Taiwan’s strong semiconduc- opment Council Minister Chen Mei- ucts that would be slated for American tor industry, since specialized chips are ling, entire supply chains have relocated tariffs if produced in China. needed for many of the new research back to the island (although compa- Although U.S. President Donald applications. nies tend to retain some kind of pres- Trump and Chinese leader Xi Jinping Taiwan’s engineering talent is also ence in China). “More integrated supply may possibly come to an initial trade relatively inexpensive by international chains should then attract more foreign deal by the end of the year, that would be standards, while having skills that adapt investment to Taiwan,” says Ray Chou unlikely to stop the trend of relocation easily to the new technologies. Yeutien, a research fellow with Academia to Taiwan, since the American dissatis- The trade war between the U.S. and Sinica. faction with Beijing’s economic policies China has heightened Taiwan’s potential The Ministry of Economic Affairs appear deep-seated and difficult to fully to be an R&D hub, notes Wang. China- says that so far 154 returning companies resolve in the near term.
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SMART MANUFACTURING GAINS GROUND IN TAIWAN
Faced with rising labor costs, Taiwanese companies are increasingly utilizing the latest sophisticated technolo- gies to go beyond conventional automation to embrace Industry 4.0.
BY PHILIP LIU
growing number of Tai- past 10 years the company has been nology detect precisely the amount of wanese manufacturers are able to cultivate only four specialists in wear on the factory’s stamping press, Amaking the leap to smart fac- big data analytics. which cuts costs due to premature tories, reflecting the worldwide trend Another, larger challenge is ensuring replacement of the die or disruption of towards industrial automation known information security, a critical factor production because of a breakdown. as “Industry 4.0.” The Tsai administra- given the central role of the internet Industrial motors at work in the pro- tion has made the development of smart in smart manufacturing processes. duction line are outfitted with sensors machinery an integral part of its 5+2 The extensive disruptions caused by that detect abnormal temperatures or Innovative Industries initiative, and the a computer virus at the Taiwan Semi- vibration. The data is transmitted to the government continues to work toward conductor Manufacturing Corp. in MHM (machine health management) bringing Taiwan in line with Industry August 2018 highlight the importance system, enabling workers to recognize 4.0 standards. of security in maintaining smart manu- and solve any issues in a timely manner. Smart manufacturing entails auto- facturing systems. Once completed, parts are carried mating both the operations of a factory Some Taiwanese companies are away to designated locations by auto- and its management, utilizing a combi- adopting smart manufacturing in their mated guided vehicles (AGVs), which nation of automation technology, IoT offshore operations as well as domes- travel along preset routes, avoiding col- (Internet of Things), and artificial intel- tically. For example, TECO Electric & lision. Workers can monitor the status ligence (AI). Revamping a factory with Machinery, Taiwan’s leading manufac- of these smart production lines via a smart machinery carries the potential of turer of motors, this July launched a smartphone or iPad. significantly reduced operational costs new factory in Vietnam’s Binh Duong “Smart manufacturing has bene- and improved efficiency and quality. Province that will produce small, fited us in multiple ways,” says TECO’s The trend also poses some major high-efficiency motors using smart man- Acting President J. George Lien. “We challenges for Taiwan’s industrial sector. ufacturing technologies developed by have enjoyed reductions in the amount One is the need for specialized talent, the company over the past several years. of machinery equipment used, as well including those trained in AI, automa- The plant boasts an intelligent as in consumption of energy and mate- tion, robotics, industrial control, IoT, painting process, in which the paint des- rials. We have also seen increases in communications, and software. Wu ignated for each specific workpiece is productivity and output, and a 300% Yu-tien, president and CEO of Kaoh- mixed and applied automatically after reduction in our defect rate.” siung-based Advanced Semiconductor scanning of the work order. In addition, Lien says the next step is to ensure Engineering (ASE), notes that over the sensors and image-recognition tech- the profitability of the company’s smart-
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manufacturing program, starting by that demand from China accounts for oped most of the robots – which the selling its sensors and image-recognition half of the company’s profits. “Given company calls “Foxbots” – used in technology to other local manufac- soaring labor costs and high turnover, the process. The entire production line turers. The added value gained by those factory automation is the only path for- requires only 30 workers, who mostly companies will help them alleviate some ward for China,” says Hai. supervise operations, a huge reduction of the pressure brought on by the U.S.- Other Taiwanese firms aiming at new from the 300 that were needed for pre- China trade war, he notes. levels of automation include Quanta automated production. At the Victor Taichung factory Computer, AU Optronics, and ASE. Foxconn also maintains a dark fac- in central Taiwan, production lines These companies use various robotics, tory in Kunshan in China’s eastern making machine tools operate indepen- IoT, big data analysis, and AI technol- Jiangsu Province. The factory’s auto- dently for 72 hours nonstop while plant ogies in their manufacturing processes. mated manufacturing process covers managers monitor operations remotely The result has been large savings in delivery of materials, loading and on mobile devices. The company’s terms of usable space and energy, as well unloading, assembly, and packaging. smart machines, robotic arms, sensors, as increases in productivity. The entire factory now employs only and automated warehousing devices are 800 workers, as opposed to 3,000 in all connected by means of the compa- Foxconn pulls ahead 2015, while production value over the ny’s industrial IoT system. past four years has increased by 38.7%. “We’ve been shipping custom- Hon Hai Precision (also known as Substituting automated machinery made smart manufacturing systems Foxconn), the world’s largest contract and robots for laborers has not only costing NT$20 million to $30 million electronics manufacturer, has made slashed production costs, it has also (US$625,000-$937,500) each to cus- huge strides in automating produc- mitigated the issues associated with tomers in Taiwan, China, and Southeast tion. In order to cope with rising labor managing an enormous workforce, as Asia,” says Chairman Bert Huang. costs in China, where the bulk of its manifested in the rash of suicides that Innolux Corp., a leading Taiwanese manufacturing operations takes place, took place at Foxconn’s Shenzhen pro- LCD panel maker, began developing Foxconn has made some sweeping duction base in 2010. smart manufacturing operations in its changes that have received international Foxconn is the only Taiwanese man- factories in 2012. Over the past several attention. ufacturer to make it onto the World years, the company has invested over A prime example is Foxconn’s dark Economic Forum’s list of 16 “light- NT$3 billion in this endeavor, and most factory in Shenzhen’s Longhua Dis- house factories” – facilities that have of its production, assembly, and inspec- trict. Visitors to the factory must use employed Industry 4.0 technologies at tion operations have reached very high flashlights, as the only light source scale and have seen impressive gains. levels of automation. comes from the small green lights on In 2015, Hon Hai established Fox- This year, the company stepped machinery indicating that the equip- conn Industrial Internet (Fii), which up efforts to reach its goal of lights- ment is functioning normally. focuses on automation and machine out manufacturing. Also known as One of the facility’s production systems for smart manufacturing. This “dark factory,” the term refers to the lines makes OTT (over-the-top) set- September, the company unveiled its full automation of manufacturing top boxes. Manufacturing, assembly, plans for a new factory and office operations without the need for any and packaging of the products have all building in Mount Pleasant, Wisconsin. workers to be present. As a result of been fully automated. Foxconn devel- Li Jieh, vice president of Fii, notes this initiative, Innolux’s workforce has declined to 55,000, down from 136,000 in 2012. Power-supply producer Delta Elec- tronics has also entered the automation game. Delta has developed robotic arms for its manufacturing process, allowing it to reduce manpower at its China and Taiwan factories by 60% since 2015. It is now building a NT$1 billion robotic R&D center in the Central Taiwan Science Park, scheduled to begin opera- tions in 2020. Delta has been selling its solution to manufacturers in China, Europe, the U.S., and Southeast Asia. “Automa- tion will be a major growth driver for the company in the coming years,” says Yancey Hai, Delta’s chairman. He notes
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Smart-manufacturing production facilities at TECO Electric & Machinery Co. PHOTO: TECO
that the new plant would feature data- tion of the site’s equipment is controlled Vietnam plant. The system includes up oriented management, employing remotely by an MES (manufacturing to 100 vehicles that travel along dif- IoT technology that allows workers execution system), which receives and ferent routes on a factory floor. to manage and control equipment analyzes information relayed by sensors To encourage SMEs to ramp up from a network operations center and RFID (radio frequency identifica- their smart manufacturing practices, the inside the facility. The factory’s robots tion) on the production line. It is also Ministry of Economic Affairs’ Indus- would complete entire work flows pre- able to make on-the-spot adjustments, trial Development Bureau in 2018 cisely, rapidly, and safely in darkness, providing for both small-volume and began promoting its smart machine box enhancing the quantity and quality of large-variety production. Through the (SMB). Installed on existing machinery, production, reducing costs, and mini- use of AI, the system can detect signs of the SMB connects each piece of equip- mizing inventories. malfunction and arrange for timely rec- ment by way of Microsoft Azure and Fii brought in revenue equivalent tification. IoT Edge technology. to US$3.8 billion in 2018, a 17.16% Chen Lai-sheng, chief executive The Bureau helped 61 SMEs install increase from the previous year. of ITRI’s Smart Machinery Center, an SMB on 1,300 pieces of machinery Taiwan’s government, aware of notes that the MES is combined with equipment in 2018. That number is smart manufacturing’s critical impor- resource planning software and sold to expected to rise to over 9,100 boxes tance to the island’s industrial customers as a single module for a frac- installed by 2022. development, has rolled out several tion of the price of similar systems sold This June, the Executive Yuan initiatives aimed at furthering local abroad. The system makes technology approved amendments to the Statute manufacturers’ embrace of the new and transfer more convenient. So far, the for Industrial Innovation that will pro- emerging technologies. center’s six-person team has helped 30 vide tax incentives for those investing One of the initiatives was to orga- local enterprises set up smart produc- in smart machinery between 2019 and nize a team of academics and industrial tion lines. 2021. The amendments have been for- experts to assist local firms in intro- ITRI’s system can be used to make warded to the Legislative Yuan and are ducing smart-manufacturing processes metal parts for a wide range of indus- awaiting ratification. into their operations. Since its incep- tries, including bicycle and automotive, ITRI’s Chen credits Taiwan’s impres- tion, the team has provided services to ICT, semiconductor, machine tool, sive advances in Industry 4.0 to the over 500 small and medium-sized enter- hardware, and aerospace manufac- government’s large investments in smart prises in Taiwan. turing. It doubles as an open laboratory manufacturing and related technology. In addition, the semi-official Indus- in which SMEs can experiment with dif- He emphasizes the importance of this trial Technology Research Institute ferent configurations and choose overall trend to Taiwan’s future development. (ITRI) in 2018 launched its Intelligent solutions based on their specific manu- “Taiwan is squeezed between industri- Manufacturing Pilot Production Site at facturing needs. ally developed and emerging countries,” the Taichung City Precision Machinery ITRI was also responsible for the he says. “Smart manufacturing is the Innovation Technology Park. Opera- AGV system used by TECO in its new only way forward.”
30 TAIWAN BUSINESS TOPICS • DECEMBER 2019
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THE AUTO INDUSTRY IS IN LOW GEAR (BUT SO FAR NOT IN REVERSE)
While global auto markets faced significant setbacks and weak sales growth this year, Taiwan appears to have fared relatively well. However, challenges for domestic automakers continue to intensify as consumers increasingly choose imported vehicles.
BY JEREMY OLIVIER
019 was a tough year for global automakers that have come to depend with manufacturing bases in China auto markets. A combination heavily on Chinese demand. begin moving operations back to their 2 of factors – declining demand, Taiwan, on the other hand, seems home turf, it stimulates investment and increasingly strict emissions and fuel- to have been somewhat immune to overall economic growth on the island. consumption standards, pressure on the disruptions happening elsewhere Also encouraging is that brisker sales automakers to sink new money into in the world’s auto markets. Although can be expected in the fourth quarter. R&D for autonomous and electrified a drop has occurred in total car sales Purchases of large-ticket items, partic- vehicles, and gradual changes in how – around 3% during the period of Jan- ularly cars and apartments, tend to dip people are choosing to get around – has uary through October, according to the in August each year – Ghost Month on contributed to a large slump in sales of Taiwan Transportation Vehicle Man- the lunar calendar, during which time new motor vehicles worldwide. ufacturers Association (TTVMA) – making big purchases is considered to While the auto industry in the U.S. Taiwan also managed to register some bring bad luck – and rise again in the and EU suffered declines in the number impressive figures on a month-to- final quarter. of units sold domestically this year, an month basis. Overall, though, car sales have even bigger drop was experienced in For example, car sales rose 7% in remained relatively stagnant for the past China, the world’s single largest auto April, likely due to the rollout of several several years, despite a spike in 2017, market. new models of international brands, and analysts are not generally optimistic “China’s auto market starting last including Ford’s new Focus hatchback about what’s to come. year began slipping, largely due to and sedan models and Toyota’s 2019 “We’ve seen a downward trend this uncertainty in the industry, driven by RAV4. A report by local car industry year, especially in the area of luxury factors like the U.S.-China trade war,” publication TopCar showed that in vehicles,” says Champion Chen, Top- says Thomas Fann, former president of October, Taiwan’s auto industry saw Car’s editor-in-chief. He mentions that Ford Lio Ho Motor Co. “Even without sales growth of 17% – higher than any the upcoming presidential and leg- the occurrence of the trade war, the other market in the world that month. islative elections are a major factor industry would have been hit due to a The TTVMA predicts that car sales for contributing to the decline. “There is slowdown in the growth of local econo- 2019 will total 425,000, marginally an air of uncertainty over who will be mies, but not to this degree.” lower than last year’s 435,000. elected, and so the idea is to wait until Fann notes that auto sales in China In part, the relative stability of the after it’s over, once things have stabi- through October this year have fallen Taiwan market during this period may lized, to decide whether to buy.” around 10%, a significant decline, be a knock-on effect of the U.S.-China Chen also points to Taiwan’s slug- which has negatively impacted global trade war. As Taiwanese businesses gish economic growth over the past
TAIWAN BUSINESS TOPICS • DECEMBER 2019 31
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few years as contributing to an ero- sion in consumer confidence, pulling down demand. “Even though analysts are saying that Taiwan’s growth rate will stay at 2.4% next year, this is still pretty minimal,” he says. Thomas Fann echoes Chen’s anal- ysis, adding that consumers in Taiwan, like those in other markets, are becoming less likely to want to own their own vehicle, even though traffic congestion in major metropolises like Taipei has improved in recent years. Furthermore, new disruptive technol- ogies such as ride-hailing services and emerging driverless car businesses could increasingly make the idea of car own- The Lexus NX 200t, part of the company's NX SUV series, proved a popular choice among Taiwanese motorists in 2019. ership – especially in high-density urban PHOTO: KĀRLIS DAMBRĀNS UNDER A CC-BY 2.0 LICENSE. areas – obsolete. “Most people – even me – don’t from 2018. Similarly, Mercedes’ entry produced ones. drive very often. We take buses, we level A Class sedan was a popular To the casual observer, Taiwan’s walk, we ride bikes if the weather is choice, experiencing almost double slew of import duties and value-added nice,” Fann says. “So, car ownership sales growth for the first three quarters taxes would seem to make buying an is now saturated, and I don’t think we of 2019 compared with the same period imported car an illogical choice com- will exceed the current high point of last year. pared to one that’s manufactured or around 400,000 to 450,000 units sold “There are customers that are assembled at home. However, as Chen per year.” attached to those brands,” says of TopCar points out, even if a car is As for the luxury vehicle market, Thomas Fann. “Even if what they end assembled in Taiwan, the majority of which for years has enjoyed steady up buying is a lesser model, it still has parts and components still has to be growth in Taiwan, demand remains the name attached to it, so you can see imported, and the tariffs on these items high, but is beginning to level off. Two why so many consumers are choosing are comparably high. As a result, the leading brands, Mercedes and BMW, to buy them.” difference in cost between an imported experienced some significant setbacks Such a strategy may be effective, but vehicle and one assembled in Taiwan worldwide in 2019, but this seems to it’s not without its detractors. TopCar’s is increasingly negligible to the average have had little effect on their Taiwan Chen argues that the surge in popu- consumer. performance. Mercedes still domi- larity of the lower-priced luxury models In addition, Taiwanese consumers nates the local luxury market and is indicates that things are not at all well tend to have the perception that the the motor vehicle brand with the fifth in the car market. “It’s not healthy,” he imported version is of better quality, highest sales in Taiwan in 2019. BMW says. “If consumers are going to buy Chen says, which is shrinking the holds the number-three spot among a Lexus, such a high-end brand, they already small domestic market for luxury car brands. should be buying higher quality models such cars. The second-most-popular luxury with better equipment – more luxu- Furthermore, markets that had brand in Taiwan, Lexus, saw the rious cars.” previously been export targets for Tai- most remarkable growth this year, wanese car manufacturers – the Middle jumping 17.4% in the first three quar- Local automakers suffer East and more recently China – are suf- ters. Behind this boost is a growing fering economically, decreasing demand demand for Lexus’ SUV models, such The more affordable models on there as well. Loss of that business as the NX, UX, and RX series, and the offer from luxury brands are also exac- means higher production costs due to ES-series sedans among an expanding erbating a salient long-term trend in reduced economies of scale, setting off a aspirational middle class in Taiwan. Taiwan’s auto market: the narrowing vicious cycle. Luxury brands have continued a gap between domestically produced Chen of the TTVMA paints the strategy from recent years of intro- and imported cars. In 2010, 77% of all situation in even more dire terms, ducing more reasonably priced models cars sold in Taiwan were locally made, emphasizing the potential for a crisis in an effort to bump up sales num- versus 23% for imports. Nine years among Taiwan’s local automakers if bers and remain relevant in the market. later, that ratio has shifted to 53% things don’t improve. “At this point, all Lexus’ NX and RX series have done and 47%, respectively, and appears set you would need is just one Taiwanese very well in Taiwan this year, although to continue along the same path until firm to give up and stop producing sales of these models are down slightly imported vehicles exceed domestically cars,” he says. “It would trigger a chain
32 TAIWAN BUSINESS TOPICS • DECEMBER 2019
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reaction, with the local supply chain years old in order to buy new ones. the government has no auto policy,” collapsing due to being unable to main- Chen says that the next step for the Fann says, “and where they do, it is tain economies of scale.” government should be to reduce the short-lived and inconsistent.” While things are looking increasingly import duty on auto parts used for Fann says that any future policy grim for local car producers, Chen puts domestic car manufacture or assembly. should seek to protect local auto- forward a couple of suggestions for the This suggestion is currently being dis- makers, but that some creative thinking government to help ease the pressure cussed by relevant government agencies is necessary. “Given the changes in the they are facing. One is to extend the and the Legislative Yuan, he notes, way we think about mobility, I recom- current scrappage policy, which Chen but the TTVMA hopes that any neces- mend that the government think about notes has contributed to better sales of sary amendments to import laws can be how to leverage the technological capa- domestically produced cars since it was passed quickly. bility Taiwan already has,” he says. instated in 2016. The program, which is Thomas Fann argues that the “They should focus less on traditional set to end in January 2021, provides an authorities need to pay more attention vehicles and more on adapting that NT$50,000 tax deduction for drivers to the local car industry because of its capability to produce newer, more inno- who give up cars that are at least six value to the economy. “If you ask me, vative technologies.”
before needing to be recharged. Tesla, therefore, still dominates the electric FOR ELECTRIC VEHICLES, vehicle market in Taiwan. In previous years, the cost of Tes- PROGRESS ON THE HORIZON la’s electric cars was beyond the ability of most Taiwanese consumers to afford. However, a company decision earlier aiwan’s plan to begin imple- stringent standards with the current this year to reduce the price of all of its menting strict emissions combustion engine model. So the trend models worldwide opened the way for T standards in 2020 could be the is going to be toward EVs.” drivers of more modest means. spark that ignites a widespread shift Fann notes that most major industry Major cuts to the price tag on the toward the electrification of transporta- players, including Ford, Mercedes-Benz, company’s higher-end models – the tion on the island. and Volkswagen have introduced – or Model P100D went from NT$6.389 Such a development would be wel- are in the process of bringing to market million to NT$3.06 million, a reduction come news for Taiwan, where air – new fully electric models. of over 50% – led to a surge in sales for quality is a growing concern, and While the sole local Taiwanese car the company in 2019. According to Sec- where gas- and diesel-powered cars brand Luxgen has rolled out its own retary General Chen Ming-teh of the and scooters contribute substantially line of electric cars in the past year, Taiwan Transportation Vehicle Manu- to increasingly high levels of PM2.5. sales have been minimal so far, and con- facturers Association, Tesla experienced A 2019 study published in the medical sumers have expressed concerns about sales growth of an astounding 453% journal The Lancet Planetary Health the limited range the vehicles can travel in the first three quarters of 2019. The ranked Taiwan fourth worst in the world for childhood asthma from expo- sure to traffic pollution. The emissions standards set to be adopted are the Euro 6, the EU’s most stringent yet, which have forced a number of traditional car companies to rethink their R&D strategies, diverting more resources into the development of electric models. “The problem for car makers in markets around the world is that you first need to find a way to emit less pol- lution, and then try to reduce the fuel economy to the lowest amount pos- sible,” says Thomas Fann, former president of Ford Lio Ho Motor Co. “None of the car companies believe that Tesla's Model X experienced a major sales boost after the company slashed the price in half they will be able to meet the EU’s very earlier this year. PHOTO: DON MCCULLOUGH, DISTRIBUTED UNDER A CC-BY 2.0 LICENSE.
TAIWAN BUSINESS TOPICS • DECEMBER 2019 33
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move also attracted the ire of early rise or apartment building, there just is how to maintain a large-scale system of buyers, who tried and failed to obtain not enough room for putting a charger chargers while continuing to confront compensatory measures from the com- in every parking spot,” says Cham- Taiwan’s energy sufficiency issues. With pany in Taiwan. pion Chen, editor-in-chief of local car the Tsai administration pushing to phase An industry insider who declined industry publication TopCar. out nuclear and reduce coal power to speak on the record mentioned that The industry insider who spoke to within the next several years, concerns with an increasing number of com- Taiwan Business TOPICS admitted remain as to whether Taiwan will have panies focusing on producing low- that space is an issue, as is the fact that adequate energy supply to meet current emission or fully electric vehicles, Tesla such at-home charging stations must demand – much less a nation-wide elec- is more likely to keep the prices on its tap into public electric lines. But he tric transportation infrastructure. vehicles affordable moving forward, also noted the investment Tesla has Others dismiss fears regarding a targeting the mass market rather than made in installing a large number of lack of energy resources, pointing out those with deep enough pockets to DC-powered supercharger stations that the majority of at-home charging spend more than an average of NT$1.5 around the island. will be done overnight, when energy- million (the approximate cost of a basic Taiwan’s government has worked use levels are much lower. In addition, Tesla Model 3). on setting up its own system of public the energy conversion rate of electric Although the Tsai Ing-wen admin- EV chargers over the past two years. vehicles is around 59-62%, three times istration, the business sector, and civic There were around 1,700 such chargers higher than the 17%-21% possible with groups are supportive of the move in 2018, and the total is expected to be conventional gas-powered vehicles. toward electrification, the prolifera- raised to about 5,000 by 2022. Taipower, Taiwan’s state-owned tion of electric vehicles on the island The existing chargers, however, have utility, has over the past few years gives rise to some other thorny issues. generated some user complaints about begun implementing Demand Response A big question on many minds is how quality and the amount of time needed methods to combat the strain on the to make Taiwan’s infrastructure more for the AC-powered stations to fully power grid caused by excessive con- accommodating for electric vehicles. charge their vehicles. Also, according sumption. Under these programs, Taiwan faces the issue of limited to an article in local publication Dig- monetary incentives are provided to fac- space, especially in denser metropol- itimes, there is no set standard for the tories, businesses, and private citizens itan areas, which could pose a problem current chargers; some have multiple in return for cutting down on peak-time for installing charging stations in busi- adapters, which drives up the cost of energy use. ness and residential buildings. “In the installation. parking garage of an average high- Another, more pressing question is — By Jeremy Olivier
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Auto.indd 34 2019/12/4 下午10:14 SPECIAL REPORT
2020 Taiwan Forecast: Thriving Despite Trade War Dislocations
Next year, Taiwan’s economy will benefit from a steady flow of capital repatriation as local manufacturers move capacity home from China.
BY MATTHEW FULCO
omentum from Taiwanese since the first tranche of tariffs Wash- 154 returning businesses have pledged to businesses returning from ington slapped on Chinese goods in June invest NT$697.7 billion (about US$23 M China should help Taiwan 2018. Taiwan, however, has been in a billion), of which NT$200 billion is reach a GDP growth rate of 2.3% to unique situation. Although it has among expected by year-end, according to the 2.6% in 2020, compared to about 2.4% the highest exposure of any country to Ministry of Economic Affairs. this year, economists say. In addition, Chinese-based supply chains, its manu- Rising exports to the U.S. are driving growth in trade is expected to pick up facturers are also famously agile. When economic growth, while declining sales next year on the back of strong global the U.S. tariffs began to batter their to China are retarding it, says economist demand for the tech hardware products bottom lines, many Taiwanese manufac- Liang Kuo-yuan, president of the Yuanta- Taiwan excels in producing, including turers swiftly packed their bags. Polaris Research Institute. “We can think semiconductors, smartphones, internet of Some headed to Vietnam and other of the Taiwan economy as a seesaw things devices, and 5G infrastructure. countries. But for quite a few companies, caught between those two opposing Taiwan is among the main beneficia- it was time to go home. forces,” he says. “Growth remains fairly ries of the U.S.-China trade war. Amid The Taiwan government rolled out the good as long as exports to the U.S. are the tit-for-tat tariff escalation, Taiwanese red carpet for their return with a three- growing more than those to China are companies are repatriating billions of dol- year (2019-2021) incentive program that falling.” lars in capital from China, helping to provides support for productive invest- Illustrating this trend, Taiwan’s total rejuvenate local manufacturing. ments, including assistance with land exports fell by 2.4% year-on-year from Supply chains have shifted from acquisition and recruitment of per- January to October, weighed down by the China to many countries across Asia sonnel, as well as tax breaks. Thus far, 6.4% drop in orders from China. But the
TAIWAN BUSINESS TOPICS • DECEMBER 2019 35
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decline slowed as shipments to the U.S. reporters. “I haven’t wanted to do it yet,” the 2008-2009 global financial crisis. picked up during the year. Exports to the he added, “because I don’t think they’re A recession in the U.S. would hit Tai- U.S. constituted a record 19% of out- stepping up to the level that I want.” wan’s export-dependent economy hard, bound shipments through August. For the The possibility of new levies on Chi- especially as Taiwan is relying on con- first 10 months of the year, they were up nese goods remains on the table, should tinued growth in that market to offset the 17.7% over the same period of 2018. the two sides fail to reach an agreement. fall in trade with China. Should the U.S. The Chung-Hwa Institute of Economic “If we don’t make a deal with China, enter a downturn, Taiwan would almost Research (CIER), a semi-governmental I’ll just raise the tariffs even higher,” certainly plunge into a period of eco- think tank, estimates export growth of Trump said during a Cabinet meeting in nomic contraction itself. 6% in the fourth quarter, resulting in a November. When the U.S. economy was last in slight 0.3% decrease for the year. Barring unlikely concessions from recession, during the global financial If the pace of returning investment China on intellectual property protection crisis, Taiwan’s economic growth cra- from China accelerates, the outlook for or its contentious industrial subsidies, tered. In the fourth quarter of 2008, next year could be even better, says Liang most of the tariffs are likely to remain in Taiwan experienced a record quarterly of Yuanta-Polaris. Government surveys place. Yuanta-Polaris therefore expects economic contraction of 8.36%. For the show that roughly 50% of Taiwanese the level of Taiwan’s private investment full year of 2009, Taiwan’s GDP growth companies in China plan to reduce their to rise about 5% in 2020, compared to fell by 1.6%. investment there or relocate. Of the total, an earlier estimate of roughly 3.7%. According to the Washington, DC- 20% plan to shift production to Taiwan based National Association for Business and 22% Southeast Asia. Braving rough seas Economists, there is a 38% chance of a More Taiwanese businesses may U.S. recession in 2020 and a 34% chance exit China if no trade deal is reached Skeptics of President Trump’s tariff of one in 2021. between the U.S. and Beijing. China has war have warned that protectionist trade A more immediate risk for the Taiwan pressed for a phased rollback of all tariffs policies could push the global economy economy is heightened coercive pressure imposed since the trade war began, but into recession. A recession is “the risk from Beijing. Chinese leader “Xi Jinping President Trump has resisted. posed by the decoupling of U.S.-China is taking a tougher approach to Taiwan Trump criticized Beijing’s approach to trade,” wrote Nouriel Roubini, an now than earlier on,” says Wang Jiann- the recent trade talks during a November economics professor at New York Uni- chyuan, vice president of CIER. “He’s visit to an Apple production facility versity’s Stern School of Business, in an going to do what he wants to show Chi- in Texas. “China would much rather October column for Project Syndicate. na’s dissatisfaction with cross-Strait make a trade deal than I would,” he told Roubini was one of the few who predicted relations, without regard for Taiwan’s feelings.” Wang didn’t speculate about what fur- ther measures China might take, but he notes that Beijing has already banned its citizens from visiting Taiwan as indi- vidual tourists. That ban, which went into effect August 1, has put a dent in hotel occupancy and hurt retail busi- nesses reliant on Chinese tourists. Despite the ban, tourist arrivals keep growing. In the third quarter, a surge in visitors from Japan, South Korea, the Philippines, and Thailand helped the number of tourist arrivals to expand by 6.5% from the year before. The govern- ment now expects visitor numbers for the year to reach 11.8 million, up 7% over 2018. Meanwhile, amid the frosty cross-Strait relationship, the future of Tai- wanese firms in Chinese tech hardware supply chains remains a big question mark. Taiwanese firms typically enjoy a technological edge and are price-compet- itive. That has allowed them to sell a lot Mainland Chinese tourists visit the National Palace Museum in Taipei. of components to Chinese smartphone PHOTO:WIKIMEDIA COMMONS makers like Huawei, Xiaomi, and Oppo,
36 TAIWAN BUSINESS TOPICS • DECEMBER 2019
19 Forecast.indd 36 2019/12/4 下午10:22 2020 Forecast
as well as American customers like Apple. of Taiwanese businesses has not made The government will provide underused For now, Taiwan continues to do a noticeable impact on industrial trans- or unused land in central and southern big business with Huawei, the world’s formation efforts. At the same time, the Taiwan as a base for this project, he said. largest maker of telecommunications initiative offers more potential benefits for Addressing environmental concerns, equipment and a target of crippling U.S. the real economy than cuts to the estate Kung said that Taiwan should establish sanctions for more than a year. Wash- and inheritance taxes made by the Ma green supply chains and will do its best ington alleges that Huawei violated U.S. Ying-jeou administration (2008-2016) to to achieve the target of having renew- sanctions on Iran and North Korea and encourage capital repatriation. The pri- ables account for 20% of the energy mix could be deployed by China to assist in mary outcome of that policy was rampant by 2025. Analysts say that deregulation espionage campaigns. The U.S. has lob- speculation in the property market. of the energy market is likely necessary bied its allies to prohibit Huawei from Still, questions remain about what lies to reach that goal, entailing the introduc- building their 5G infrastructure. Japan ahead for Taiwan’s economy once the tion of new business models for electricity and Australia have sided with Wash- reshoring plan runs its course. The policy generated from renewables. ington, while European countries are looks more like a short-term stimulus Another question is how well demand still mostly undecided. than a piece of a long-term restructuring for Taiwan’s exports will hold up, espe- Taiwan won’t allow Huawei to build plan. And without some fundamental cially from China. Although some its 5G network because of the company’s changes, Taiwan’s economy will remain Taiwanese manufacturers will retain suspected links to the Chinese Com- highly vulnerable to external shocks that large Chinese clients, Taiwan’s expo- munist Party. But business ties between shake export demand. sure to China will likely continue to fall. Taiwan and Huawei are robust overall. “Without the return of the Taishang “The Chinese market is actively replacing In November, Nikkei Asian Review [Taiwanese businesspeople], the economy imports with China-made products and reported that a group of Huawei exec- would not be doing so well,” says some products will start to replace U.S.- utives recently visited Taiwan to ensure Yuanta-Polaris’s Liang. He notes that Tai- made components with homegrown one,” that one of its top integrated-circuit wan’s GDP growth this year will outstrip says Eddie Han, a senior industry analyst suppliers, Taiwan Semiconductor Man- that of the other former Asian tiger econ- at MIC. “This will also reduce China’s ufacturing Co. (TSMC), the world’s omies (Hong Kong, Singapore, and South reliance on Taiwan supply chains.” largest contract chipmaker, could con- Korea), a rare occurrence. The challenges posed by changing tinue to provide the Chinese firm with A challenge for Taiwan will be to supply chains highlight the need to cul- industry-leading chips. accelerate its plans to develop the digital tivate new industries. Taiwan is the only “Observing the interaction between economy, going beyond the production one of the four erstwhile Asian tigers Taiwan, the United States, and China, of hardware components. Manufacturing without a billion-dollar startup or “uni- selling components between countries is is just one part of the digital economy, corn.” None of the unicorns established a matter of the laws and regulations of and not necessarily where the most value in Singapore, South Korea, or Hong individual countries,” says Pan Chien- is added. In ascendant sectors like fintech Kong is a hardware manufacturer. Sin- kuang, a senior industry analyst at the and artificial intelligence, software and gapore’s Grab, valued at US$14 billion, Taipei-based Market Intelligence & Con- services are often more important than began as a ride-hailing app and is now sulting Institute (MIC). “Nevertheless, the hardware. moving into digital banking. South decisions of Taiwanese suppliers selling With limited natural resources and Korea’s Toss, valued at US$1.2 billion, components should not violate U.S. space, Taiwan is already under strain is a payment services app. Hong Kong’s export and sanction laws.” to meet the energy and land demands Klook, valued at roughly US$1 billion, The PRC remains Taiwan’s top trade of manufacturers. There are also peren- is a travel services and activities booking partner, with China plus Hong Kong nial environmental issues. Ratcheting up platform. accounting for nearly 40% of the export manufacturing activity could increase In February 2018, the Tsai Ing-wen value. air pollution, which is already a serious administration announced its intention problem in central and southern Taiwan. to create a Taiwanese unicorn within two Upgrading industry At a November press conference, Min- years and six unicorns within three years. ister Without Portfolio Kung Ming-hsin The first goal may be out of reach, while The U.S.-China trade war has been said that the government planned to use the second will not be easy. a mixed blessing for Taiwan. By forcing artificial intelligence and smart machinery When that objective was announced, Taiwanese manufacturers to reduce their (part of the 5+2 Innovative Industries then-Premier William Lai concluded: China exposure, it has helped mitigate a plan) to help Taiwan deliver “a total solu- “Taiwan failed to grasp the business growing risk for the nation’s economy. tion” and not just rely on the production opportunities offered by the Internet and Excessive concentration of resources of components. mobile applications, because of its focus across the Taiwan Strait was a crisis To tap the momentum from returning on personal computer development at waiting to happen, whether as the result investment, Kung said that the Tsai Ing- the time. It cannot afford to fall behind of political tensions with Beijing or a wen administration will launch a plan the latest trends in artificial intelligence, steep slowdown in the Chinese economy. to make Taiwan “a high-end research, Internet of Things, financial technology Thus far, however, the homecoming development and manufacturing hub.” and autonomous vehicles this time.”
TAIWAN BUSINESS TOPICS • DECEMBER 2019 37
19 Forecast.indd 37 2019/12/4 下午10:22 SPECIAL REPORT Modest Growth Ahead for Chipmakers in 2020
The semiconductor industry’s concentration at home provides it with some insulation from the direct effects of the U.S.-China trade war.
aiwan’s crucial semiconductor industry is set to grow Taiwan’s IT industry,” he says. 5% in 2020 on the back of rising demand for artificial A perennial challenge for Taiwanese IC makers is staying two T intelligence applications and 5G telecommunications steps ahead of China’s own innovation plans. Beijing has made infrastructure. Overall industry output value is expected to reach plain its intentions to develop self-sufficiency in semiconduc- NT$2.8 trillion (US$87 billion), up from NT$2.6 trillion in tors. Yet five years after it announced that goal, foreign suppliers 2019, according to the semi-governmental Industrial Technology still provide China with 86% of its ICs, just a 4 percentage-point Research Institute (ITRI). increase from 2014. Last year, China imported US$312 billion The local IC sector’s projected growth largely mirrors that worth of semiconductors. of the industry worldwide. Research firm IHS Markit estimates Slow progress hasn’t prevented Beijing from doubling down. that global semiconductor revenue will rise to US$448 billion in In October, China announced it had established a new US$29 2020, up 5.9% from $423 billion this year. billion semiconductor fund, $9 billion larger than the first fund Taiwan’s chipmakers are an outlier in the local tech sector set up in 2014. The initiative is bound to irk Washington, one in terms of their modest China exposure. As a result, the U.S.- of whose stated objectives for the trade war is to change Chi- China trade war has not disrupted their businesses to the extent na’s many unfair trade practices. Foremost among these are it has other Taiwanese manufacturers. Reshoring is not an issue technology import substitution and the heavy state subsidies to because most of the production capacity never left Taiwan. designated “national champions.” Peng Mao-jung, manager of ITRI’s Industry Science and For Taiwanese IC makers, China continues to offer oppor- Technology International Strategy Center, notes that only about tunities in the short term, especially in the premium market. 10% of Taiwan’s semiconductor production capacity is located “China is highly dependent on Taiwanese foundries and OSAT in China, and it’s there primarily to serve local customers. In [outsourced semiconductor assembly and testing] for high-end contrast, the semiconductors that Taiwanese companies export ICs,” says Chris Hsu, an analyst at Taipei-based market intel- to the U.S. are made here, with the result that the increased ligence firm TrendForce. “It is difficult in the short run for American tariffs “have had no direct impact on Taiwan’s semi- Chinese manufacturers to fulfill China’s domestic demand for conductor industry,” he says. high-end ICs.” Yet Taiwanese chipmakers are not immune to the tensions With their focus on AI applications, Chinese IC firms are caused by the trade war, especially as their clients include both expected to continue to rely heavily on Taiwanese manufac- major U.S. and Chinese companies. Adroit strategies will be turers, which excel in relevant advanced wafer manufacturing required to avoid upsetting the apple cart. and packaging processes, Hsu says. For that reason, TrendForce Media reports in October and November suggested that sees the premium IC market as remaining favorable to Tai- Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s wanese suppliers in 2020. largest contract chipmaker, had been pressured by the U.S. gov- In the low- and mid-range IC segments, the market will be ernment to halt chip sales to Chinese telecoms giant Huawei. tougher for the Taiwanese. Hsu expects that Chinese manufac- Washington has blacklisted Huawei and considers it to be a turers will increasingly aim to produce ICs for home appliances major security threat. The Taiwan government has denied the or electric vehicles. Although EV demand is currently weak reports. in China, “this may give Chinese IC companies some room to HiSilicon Technologies, a Huawei subsidiary, is TSMC’s improve their manufacturing technology to catch up, since all second-largest customer after U.S. tech giant Apple. HiSilicon the suppliers suffer from the same adverse effect,” he says. generated 8% of TSMC’s revenue in 2018 and 11% in the first SEMI, the electronics industry supply chain association, fore- half of this year, according to the Chinese-language Common- cast in September that China would overtake Taiwan next year wealth News. to become the world’s largest semiconductor equipment market. Amid the trade tensions with the U.S., Huawei is moving to By raising its IC equipment investment 21% in 2020 to more reduce its reliance on U.S. suppliers and is establishing an Asian than US$14 billion, China would surpass Taiwan (US$11.6 bil- supply chain with partners from Korea, Japan, and Taiwan, lion) and South Korea (US$10.5 billion), SEMI said. says Eddie Han, a senior industry analyst at Taiwan’s Market Intelligence & Consulting Institute. “This is expected to benefit — By Matthew Fulco
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TAIWAN’S DEEPENING DIPLOMATIC PREDICAMENT
Left with just 15 diplomatic allies, Taiwan now looks to safeguard its most vital remaining relationships while strengthening unofficial ties with key democracies.
BY MATTHEW FULCO
ince the election of President diplomatic relations with the PRC. In Tsai Ing-wen in 2016, China has Taiwan, the KMT asserts that Taiwan S stepped up efforts to curtail Tai- is indeed part of China but inter- wan’s international space. Luring away prets “China” to mean the Republic of Taiwan’s diplomatic allies has been inte- China, not the PRC. The ruling Dem- gral to this campaign. In September, ocratic Progressive Party (DPP) rejects both the Solomon Islands and Kiribati – the idea outright. two Pacific Island countries – broke ties Having established ties with Kiri- with Taipei in favor of Beijing, leaving bati and the Solomon Islands, China Taiwan with just 15 official allies. has now poached seven of Taiwan’s dip- Taipei is well aware that its ties lomatic allies over the past three and a with small Pacific Island countries have half years. The others are El Salvador, limited economic importance. It also Panama, Sao Tome and Principe, the understands that such countries lack the Dominican Republic, and Burkina Faso. During a transit stop in Hawaii in March, clout to successfully lobby for Taiwan’s President Tsai views an exhibit commemo- With the exception of the Vatican, interests in key international organiza- rating the 40th anniversary of U.S. passage Taipei’s sole diplomatic ally in Europe tions like the United Nations or World of the Taiwan Relations Act. and the most important from a sym- Health Organization. PHOTO: WANG YU CHING / OFFICE OF THE PRESIDENT bolic standpoint, the states involved in Nevertheless, the loss of each diplo- the Taipei-Beijing diplomatic tug-of- matic relationship, no matter how small a professor at Tamkang University and war are developing countries. Many are the country, is a symbolic blow. Official senior associate at the Center for Inter- impoverished and decide to break ties diplomatic relationships validate Tai- national and Strategic Studies (CSIS) in with Taipei due to the more generous wan’s sovereignty on the world stage. Washington, DC. Huang is currently financial incentives offered by Beijing. As long as there are countries recog- serving as an advisor to the presidential The allies in the Latin America and nizing the Republic of China (Taiwan's campaign of Chinese Nationalist Party the Caribbean provide a particular official name) as a sovereign state, Bei- (KMT) candidate Han Kuo-yu. benefit to Taiwan: a rationale for Wash- jing’s irredentist claims to Taiwan carry The “One-China principle” refers ington to permit the Taiwan President less weight. to Beijing’s insistence that there is only to make stopovers in the U.S. en route For Taiwan, “the risk of having zero one China – the People’s Republic of to visiting those countries. Without diplomatic allies would be a de facto China – and that Taiwan is a part of the justification of a transit stop, the unification in which every country it. Acknowledgement or acceptance U.S. government would have difficulty accepts the ‘One-China principle’ as of this notion is an essential condition allowing such visits in the face of Chi- Beijing sees it,” says Alexander Huang, for countries that choose to establish nese pressure. Every President since Lee
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Teng-hui has used this opportunity to 1. The Chinese Ministry of Foreign to exercise considerable influence in the engage in “transit diplomacy.” Affairs’ successful efforts to persuade South Pacific, which sits in its maritime In the game of checkbook diplo- the two countries to break ties with backyard. Now China has a strategic macy, Taipei usually cannot compete Taipei before the celebration kicked off foothold at its doorstep. with deep-pocketed Beijing. However, it scored the ministry big points with Chi- Just weeks after the Solomon Islands can cultivate meaningful substantive ties na’s leadership, says Huang of Tamkang established diplomatic relations with with the governments of its diplomatic University. China, international media reported allies. Over time, the strong connec- Having failed to dissuade Wash- that the Chinese state-backed con- tions with Taipei have made some allies ington from selling Taipei a new US$2.2 glomerate China Sam had obtained a reluctant to recognize the PRC. billion arms package, including M1A2 75-year lease for the island of Tulagi Yet Beijing often counters that Abrams tanks and F-16V fighter jets, – an island in the Solomons’ Central strategy by courting the political oppo- China’s foreign ministry was under Province that contains a strategic deep- sition. Since most of Taiwan’s allies are pressure to retaliate, Huang says. water port. Tulagi’s port was used by democracies, China has a new chance For Chinese leader Xi Jinping, Britain as its South Pacific headquar- to poach one every time there is an elec- who has vowed to ensure Taiwan’s ters during World War II before being tion, says Fabrizio Bozzato, a research union with China, snatching away briefly occupied by Japan. fellow at the Taiwan Center for Interna- two more of the island’s allies sig- The Solomon Islands and Vanuatu, tional Strategic Studies, whose research nals that “Taiwan will be punished for another South Pacific ally of Beijing, areas include Taiwan’s diplomatic rela- rejecting ‘one country, two systems,’” are situated in sea lanes that connect tionships. Huang says, referring to the frame- Australia and the United States. If Bei- Former Solomon Islands Prime Min- work governing Hong Kong and Macau jing builds infrastructure with military ister Rick Nelson Houenipwela was – one that former Chinese leader Deng applications – such as airports and loyal to Taiwan, Bozzato notes. How- Xiaoping created with Taiwan in mind. ports – on those countries’ territory, ever, his successor Manasseh Sogavare, The Solomon Islands at least gave it could use it to track military move- who assumed leadership in 2019, was Taiwan ample notice of its plans to ments by the U.S. and Australia. Beijing open to making the switch in exchange reconsider the two countries’ dip- is already building a major seaport in for the right offer from Beijing. lomatic relationship. The switch to Vanuatu that many analysts believe will Sogavare had previously pushed for Beijing occurred after a somewhat be used as a military base. making such a shift for economic rea- transparent three-month public consul- Beijing has denied any intentions to sons. His official statement on severing tation period. militarize the South Pacific. “We have ties with Taiwan is consistent with that Kiribati’s severance of diplomatic no private interests in island countries, line of thinking. “The Solomon Islands ties, just four days after the Solomon and do not seek a so-called ‘sphere of is better served making a decision that Islands did the same, was abrupt by influence,’” the Chinese Ministry of reflects our long-term development comparison. At a September press con- Foreign Affairs said in a May state- interests rather than being uncertain ference, Taiwanese Foreign Minister ment. over what might happen should one Joseph Wu attributed Kiribati’s decision Bozzato notes that Pacific island day Taiwan democratically decide to to Taipei’s refusal to provide funds for countries are integral to China’s 21st reunite with mainland China,” Soga- the purchase of commercial airplanes. Century Maritime Silk Road, the sea- vare said. Wu noted that Kiribatian President route portion of the country’s grandiose Reportedly, the aid package Bei- Taneti Mamau and some of his col- Belt and Road initiative. The Maritime jing was prepared to offer the Solomon leagues had been in regular contact Silk Road seeks to connect China with Islands in exchange for severing ties with Beijing since 2016, and that China Africa and Europe via the South China with Taipei was worth US$500 million, has boosted its presence in Kiribati with Sea and Indian Ocean. China sees Oce- including funding for infrastructure, fisheries and other investments. ania as an arena for testing the resolve education, and professional training, “Kiribati officials may have been and capabilities of its Western rivals in in addition to access to China’s huge gambling on the ‘dollar diplomacy’ of the Indo-Pacific, Bozzato says. market. the past to return, where Taiwan would In the case of Tulagi, however, Bei- “The Taiwanese tried everything to be willing to match or exceed Chinese jing’s efforts were ultimately rebuffed. hold onto the Solomon Islands, and the aid offers, even ones that move beyond In late October, the Solomon Islands’ U.S. even got involved on their behalf, infrastructure, agriculture, and human- attorney general announced that the but it was to no avail,” Bozzato says. itarian assistance more broadly,” says provincial government lacked the Timothy Rich, an associate professor at authority to lease Tulagi to China Sam. Hegemonic aspirations Western Kentucky University special- A statement from the Prime Minister’s izing in East Asian politics. office described the deal as “unlawful, Beijing’s poaching of the Solomon Besides disadvantaging Taiwan, the unenforceable and must be terminated Islands and Kiribati came in the lead- loss of the two Pacific-island allies to with immediate effect.” up to the 70th anniversary celebration Beijing also worries Australia, analysts On Twitter, U.S. Secretary of of the PRC’s founding on October say. Canberra has historically been able Defense Mark Esper lauded the move.
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“Many nations in the Pacific have dis- covered far too late that Chinese use of economic and military levers to expand their influence often is detrimental to them and their people,” he wrote. Says Bozzato: “Tulagi would have turned into a national and regional Trojan horse.”
Relationship building
The Taiwanese people reject the “one country, two systems” formula – now more than ever as the model unravels in turmoil-ridden Hong Kong. A new survey by the Mainland Affairs Council found that about 89% of Tai- wanese oppose unification with China President Tsai's "Oceans of Democracy" tour took her to Nauru and two other Pacific under “one country, two systems,” up countries last March. from 75% in January, before the Hong PHOTO: WANG YU CHING / OFFICE OF THE PRESIDENT Kong protests began. Amid icy cross-Strait relations, jing, Feingold says. any time before.” holding onto diplomatic allies could In contrast, the Marshall Islands Republican Senator Ted Cruz of prove to be a tough task. Tuvalu, which and Palau are unlikely to abandon Texas, who sits on the Senate’s For- recently held an election, and Saint Kitts Taipei because of their close ties with eign Relations Committee, attended and Nevis, scheduled to have an elec- Washington through the Compact of this year’s National Day celebrations in tion in 2020, could be at risk, says Ross Free Association (COFA). The COFA Taipei. It was the first time that a sitting Darrell Feingold, a Taipei-based political allows the U.S. to station its military in U.S. senator had attended the festivities risk analyst. If Tuvalu makes a switch, the member states to provide for their in 35 years. In a joint press conference it also becomes more likely Nauru will defense. with Foreign Minister Joseph Wu, Cruz do the same, as neither wants to be one Other diplomatic allies of Taiwan emphasized the importance of the U.S.- of the few remaining countries in Oce- mulling a switch to Beijing might be dis- Taiwan relationship. ania that lacks diplomatic relations with suaded by U.S. pressure, but that’s far Unofficial ties are flourishing China, Feingold says. from certain. “My concern would be between Taiwan and the European Taiwan was therefore relieved when that cutting off U.S. aid would just lead Union as well. Bilateral trade reached Tuvalu foreign minister Simon Kofe these countries to be more dependent a record €51.9 billion (US$58.1 bil- explicitly expressed support for Taiwan on Chinese aid,” says Western Ken- lion) in 2018, according to a July report during a visit to Taipei in November tucky University’s Rich. by the European Economic and Trade and said his country was working to set However, Beijing may refrain from Office in Taiwan. up a group uniting Taiwan’s remaining poaching all of Taiwan’s allies for Meanwhile, observers are urging four allies in the Pacific. fear of the potential shock such a sce- Taiwan to further develop its inter- Haiti, the poorest nation in the nario could deliver to cross-Strait national business links. Of particular Western hemisphere, is also reportedly relations. “It could push deep-green importance are the long-term invest- mulling the establishment of diplomatic independence-oriented politicians to ments in Taiwan from multinational ties with Beijing. Wang Xiangyang, demand constitutional reform, such as companies, strengthening the island’s who heads China’s office of commercial renaming the country (for example, to ties to key global supply chains and development in Haiti, met recently with the Republic of Taiwan). Such a move markets. In the first nine months of Haitian Tourism Minister Marie Gréta is certainly not in the interests of the the year, foreign direct investment in Roy Clément and former prime minister PRC,” Rich says. Taiwan rose 9% year-on-year to reach Evans Paul. In the meantime, Taiwan has been US$7.9 billion. For Taipei, there is a growing risk seeking to deepen ties with the world’s “More important than official ties that the Haitian leadership could see leading democracies – the U.S. in par- with tiny countries are investments by relations with Taiwan as unable to ticular. In July, President Tsai made a MNCs that strengthen Taiwan’s con- materially boost its socio-economic two-day stopover in the United States, nection with the global economy, bring development, a factor implied in the despite Beijing’s objections. In an August innovation to Taiwan, and create good “farewell statements” issued by leaders interview with Voice of America, For- jobs for young professionals,” says Wil- of the Solomons and Kiribati when they eign Minister Wu described the bilateral liam Foreman, president of the American switched diplomatic recognition to Bei- relationship as “probably better than at Chamber of Commerce in Taipei.
TAIWAN BUSINESS TOPICS • DECEMBER 2019 41
diplomacy.indd 41 2019/12/4 下午10:16 EXECUTIVE SUITE
MEET BRENDA TANG OF UNITED AIRLINES
Brenda Tang has a passion for sales and is not afraid to admit it. Starting off her post-college career as a general sales associate at Delta Airlines, Brenda worked her way up through middle and upper management in the travel, pub- lishing, and hospitality sectors. She has been General Man- ager for Taiwan Sales at United Airlines for almost a decade.
Brenda met with Taiwan Business TOPICS Deputy Editor Jeremy Olivier to talk about her career and experience as a manager in some of Taiwan’s most dynamic and competitive industries. A condensed version of the interview is below.
You studied public finance in univer- rewarding aspects of working in this hotels, car rental companies, Global sity. In what ways did this prepare you area? Distribution System operators, and our for your eventual career? This is a question I like to ask when customers. These contacts formulate an Back when I took the exam to get I interview potential new staff. Why do important part of my professional net- into university, we didn’t have a choice they want to join United? They invari- work. Through this network, I have of which department to go into. I had ably tell me its because they love to been able to build more business and my wish list, but to my surprise, my travel. So, the first thing I tell them is make new friends. score was high enough to study public that their love of travel is not really finance. I ended up really enjoying it. related to the work they will be doing in What are the main characteristics of Public finance equipped me with the the company. It’s only a small part. the travel market in Taiwan? ability to analyze a company’s finances When I was young, just out of uni- I think the travel market in Taiwan and to recognize solid financial reports, versity, I worked in an airline company is very dynamic and competitive. Tai- which are a requirement for a well- as ground staff for the same reason wanese people, for example, tend to run company. This was very helpful for as these young job candidates. As my plan their travel very late, compared determining what kind of activities I career progressed and I began shifting to our counterparts in the U.S. and wanted to engage in, what investments among the next few jobs in the hos- Europe, who may book tickets and I wanted to make – I always consider pitality and publishing industries, I hotels half a year or longer in advance. the returns that are possible with each realized that it wasn’t that I specifically There is also a growing tendency among investment. liked working for an airline. What I Taiwanese to do independent travel, I’ve always considered myself to really loved was working in sales. Every rather than travel in tour groups. be a “numbers” person. I’m skilled at company needs a sales team; we drive In the past, Taiwanese travelers looking at the numbers and making a the business forward. relied heavily on travel agencies to book good analysis based on that. I think I think the most rewarding aspect of their trips. Now, they are more self- this gave me a very solid foundation for this business for me is getting to interact reliant and just go online. This kind of entering into the business sector. with all different kinds of people. My consumer behavior drives ticket fares team is consistently in contact with the lower and lower. The industry is very What drew you to the airline Tourism Bureau to discuss joint promo- price driven, which makes the air- industry? What have been the most tions. We also talk to travel agencies, line business quite challenging and has
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an impact on our company’s sales What advice can you give for strategy. We have had to make our- someone considering a career in selves think in terms of the internet. sales or marketing? We also need to monitor our compet- Choose sales! When I was itors’ activities so that our products young, salespeople didn’t have a stand out from theirs. good image. If you were around a salesperson, you might worry that How do the travel preferences of they would try to sell you some- Taiwanese consumers affect the way thing – not because you needed the your team conducts its sales and mar- product, but because they needed to keting efforts? make the sale. So, we used to feel United is the only U.S. carrier with some antipathy towards the sales operations in Taiwan. Compared profession. with Taiwan’s two major airlines, China you are able to clearly communicate However, my view on this has Airlines and EVA Air, which have lots of with your staff. We always say that changed since I got involved in sales. I trans-Pacific flights each day, our share people are a company’s most important enjoy the challenge and the need to stay of the market here is relatively smaller. assets. You need to discuss things with hungry – the need to take advantage of So, how do we tackle this issue? We your staff, to incorporate their input opportunities and take control. I like have to put a spotlight on our unique and make adjustments based on that feeling like I have taken ownership of selling points. For instance, we are the input. You need everyone to be on the my career. I enjoy being able to advo- only airline with a presence in Taiwan same page regarding strategy. This con- cate for the customer and to be our that also has a comprehensive U.S. sensus will help you with the execution company’s driving force, getting good domestic network. As a rule, we try to and implementation. results and reaching our targets. I think persuade our customers who need to these goals are very practical and very transfer to choose United for the con- Where do you excel as a manager? motivating. necting flight because they will be better What lessons have you learned from In the past, being in sales was all covered in case of delays or cancella- managing large operations? about talking, telling the customer tions. We view these selling points as I think that I’m very good at how great a product is. But the reality what make us the airline of choice for “change management,” leading a team is that you have to both talk and to our customers. through organizational change. listen. When you sell something, you We also need to take care of our dif- Years ago I was hired by a company don’t just boast about your product; ferent market segments: our corporate where management had expressed their you need to explore your customer’s travelers, our independent travelers, concern that the team I would be leading specific pain points by asking ques- our agencies, our distribution channels. had become a bit too complacent, and tions and getting their feedback. You We need make a balanced mix of these a shift in working culture was needed. I then imply that their issues, without a segments to maintain a solid business went to the company, talked to the staff, proper solution, will turn into other, intake. gathered all the diagnostics, and set to bigger issues. making a plan that successfully pulled Finally, you propose your partic- Before you started at United, you that department out of its lull. ular solution. It’s a two-way street, and held several management-level posi- Similarly, after I joined United, we if you’re a salesperson who only talks, tions in the hospitality, publishing, and merged with Continental Airlines and chances are it’s going to be very difficult travel sectors. How did those experi- created a joint venture with All Nippon to make the sale. ences shape your current approach to Airways (ANA). All of these compa- leadership? nies had different work cultures and the What is your favorite way to unwind I consider myself lucky in that all of question for me as a manager was: how after a long week at work? my companies – previous and current can I lead the team through this process I love listening to music and going – have put a strong emphasis on cor- so that once it’s complete, we can still to see movies – particularly courtroom porate training. Over the years, I have exceed our revenue target? dramas. If I had the chance to choose taken many training courses and work- Once again, communication is key my career over again, I would love to shops, which helped me hone my sales to this process. People need to know be a lawyer! I also enjoy doing puzzles, and leadership skills. These experi- what is happening, to take part in the like sudoku and word games. They help ences also allowed me to build up my discussions. There can’t be gaps in com- me keep my brain active even while I’m business acumen and develop more log- munication because people will start to relaxing. ical thinking. Because of the training get distracted from the task at hand. For outdoor activities, I enjoy riding I received, I feel that I can be a good, After my past experience with this bicycles with my husband. Taipei is proficient manager, regardless of which kind of process, I think I’m now very a great city for cycling, since there industry I am working in. comfortable with leading my team are many routes along the rivers and Being a good manager requires that through similar changes. around the city.
TAIWAN BUSINESS TOPICS • DECEMBER 2019 43
12 Brenda.indd 43 2019/12/4 下午10:17 SEEING TAIWAN The Charms of Rustic Tainan
OCTAGONAL PAVILION
ing every generation or two, it retains a great deal of wood. The one-and-a- half-story structure that stands today is delightfully timeworn and extremely photogenic. Before you step inside, look carefully at the woodcarvings and painted panels that face the street. When you enter, you will see the tools of the Chinese herbalist’s trade. There are mortars and pestles; vials, jars, and bottles; and sets of drawers labeled so the physician could quickly find what JINGLIAO OLD STREET he needed. Three very different landmarks lie ainan is a tourist magnet that a village called Jingliao, at the intersec- 400 meters east of the Old Street. Two deserves every bit of attention tion of Local Road 82 and Local Road are on the campus of Jingliao Elemen- T it gets. In addition to a stupen- 85. Before the north-south railway was tary School, and both date from dous number of ancient shrines, the completed, it was an important way the Japanese colonial period. These heart of the city boasts imposing land- station for those making their way on superbly preserved, mainly wood marks from the 1895-1945 period of foot or by oxcart between Tainan and structures now serve as the school audi- Japanese colonial rule, and a maze of Chiayi. Bypassed by major roads, the torium and library. alluring alleyways. village spent decades as an agricultural The other is Jingliao Holy Cross Even though the city lost its status backwater, until a 2005 documentary Church, designed in the 1950s by Gott- as Taiwan’s administrative capital more titled Let It Be shone a spotlight on the fried Böhm, a German architect who than 130 years ago, it has continued to lives of some of its elderly residents. won the Pritzker Prize in 1986. Its expand and subsume nearby country- The film’s depiction of traditional alloy-covered spire is not only taller side. Travelers approaching from the lifestyles struck a chord with Taiwan- than anything nearby, but also quite north by high-speed train will cross into ese people. Its Chinese-language title, different in terms of color. the city’s Houbi District more than 45 Wumile, has been adopted as an alter- A truly exceptional Christian place kilometers north of Tainan’s magnifi- native place name, and appears in the of worship can be found in the heart of cent Confucius Temple. If they glance bilingual signs which direct cyclists Yanshui. Holy Trinity Catholic Church out the window there, they can enjoy through the surrounding countryside. is a splendid example of how Catho- views of rich farmland and tidy villages. But even if the documentary had never lic chapels in Taiwan often resemble Few international visitors give any been made, Jingliao would surely be on folk temples. Holy Trinity’s tiled roof, thought to spending time in Houbi or the tourist map by now. for instance, is not very different from the adjacent district of Yanshui. But Along or very near Jingliao Old those atop shrines devoted to popular they should, if they have an interest in Street, there are at least a score of religion. However, the true glory of this the rural Taiwan that existed before highly photogenic traditional houses. church lies within. industrialization, or in the modern- The best known of them is the Ruan The images of the crucifixion have ized yet characterful countryside which Family Old House (also called the Jing been thoroughly localized. Thanks produces much of the food they will De Hsing Drug Store), parts of which to his bulbous forehead, drooping enjoy during their trip. date from before 1795. eyebrows, and white beard, the deity The most seductive part of Houbi is Despite remodeling and rebuild- who looks down from the rear wall
部
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looks remarkably like the Chinese god of longevity. The Last Supper has been reimagined as a gathering of sages in which Christ and his apostles have Asian facial features, wear traditional Chinese clothes, and eat steamed buns with chopsticks. Throughout the 18th and early 19th centuries, Yanshui – now 16 kilometers from the coast – was one of Taiwan’s key harbors. Until sedimentation made it inaccessible, flat-bottomed boats carried goods and people upriver to the town. Qiaonan Old Street was the heart of this bustling entrepôt, and the HOLY TRINITY CATHOLIC CHURCH thoroughfare retains a number of anti- quated wood-framed buildings. being connected by mortise and tenon. helmets and thick fireproof clothing, A short stroll away stands another Yanshui may have been a backwa- so they can stay on the frontline during relic of Yanshui’s mercantile past. The ter for the past century, but its name is bombardments, and experience a thrill- Octagonal Pavilion, the only surviv- familiar to people throughout Taiwan ing adrenaline rush. ing part of a large mansion built in the thanks to the Beehive Fireworks Festi- The festival is a reenactment of a 1850s for a local sugar tycoon, is a val. This event takes the enjoyment of plague expulsion rite. Back in the late sublime two-floor, eight-sided building. pyrotechnics to an extreme. Like the 19th-century, cholera ravaged Yanshui, As with many other traditional build- running of the bulls in the Spanish town and desperate townsfolk sought super- ings in Taiwan and China, no nails were of Pamplona, those who attend the natural help. To drive out the evil spirits used, the beams, windows and sills Beehive Festival should understand the they blamed for the epidemic, they risks they face and prepare carefully to carried through the streets an effigy of minimize the danger. Guan Gong, a deified general regarded Thousands of bottle rockets are as the god of brotherhood and righ- launched over and into the crowds teousness. Along the way, they burned on the streets. The event gets its name joss paper and let off firecrackers. because these tiny projectiles, like angry This exorcism by fire and noise bees, scream in every direction, rico- apparently worked. The contagion chet off walls and houses, and sting any receded, and Yanshui’s citizens continue flesh left bare. Nothing like it happens to show their gratitude in the form of a anywhere else in the world. Festi- rowdy nocturnal parade always held at val veterans wear full-face motorcycle the time of the Lantern Festival. BEEHIVE FIREWORK FESTIVAL Yanshui and Houbi are respectively served by Brown Line and Yellow Line local buses; route and timetable details can be found at https://2384.tainan.gov. tw. For travel information in English and other languages about every part of Greater Tainan, see the city govern- ment’s Travel Tainan website (www. twtainan.net). For all kinds of information useful when planning a trip to Taiwan, visit the Tourism Bureau’s website (www. taiwan.net.tw). The 24-hour tourist information hotline (0800-011-765) is toll-free within Taiwan. The visitor service centers at airports, high-speed railway stations, and other locations are happy to provide maps and leaflets and JINGLIAO ELEMENTARY SCHOOL answer your questions.
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