April 2021 | Vol

2021/4/1 10:15 PM Issue Sponsor Vol. 51 4 51| Issue | Vol. 2021 April 號執照登記為雜誌交寄 THE AMERICAN CHAMBER OF COMMERCE IN TAIWAN TAIWAN BUSINESS TOPICS April 2021 | Vol. 51 | Issue 4 中華郵政北台字第 5000 4_2020_Cover.indd 1

CONTENTS

NEWS AND VIEWS 7 Editorial

APRIL 2021 VOLUME 51, NUMBER 4 Taiwan Should Keep Its Eyes on the Prize 一一○年四月號台灣應心無旁騖追求目標 8 Profile Publisher 發行人 AmCham’s New President Looks to Leo Seewald 李豪 Senior Advisor 資深顧問 Take Chamber to the Next Level Don Shapiro 沙蕩 Senior Editor 資深編輯 12 Taiwan Briefs Jeremy Olivier 歐嘉仁 By Jeremy Olivier Art Director/ 美術主任/ Production Coordinator 後製統籌 Katia Chen 陳國梅 17 Issues Cover Designer 封面設計 Grace Yang 楊慈安 6 President’s View Wrapping up the 2020 White Paper Manager, Publications Sales & Marketing 廣告行銷經理 A fond goodbye, but not farewell Meetings Caroline Lee 李佳紋 Translation 翻譯 By Leo Seewald By Jeremy Olivier Kevin Chen, Yichun Chen 陳又銘, 陳宜君 COVER SECTION Bolstering Taiwan’s Defense 強化台灣國防 American Chamber of Commerce in Taiwan 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan By Matthew Fulco P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: [email protected] website: http://www.amcham.com.tw 名稱：台灣美國商會工商雜誌發行所：台灣美國商會臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182

Taiwan Business Topics is a publication of the American Chamber of Commerce in Taiwan. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2021 by the American Chamber of Commerce in Taiwan. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house, Printing by Farn Mei Printing Co., Ltd. 18 For Taiwan’s Defense, the 24 Taiwan’s South China Sea 登記字號：台誌第一零九六九號印刷所：帆美印刷股份有限公司 Focus is on Asymmetric, Defense Challenge 經銷商：台灣英文雜誌社台北市108台北市萬華區長沙街二段66號 Indigenous Capabilities The ROC’s two territories in 發行日期：中華民國一一○年四月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961 Military planners say the region have strategic and asymmetric platforms will boost political significance, yet both

Chairperson: CW Chin Taiwan’s overall warfighting are difficult to defend. Vice Chairpersons: Fupei Wang, Timothy Shields Secretary: Daniel Tseng capabilities, raising the cost to Treasurer: Angela Yu Beijing of an invasion. 2020-2021 Governors: C.W. Chin, Brian Sung, Timothy Shields, Fupei Wang, Roger Yee, Angela Yu. ANALYSIS 2021-2022 Governors: Justin Chin, Cynthia Chyn, Paulus Mok, Terry Tsao, Daniel Tseng. 29 Improving Urban Life

2021 Supervisors: Max Chen, Shelley Chia, Seraphim Through Smart City Ma Projects COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ A visiting Henry Luce Fellow Eric Lin, Angela Yang, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Mandy Huang, Eric Jai, C.P. looks at the progress Taiwan has Liu; Chemical Manufacturers/ Charles Liang, Michael made on its urban digitization Wong; Cosmetics/ Abigail Lin; Defense/ Manohar Thyagaraj, Roger Yee; Digital Economy/ Max Chen, efforts and what is needed to Renee Chou, Tai Chi Chuan; Energy/ Richard Freer, Randy Tsai; Human Resources/ Christine Chen, make those programs more effec- 32 Challenges in Evaluating the Carmen Law, David Tsai; Infrastructure/ Wayne Chin, tive and equitable for all citizens. Paul Lee; Insurance/ KT Lim, Mandy Shih, Linda Tsou; Progress Intellectual Property & Licensing/ Jason Chen, Peter By Roman Shemakov By Roman Shemakov Dernbach, Vincent Shih; Marketing & Distribution/ (tba); Medical Devices/ Louis Ko, Jeffrey Wang; Pharmaceutical/ Justin Chin, Cellina Yeh, Serena Chow; Private Equity/ Echo Yeh; Public Health/ Joyce SPONSORED CONTENT Lee, Pongo Peng, Tim Shields; Retail/ Ceasar Chen, Mark Chen, Peggy Liao; Sustainable Development Goals/ Kenny Jeng, Lume Liao, Cosmas Lu, Fupei 16 Cadence Helps the Industry Take on System Design-Era Wang; Tax/ Heidi Liu, Cheli Liaw; Technology/ Cynthia Chyn, Stella Lai, Angela Yu; Telecommunications Opportunities & Media/ Thomas Ee, David Shin, Joanne Tsai; Transportation & Logistics/ (tba); Travel & Tourism/ 42 Taoyuan Aerotropolis: Bringing Taiwan’s Industrial Advantages Marvin Ma, Jason Yeh, Fiona Yuan. to the World

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4 contents.indd 4 2021/4/6 2:59 PM APRIL • VOLUME 51 NUMBER 4 COVER SPONSOR INDUSTRY F CUS Taiwan’s Changing Auto Industry

Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. 34 The Taiwan Auto Industry’s Blockbuster Year Citi is proud to have had a strong presence in Taiwan since 1964. Taiwan’s car market experienced sub- Being the leader in Taiwan’s banking industry, Citibank Taiwan stantial sales growth in 2020, record- has been recognized as the Best International Bank in Taiwan for ing the highest number of units sold 24 consecutive years by FinanceAsia, Best Bank - Global by The in 15 years. Yet global headwinds and Asset Triple A for 18 consecutive years, and winner of the “Trusted Taiwan’s relative lack of an EV market Brand: Credit Card Issuing Bank - Gold Award” from Reader's could slow the momentum in 2021. Digest for 13 consecutive years. By Austin Babb and Jason Wu 37 Taiwan’s EV Supply Chain Citi's Institutional Clients Group provides top-tier corporations with a full range of value-added local and cross-border products and Cranks into High Gear services. Leveraging Citi’s world-class banking platform, Citi acts Taiwan has a relatively complete as clients’ best partner to support and grow their businesses to the supply chain for electric vehicle com- next level by delivering cost effective solutions with a flexibility that ponents, and companies such as is unmatched by Citi’s competitors. Tesla rely heavily on Taiwanese suppliers for a majority of their EV parts. Yet Citi’s Global Consumer Banking leads the market by pioneering the island has not produced a viable Wealth Management banking service, providing wealth advisory EV brand to contend in the global service, local and multi-currency deposits to premium accounts, market. OBU products and services and a variety of mutual funds, bonds, By Angelica Oung and Hong Kong and U.S. stocks. By providing customers with value-added services, Citi’s Cards business enjoys high customer 39 Automakers’ Reliance on Taiwan satisfaction and strong brand recognition in the market. Chips Sparks Discussion Taiwan has a relatively complete Citi aims to become the world’s digital bank. In addition to introduc- supply chain for electric vehicle coming smart banking branches in 2010, Citi possesses the innovative ponents, and companies such as culture that positions it to lead the digital trend and deliver more Tesla rely heavily on Taiwanese suppli- effective, dynamic, and convenient approaches to better serve ers for a majority of their EV parts. Yet clients. Citi was also the first bank in Taiwan to introduce Voice Bio- the island has not produced a viable metrics authentication technology into its call center, and continues EV brand to contend in the global to roll out mobile-based digital solutions to enhance and simplify the market. customer experience. By Jens Kastner Citi believes strongly in its responsibility to both Taiwan and the global community. To build Citi’s ESG (Environmental, Social and EXECUTIVE SUITE Governance) thought leadership, Citi Taiwan issued its first certi- 44 Meet Fupei Wang of Ogilvy fied ESG Report late last year. Citi has also supported sustainable financing and investment, and launched various initiatives to pro- By Jeremy Olivier mote financial education, community care, youth employment, and environmental protection in Taiwan. All these initiatives demonstrate Citi's long-term commitment to the community in which it lives and TAIWAN BUSINESS TOPICS • APRIL 2021 5 runs its businesses.

4 contents.indd 5 2021/4/6 3:00 PM PRESIDENT'S VIEW

A fond goodbye, but not farewell

Dear Members and Friends, believe this growth can be interpreted as a sign that companies see the value of joining AmCham, and this sentiment is When I took up the AmCham Presidency last Sep- really our most precious asset. It has been an honor to rep- tember, I didn’t foresee how personally rewarding the role resent AmCham’s membership. I really enjoyed getting to would be. In many ways, I found it more engaging than my know members better through my role as President. previous role as AmCham Chairperson because I am now On the government side, it is the Chamber’s honor to directly involved with both the members and with the intri- serve as a trusted partner and a bridge between the Taiwan cate details of the Chamber’s work. and the US. It is in this capacity that the Chamber can be I also feel that the Chamber’s work is particularly an effective supporter of commercial and trade agreements meaningful at this time. Now more than ever, Taiwan and many other initiatives that are of mutual interest to the has a golden opportunity to build on shifting global U.S. and Taiwan. It is also the reason Taiwan government supply chains, its strength in the semiconductor and other officials take AmCham’s White Papers so seriously. They industries, and its excellent handling of the COVID-19 know that behind any specific issue is a desire to improve pandemic. These circumstances have kept Taiwan finan- Taiwan’s competitiveness and introduce global best prac- cially strong, and its people inspired at a time when most tices to Taiwan. We are lucky in Taiwan to have great of the rest of the world is suffering. It has also raised Tai- representatives in both the U.S. and Taiwan governments wan’s profile globally. As President of the Chamber, I had who work passionately to make Taiwan a better place to a unique chance to participate in helping Taiwan build on work and live. I am very thankful to have had the opportu- this opportunity. nity to get to know them and work closely with them. Some of the initiatives we have been working on – such Finally, I would like to give a word of thanks and praise as advocating for a bilateral trade agreement (BTA) and to the AmCham staff. I have known and worked with the a double taxation agreement with the U.S. – have been staff in my capacity as member, Chairman, and now Pres- around for a long time, and I am optimistic that good ident. It has been a pleasure and an honor to work with progress can be made in the near future. I believe we will such a dedicated team. We have hit a lot of milestones in see TIFA talks resuming later this year and also think the last few months: our change of name from “AmCham Taiwan is in the best position in years to negotiate a double Taipei” to “AmCham Taiwan,” the renovation of our taxation agreement. office, hitting the 1,000-member mark, setting the ground- There are also a number of new initiatives that work for our 70th anniversary, as well as a record number AmCham has become involved in the last few months, of high-level government engagements. It has also been a including supporting Taiwan’s 2030 Bilingual Nation plan lot of fun – we have an excellent team that is close-knit, and its efforts to attract foreign talent through the Employ- hardworking, and very effective. ment Gold Card program. If successful, these initiatives As my Presidency comes to an end, I want to express will help boost Taiwan’s global competitiveness and con- my gratitude to all of AmCham’s stakeholders for the nectivity. opportunity to work with you and to do my part in The secret to the Chamber’s success is to a large extent keeping the Chamber moving forward. As Henry Ford tied our stakeholders – our members, our government part- once said, “If everyone is moving forward together, then ners on both the U.S. and Taiwan sides, and of course success takes care of itself.” our Chamber staff. Our membership covers a very broad industry base, and members share a very optimistic view of Taiwan, with 86% of respondents to our 2021 Business Climate Survey saying they are confident in Taiwan’s economic prospects for the coming year. Our membership has also been growing steadily, despite Leo Seewald the effects of COVID-19, and we have made it over the President, 1,000-member threshold for the first time since 2017. I American Chamber of Commerce in Taiwan

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4 presidents view.indd 6 2021/4/1 10:18 PM E D I T O R I A L

Taiwan Should Keep Its Eyes on the Prize

ast month, Central Bank of the Republic of China facturing advantages of Taiwan’s industries. Their high-value (CBC) Governor Yang Chin-long spoke to lawmakers production capacity has greatly benefited countries where much L regarding the U.S. possibly labeling Taiwan a currency of the economy and educational system have had to go remote. manipulator, one of the criteria for which is a trade surplus However, flippant comments like those made by Yang with the U.S. of more than US$20 billion. Yang noted that and even rumors of using Taiwan’s semiconductor and ICT the U.S. market has become increasingly reliant on Taiwan strengths as a bargaining chip are not only bad optics, but for semiconductors and ICT products during the COVID-19 could also easily backfire. Taiwan over the past year has right- pandemic, and if it insisted on reducing its trade deficit with fully received an unprecedented amount of international Taiwan, “we just won’t sell [them] our products.” goodwill. Injecting an overtly transactional element to new or The comment was intended as a joke, but it also raises ques- improving relationships with other countries may deter them tions about whether such an attitude is helpful or harmful to from building on or deepening those ties once the worst of the Taiwan, especially in light of the increasingly warm relationship pandemic is over. It would therefore be unwise for Taiwan to it has developed with the U.S. mix or imply that it can mix political influence with legitimate Yang’s assertion also follows rumors in late January that business transactions. the Ministry of Economic Affairs (MOEA) requested a deal Taiwan finds itself in one of the most outstanding periods involving supplying automotive semiconductors to Germany in in its short history as a liberal democracy. It is making steady exchange for vaccines, after the MOEA’s German counterpart progress toward improving and expanding its international approached it directly for help with easing a shortfall in chips. profile. Its leaders cannot afford to become complacent at While Minister Wang Mei-hua did discuss a vaccine deal this time, but should keep their focus on the main goals of with Germany’s representative in Taipei, she categorically concluding a free trade agreement (FTA) with the U.S. or denied any kind of quid pro quo, saying “Taiwan is a free and becoming a member of the Comprehensive and Progressive democratic country. It is beyond the government’s power to Agreement for Trans-Pacific Partnership (CPTPP). interfere with private commercial contracts.” Considering the political obstacles at play, it’s imperative “Taiwan can help” is not just a catchy slogan; it has gained that Taiwan stay on the correct path and do everything it can purchase among an increasing number of like-minded partners to show it is a responsible member of the international trading across the world. Originally used to refer Taiwan’s COVID-19 community. Treating interactions with friendly countries as assistance to countries that were struggling to contain the a trade-off risks tarnishing the good reputation that it has virus, it has now come to include the technological and manu- worked so hard to develop.

台灣應心無旁騖追求目標

華民國中央銀行總裁楊金龍上月前往立法院備在則擴及台灣產業的技術與製造優勢。這些產業的高價值詢，談及美國可能將台灣列為貨幣操縱國（評判生產能力，讓經濟和教育大多須採取遠端運作的國家受益中標準之一是對美貿易順差逾200億美元）。楊金良多。龍指出，在2019年冠狀病毒疾病（COVID-19）大流行期不過類似楊金龍談話的輕率言論，還有利用台灣半導體間，美國市場越來越倚賴台灣的半導體和資通訊產品；若和資通訊優勢做為談判籌碼的流言，不僅令人觀感欠佳，華府堅持減少對台貿易逆差，「我們就不會賣產品（給美還很容易適得其反。過去一年來，台灣理應得到了空前大國）」。量的國際好評。在和他國建立嶄新或持續改善關係時注入前述談話原是開玩笑，卻也引發此態度對台灣究竟有公然具有交易性質的元素可能會使這些關係無法在疫情緩益或有害的質疑，尤其是有鑒於台灣和美國的關係日趨熱和後繼續發展或深化。因此，台灣聲稱或暗示有能力在合絡。法的商業交易中摻和政治影響力的做法，實屬不智。在楊金龍發表前述看法前，一月下旬有傳言指稱，經濟台灣發現，在其成為自由民主政體的短短歷史中，目前部在接獲德國對等機關直接找上門籲請協助緩解車用晶片正是最鼎盛的時期之一，在提升和擴展國際能見度上迭有荒後，要求達成以晶片向德方交換疫苗的協議。進展，但領導人現在還不能自滿，而是應持續專注於主要經濟部長王美花的確曾和德國駐台代表討論疫苗交易，目標――和美國達成自由貿易協定（FTA），或成為跨但她斷然否認達成任何形式的交換條件，表示：「台灣是太平洋夥伴全面進步協定（CPTPP）的一員。自由民主的國家，干涉私人商業合約超出政府的能力」。鑒於政治阻礙的影響，台灣的當務之急是延續正確路「台灣可以幫忙」不只是一句動聽易記的口號，已贏得線，並竭盡所能證明自己是國際貿易社會中負責任的成世界各地越來越多志同道合的夥伴。這句口號原指台灣能員。將其與友善國家的往來視為交換條件，可能會讓台灣為其他勉力遏阻COVID-19病毒的國家提供防疫協助，現非常努力才得來的良好聲望受損。

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AmCham’s New President Looks to Take Chamber to the Next Level

he past year has been one of they had been looking for: Andrew became familiar with Taiwan, joining a great changes for AmCham. Not Wylegala, a 29-year veteran of the nationwide tour with a visiting group of only did the Chamber weather U.S. Foreign Commercial Service and Taiwanese Rotarians. theT outbreak and spread of COVID-19 avid booster for Taiwan. Currently in “It was 1979, a really important and the residual effects of the pandemic Japan, he will take up his post with year for U.S.-Taiwan relations with the on its member companies, but it also AmCham as soon as he can complete passing of the Taiwan Relations Act,” underwent a complete renovation of the necessary paperwork and two-week Andrew says, referring to the U.S. leg- its office and began the long and labo- quarantine requirement. islation that created the framework rious process of changing its name and Andrew, who grew up in a family for unofficial ties with Taiwan after identity from “AmCham Taipei” to that placed great importance on civic America switched ofﬁcial recognition to “AmCham Taiwan.” involvement and education, has long China. “I remember thinking, in addi- Signiﬁcantly, the Chamber also expe- had an affinity for Asia. His interest tion to this love for Japan I’ve started, rienced a change in leadership when the in the region started with an exchange Northeast Asia in general is really inter- previous President, William Foreman, year in Japan during his junior year of esting, and I want to learn more about resigned last September to pursue per- high school. Living with several host Taiwan.” sonal goals. Former Chairman Leo families, attending a local all-boys After receiving a B.A. in history from Seewald stepped in to lead the organiza- school, and immersing himself in the Cornell and a master’s degree in interna- tion through the subsequent six months, Japanese language, the young Andrew tional economics from Johns Hopkins, while the AmCham Board of Governors developed a lasting fascination with and Andrew worked for a while as a trade began an exhaustive search for a suit- respect for foreign cultures. law analyst and Congressional staff able replacement. Aside from being the place where he member. He then embarked on a two- Finally, this February, the Board’s met his future wife, Yoko, Japan was year civil service training scheme called search committee found the candidate incidentally also where Andrew first the Presidential Management Fellows

Andrew chats with former U.S. Ambassador to Japan Caroline Kennedy while pro- Seeding businesses in the Kurdish moting the Foreign Direct Investment in the United States (FDIUS) program. Region of wartime Iraq.

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Program, which allowed him to rotate through several government agencies. Although he was set to go into the civil service when he completed the program, an offer to become a U.S. diplomat irre- versibly changed his career trajectory. Upon joining the foreign service, candidates are given a choice of pre- ferred career track, including consular, economic, political, and public diplo- macy – a popular choice at the time. However, says Andrew, “my interest was international business-related. I liked the idea of assisting individual American ﬁrms by leveraging the broad architecture of regulations governing trade and international relations, oper- ating at the intersection of public and private sectors. The former U.S. commercial officer shows off some cool clothes during a work But, he says, “I was even more ener- shoot on U.S. consumer goods. gized to see how companies went abroad and expanded – how they Tokyo, and Baghdad, Andrew grad- hopeful and successful.” solved concrete problems – and I ually broadened his horizons as each In his subsequent role as Min- thought this would be a more practical, post presented new life-changing and ister-Counselor of Economic Affairs action-oriented career for me.” career-building opportunities. One par- in Hong Kong, Andrew worked with Thus began a dynamic and fruitful ticularly memorable experience for him the special administrative region’s career in the international arm of the happened during his two-year tour in trade council in 2009 to launch the U.S. Commercial Service, one which wartime Iraq, where, despite the odds, Pacific Bridge Initiative, a program spanned three decades and four conti- he helped coordinate and carry out a that facilitated use of Hong Kong as nents. “There was an opportunity to see successful trade show for Iraqi busi- a springboard for the explosion of a tremendous breadth of geographies nesses in a Green Zone hotel. outbound Chinese investment that and the whole spectrum of economic “One of my proudest accomplish- was then taking place, in the process development,” Andrew says. “But the ments in this process was convincing directing a larger share to the U.S. key takeaway was how productive, then Commerce Secretary Carlos Guti- “This was a joint program that was powerful, and global U.S. business was errez to take the tortuous flight to get partly funded by our Hong Kong part- and continues to be.” to Baghdad,” says Andrew. “He spoke ners, which nobody thought could Working as a commercial officer with the brave Iraqi entrepreneurs at happen,” he says. “How could you in markets as diverse as Berlin, Lima, our trade show and it was marvelously actually have foreign-government-

Andrew applied the cultural knowledge Andrew and wife Yoko pose with former Japanese Prime Minister Shinzo Abe and and language skills he had developed his wife Akie at the 2013 Imperial Garden cherry blossom viewing. over the years to his experiences working and living in Japan.

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Andrew adopted a practical, case- study method, which he found to be well-received by the students. “This was a program to give future leaders and policy shapers enough economics to make informed decisions,” he says. “You weren’t looking to get graduate economists out of this program.” His teaching position was also what brought him back to Taiwan. While co-leading a national security and competitiveness study of the U.S. semiconductor industry, Andrew brought a group of students on a field study to Hsinchu, which helped him establish new contacts in the island’s ICT sector.

Next Steps

After retiring from the U.S. foreign service in 2019, Andrew took a short sponsorship of a USG initiative? But it sabbatical before signing on with the worked – to the degree that other posts UK Department for International Trade in Asia looked to emulate what we did.” as the Life Sciences and Healthcare Lead Not only did Andrew focus his for the Asia Pacific Region in August life’s work on facilitating U.S. trade, 2020. The job was significant for investment, and business develop- Andrew in that it was his first regional ment abroad, he also took two years role, coordinating the trade and invest- beginning in 2017 to fill a non-tradi- ment functions of 10 ofﬁces across Asia, tional role as a visiting professor at the in contrast to the mostly bilateral work National Defense University in Wash- he did with the U.S. government. Also, ington, D.C. Andrew taught economics during that period Britain concluded and industry analysis to a diverse an economic partnership compact with cohort of high-level U.S. and foreign Japan, its first major trade deal as an uniformed and civilian military per- autonomous trading nation. sonnel and private sector professionals. Andrew sees some parallels between Rather than take a traditional theo- the UK’s recent circumstances exiting retical approach to teaching his courses, the EU and the position Taiwan now

Although a dedicated diplomat and hard worker, Andrew also enjoys having fun. He uses most of his free time to engage in lei- sure activities like running, hiking, and cycling.

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finds itself in, something that greatly AmCham Taiwan’s members.” language aficionado – he speaks fluent attracted him to the role at AmCham in And lastly, while the Chamber’s Spanish and passable German in addi- the ﬁrst place. membership roster is already very tion to Japanese – Andrew already has a “While certainly not being the same impressive, boasting about 1,000 well ﬂeshed-out study plan that he says situation, there are similar dynamics at members from around 500 member will help him get back up to a level that play,” he says. “Taiwan is on the verge companies, Andrew sees room to will make him effective on the job. of breaking out and expanding its con- expand it even further. Doing so calls While his vision for AmCham nectivity and relations regionally and for a dual-track process, he says, Taiwan is ambitious and forward- globally. This is our chance to con- looking at how to improve and enhance looking, Andrew admits he’s humbled tribute to that effort.” the mix and quality of membership ser- by the comprehensive, quality work the As for the future of AmCham vices, while simultaneously pushing Chamber’s relatively small staff is able Taiwan, Andrew’s vision is, in his words, to expand the size, composition, and to accomplish. to “take an already high-powered, diversity of the membership base. Part “It’s sobering knowing that people highly effective, very well-respected, and of this expansion will involve compre- are working that hard and getting that influential Chamber in Asia and elevate hensive work with the AmChams of kind of output,” he says. “It’s a taste it yet further.” He looks to achieve this Asia Pacific (AAP), benefiting from the of what’s to come, and the President’s through the fulfillment of three broad information sharing and development going to have to keep up. But I’m ready objectives. First is to tap into the innu- capacity that organization offers. to lend a hand.” merable connections he made as a career foreign service officer to help further Getting settled cement Taiwan’s trade and economic relations with the U.S. As he begins moving into a new “We want to make AmCham part of role in a new (but not unfamiliar) land, the coalition that steers Taiwan toward Andrew is excited to go out and explore ever more high-level agreements with Taiwan’s wonderful natural habitats via the U.S. and to raise its profile and some of his favorite outdoor activities: effectiveness in Washington,” he says. hiking, cycling, running, and kayaking. Secondly, Andrew seeks to use One of his major personal goals is to AmCham as a vehicle to help integrate complete an around-the-island bike tour. Taiwan into more regional multilat- Most of all, he looks forward to eral agreements such as the CPTPP, returning to his Mandarin studies. ASEAN+ initiatives, or even a func- Although he began learning the lan- tional agreement on digital trade. This guage during an intensive program at endeavor includes “intensifying our the Defense Language Institute in Mon- connections with Japan, Korea, and terey, California prior to his post in even Europe. We can be a part of this Hong Kong, he had few opportunities integration effort that creates more to practice it afterward and eventu- international space for Taiwan and ally, let it fall by the wayside. Being a

With over three decades of international trade and business experience, Andrew looks forward to bringing his verve and vision to his new role at AmCham Taiwan.

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profile.indd 11 2021/4/1 10:19 PM T A I W A N B R I E F S

— BY JEREMY OLIVIER —

MACROECONOMICS ECONOMIC INDICATORS

BUSINESS & ECONOMIC US$ billion Year earlier OPTIMISM ABOUND Current Account Balance (Q4 2020) 27.3 17 February was a down month for Foreign Trade Balance (Feb.) 4.5 3.3 manufacturers in Taiwan this year, New Export Orders (Feb.) 42.6 28.7 according to the results of a monthly Foreign Exchange Reserves (end Feb.) 543.3 479.7 business outlook survey conducted by the Taiwan Institute of Economic Unemployment (Jan.) 3.66% 3.64% Research (TIER). It makes sense: Febru- Discount Rate (Feb.) 1.125% 1.375% ary is already the shortest month of Economic Growth Rate Q4 2020p 5.09% 3.69% the year. Add to that the fact that both Annual Change in Industrial Output (Jan.)p 18.81% -1.54% the Lunar New Year and the 228 Peace Annual Change in Industrial Output (Jan.-Dec. 2020)p 7.08% Memorial holiday fell in February this Annual Change in Consumer Price Index (Jan.) -0.16% 1.86% year. Nevertheless, businesses are feel- Annual Change in Consumer Price Index (Jan.-Dec. 2020) -0.20% ing rather optimistic about the coming P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT six months, with 52.1% expressing an upbeat outlook about their short-term work-from-home economy as the main leaves discount rates at 1.125% – the business prospects. factor contributing to the increase. lowest in Taiwan’s history – while the Taiwan’s overall trade continues to The Yuanta-Polaris Research Institute rate on accommodations with collateral grow at a steady clip, with exports in and Cathay Financial Holding Co. have and rate on accommodations without February increasing 9.67% from the joined the chorus of Taiwan-based orga- collateral remain at 1.5% and 3.375% same month last year. Imports also rose nizations projecting annual GDP growth respectively. As Taiwan has seen little by 5.66% year-on-year, while Taiwan’s of over 4% in 2021. Yuanta-Polaris in inflationary pressure and is expected trade balance for the first two months late March forecast economic growth to maintain steady growth, the CBC registered a surplus of US$10.7 billion. of 4.4%, 1.3 percentage points higher suggested that there is no urgency for Export orders in February increased than its prediction made last Septem- monetary contraction. 48.5% year-on-year to US$42.59 billion, ber. Cathay, meanwhile, puts Taiwan’s marking the twelfth consecutive month 2021 economic growth at 4.2%, a INTERNATIONAL of growth. The Ministry of Economic full percentage point higher than its Affairs (MOEA) cited steady shipments December 2020 forecast. The company PALAU PRESIDENT of electronic products to supply the cited strong private investment and an VISITS TAIWAN improving global economic situation. Surangel Whipps Jr., President of Taiwan’s two oil refiners – state- the Micronesian country of Palau, one TAIWAN STOCK EXCHANGE PERFORMANCE owned CPC, Taiwan Corp. and the of Taiwan’s few remaining diplomatic private Formosa Petrochemical Corp. – allies, made a five-day official visit THE LINE SHOWS CHANGES IN TRADE VALUE AND THE SHADED AREA CHANGES IN THE TAIEX INDEX. on March 21 raised gasoline prices and to Taiwan in late March to celebrate

POINTS NT$ BILLION diesel prices by NT$0.5 and NT$0.6 the opening of a special travel bubble 17000 477,000 respectively. According to CPC, Taiwan, between the two partners. Accompa- 16000 424,000 the decision to raise prices was based nying Whipps on his visit was U.S. 15000 371,000 on floating oil-price calculations and Ambassador to Palau John Hennessey- 14000 318,000 price adjustment principles. It added that Niland, the first American ambassador 13000 265,000 crude oil prices dropped by 1.51% due to visit Taiwan in four decades. The 12000 212,000 to halts in EU vaccination rollouts and delegation was received at Taoyuan 11000 159,000 10000 106,000 the EU’s stringent Easter lockdowns. International Airport on March 28 by 9000 53,000 The Central Bank of the Repub- Taiwan’s Minister of Foreign Affairs 8000 0 lic of China (CBC) left key interest rates Joseph Wu. Whipps is the first head unchanged after its quarterly policymak- of state to lead a delegation to Taiwan

DATA SOURCE: TWSE ing meeting on March 18. The decision since the outbreak of the COVID-19

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pandemic early last year. At a ceremony in Taipei to celebrate trade missions in countries with which Asked by media about China’s the MOU, Minister of Foreign Affairs it has no diplomatic relations. Lithua- attempts to persuade Palau to switch Joseph Wu noted that the agreement was nia currently maintains trade attaché recognition to the People’s Republic of the first to be entered into under the U.S. offices in only 13 countries and is look- China (PRC), Whipps said that “Taiwan administration of Joe Biden. ing to enhance its commercial presence has always demonstrated the value of our The MOU commits the two part- in Taiwan. partnership and friendship, and they have ners to furthering their cooperation According to Lithuania’s Foreign been with us through thick and thin.” He on maritime issues. It was signed less Ministry, Beijing has exerted pressure added that “nobody should tell us that than a month after China implemented on Lithuanian enterprises to dissuade we cannot be someone else’s friend.” its Coast Guard Law, which autho- the country from approaching Taiwan. The travel bubble between Taiwan rizes the country’s Coast Guard to use Lithuania’s leaders have been critical and Palau – one of the only locations in force against foreign vessels within all of Chinese influence in Eastern Europe the world with zero confirmed COVID- waters claimed by China. AIT Director and have called the 17+1 platform – 19 cases – opened in mid-March. Brent Christensen, speaking at the Taipei a Chinese initiative started in 2012 to Whipps on his visit called the bubble a ceremony, said that the institute looks promote business and investment ties “sterile corridor” linking “two COVID- forward to cooperating with Taiwan on with the region – divisive. Arguing that free, COVID-safe countries,” adding “humanitarian assistance and disaster the platform has brought Lithuania that it would help spur the recovery of relief, information-sharing, and work- “almost no benefits,” they have sought to Palau’s tourism industry, which has been ing more closely together to tackle other shift Lithuania’s focus to deepening part- heavily impacted by the virus. global challenges.” nerships with other like-minded partners. Lithuania is one of the Baltic states TAIWAN, U.S. MARITIME LITHUANIA TO – a handful of small countries in north- COOPERATION DEEPENS OPEN TRADE OFFICE eastern Europe that lie along the Baltic The U.S. and Taiwan in March Defying political pressure from Sea and border Russia. The Baltics concluded a memorandum of under- Beijing, the Lithuanian government on generally take a more progressive standing (MOU) in Washington, DC, to March 25 moved forward on an amend- stance on issues related to democracy establish a Coast Guard Working Group. ment to its Law on Civil Service to and human rights due to their history The agreement was signed by Taiwan’s enable the opening of a trade office in of authoritarian rule under the USSR. representative to the U.S., Hsiao Taiwan. The decision was part of Lith- Taiwan currently has a representative Bi-khim, and Ingrid Larson, manag- uania’s strategy to enhance its visibility office in one Baltic state – Latvia – but ing director of the American Institute in overseas markets. The amendment trepidation about China’s aims in the in Taiwan’s Washington headquarters. will allow the country to establish region could encourage others to follow Lithuania’s path. News of Lithuania’s decision to establish a trade office in Taiwan follows a diplomatic loss for the island when in early February, the South American country of Guyana reneged on a deal to allow Taiwan to establish a representative office there.

CROSS-STRAIT

CHINA BUSINESS TRAVEL RESUMES After a year of restricting the entry of Chinese nationals to Taiwan due to the COVID-19 pandemic, Mainland Affairs Council chief Chiu Tai-san last month announced that MAC would lift Palau President Surangel Whipps Jr. meets with Taiwan President Tsai Ing-wen the ban on Chinese visitors for business during Whipps' visit in late March. PHOTO: SIMON LIU/OFFICE OF THE PRESIDENT

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purposes. Entry will now be permitted for Chinese business travelers fulfilling contracts in Taiwan, as well as employees of multinationals who are scheduled for transfer to Taiwan. The decision to lift the ban came shortly after Chiu assumed his role as head of MAC. He expressed his hope that the two sides can begin to address their differences, using the phrase “coop- erative ambiguity” to define his vision of cross-Strait relations. Under this concept, neither side would be forced to accept the other’s framework for how such relations should be conducted. Chiu called on China to cease its aggressive military posture toward Taiwan, engage in productive dialogue, and take a reciprocal approach to cross- CECC Commander Chen Shih-chung receives his first dose of the AstraZeneca vaccine. Strait exchanges. He urged Beijing to PHOTO: TAIWAN CENTERS FOR DISEASE CONTROL understand the differences between the two sides and take a more positive view of aircraft – something that experts In response to China’s new measures, of the development of cross-Strait ties. consider necessary but which is phys- Taiwan’s Council of Agriculture (COA) ically and financially taxing on the plans to amend the Plant Variety and PLA CONTINUES island’s air force. The MND said last Plant Seed Act in an effort to stymy the ADIZ INCURSIONS month that it was moving from sending outflow of agricultural products and On March 26, 20 Chinese military up aircraft every time there is a breach technology to China. The amendment is aircraft breached Taiwan’s air defense to using the military’s land-based missile modeled on Japanese laws that prohibit identification zone (ADIZ) – airspace forces to track China’s planes. and punish the unauthorized export of claimed by a jurisdiction to identify and local flora. track possibly hostile aircraft. Although CHINA LOOKS TO such incursions are now a near-daily POACH AGRITECH DOMESTIC occurrence, the most recent incident, China last month passed 22 measures which included bombers and fighter to develop its agricultural technology TAIWAN DOMESTIC jets, was the largest such action since capabilities, mainly aimed at attracting VACCINATIONS BEGIN China began sending its aircraft into Taiwanese talent in this area. Measures The first batch of vaccines to be Taiwan’s ADIZ and the Taiwan Strait include allowing Taiwanese agricul- delivered to Taiwan arrived on March early last year. tural professionals to buy land, receive 3. According to the Central Epidemic According to Taiwan’s Ministry of subsidies, obtain credit ratings, and join Command Center (CECC), the 117,000 National Defense (MND), several of the agricultural trade organizations. COVID-19 vaccine doses manufactured aircraft, including Y-8 anti-submarine The new measures come on the by AstraZeneca will be offered to groups aircraft and H-6K bombers, flew into heels of China’s announcement in late of individuals prioritized for vaccination airspace near southern Taiwan, while the February that it would ban imports of by the Advisory Committee on Immuni- others – J-10 and J-16 multi-role fight- pineapples from Taiwan, citing multiple zation Practices (ACIP). Top priority is ers, a KJ-500 airborne early warning and reports of pests detected in Taiwan- being given to medical personnel. control plane, and a Y-8 tactical recon- ese fruit by its customs authorities. However, concerns over the Astra- naissance plane – circled the airspace However, the ban was widely inter- Zeneca vaccine’s effectiveness and safety around Taiwan-controlled Pratas (Dong- preted as another attempt by China to threatened to derail the effort to inoc- sha) Islands in the South China Sea. exert political and economic pressure ulate one of Taiwan’s most vulnerable Taiwan’s military responded to the on Taiwan. Previously, 90% of Taiwan’s groups against the novel coronavirus. incursion with its usual scrambling pineapple exports went to China. The issue was raised after reports that

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some individuals in other countries had the pilots, Lieutenant Luo Shang-hua, suffered from blood clots after receiv- was found and later pronounced dead ing the vaccine. A survey conducted by at the hospital, a search mission contin- the CECC in mid-March found that only ued to look for the other pilot, Captain a third of medical workers at hospitals Pan Ying-chun. Following the crash, the treating COVID-19 patients were willing MND grounded its remaining F5-Es, to take the vaccine. which will remain under inspection until Nevertheless, when the vaccine was early April. rolled out a week later, over 3,000 people in the ACIP’s highest priority BUSINESS group received jabs. CECC Commander Chen Shih-chung and Premier Su Tseng- LINE BANK STARTS chang were the first people in Taiwan to TRIAL OPERATIONS the bank. It has also received member- receive the AstraZeneca vaccine, in part Online banking services company ship approval for the Central Deposit to encourage others to follow suit. LINE Bank began trials of its Taiwan Insurance Corp., allowing it to provide platform in late March. The trial oper- deposit insurance to clients. LINE Bank JET CRASH RAISES ations, which were limited to the is expected to provide debit card and MILITARY CONCERNS approximately 700 employees of LINE personal loan services in the first stages The fatal collision of two F5-E fighter Taiwan, follow a series of stress, inte- of its operation, with credit card services jets last month – the latest of five such gration, and user tests. If the trial is to come later. crashes over the past two years – raised successful, the online bank will make further concerns about the military’s a full debut in late April, according to FOXCONN STARTS handling of investigations related to LINE Bank General Manager Morris WISCONSIN PRODUCTION such incidents. A report provided by the Huang. Hon Hai Precision Industry Co., Ministry of National Defense (MND) to LINE Bank is one of only two inter- known overseas as Foxconn, has begun the Legislative Yuan stated that the mili- net-only banks in Taiwan, the other certain production operations at its tary had failed to learn from the earlier being Rakuten International Commer- manufacturing complex in the U.S. state crashes. Altogether the crashes have cial Bank Co. Its launch on the island of Wisconsin. The mostly empty site, claimed the lives of 12 airmen, with two follows the opening of a similar bank in which was originally intended to manu- others remaining missing. Thailand last year by major shareholder facture 10.5-generation LCD displays, is The most recent incident occurred LINE Financial Taiwan Corp., which now producing servers and 5G network- during a routine training mission off will be used as a benchmark for the ing equipment for several clients, the coast of Pingtung County. It is success of the Taiwan platform. including Cisco. Foxconn Vice President believed that the two jets crashed during Huang said the company has placed Lu Fang-ming said that the company a change in formation. While one of special emphasis on cybersecurity for had begun trial operations at the site, and that it would eventually incorporate

TAIWAN'S JAN.-FEB. 2021 TRADE FIGURES 5G-enabled smart factory solutions. (YEAR-ON-YEAR COMPARISON) In addition, the company is currently in discussions about whether to produce China/ apan ASEA TOTA electric vehicles (EV) at the Wiscon- sin complex in the future. Foxconn has

26.1 made clear its interest in expanding its 19.3 8.1 11.6 10.3 8.5 7.8 6.3 5.6 EV business, and last year launched its 6.9 4.3 3.9 MIH open platform for EV develop- 2021 2020 2021 2020 2021 2020 ment in Taiwan. MIH brings together 54.5 43.5

.S.A. Europe 37.6 Taiwanese EV component manufactur- 31.3 ers to collaborate on developing the first 8.6

7.2 5.7 5.6 6.2 5.1 4.6 5.2 completely Taiwan-produced EV. (See 2021 2021 2020 2021 2020 2020 the Industry Focus section of this issue T: S Billion for more on the MIH platform and EV Exports mports SO RCE: BOFT/MOEA development in Taiwan).

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4 Briefs.indd 15 2021/4/1 10:20 PM ADVERTORIAL

Cadence Helps the Industry Take on System Design-Era Opportunities

he convergence of several new integrated circuit (3D-IC), system-in- with the increasing complexity of chips technologies, such as 5G, artificial package (SiP), or multi-chip module and systems. This will allow businesses to T intelligence (AI), the industrial (MCM) layouts, bringing to fruition accomplish larger-scale design at a more internet of things (IIoT), autonomous complex chip/chiplet package design. reasonable cost. At the same time, we also vehicles, and hyperscale computing have Second, the ultra-high data transfer began to adopt machine learning (ML) brought about a wave of unprecedented rates of packaging, printed circuit algorithms to improve design optimization innovation. At the same time, these boards (PCBs), connectors, cables, and and efficiency. Cadence is always working technologies have also pushed electronic backboards require more accurate signal to address the industry’s most pressing design toward a higher level of integration integrity (SI) analysis to ensure optimal trends with the goal of helping the and facilitated the development of diverse functionality and compliance with industry achieve better design quality both vertical applications. To accelerate this regulatory requirements. Third, the future faster and smarter. innovation, computational software has will be a world in which radio frequency become a critical part of overcoming (RF) is ubiquitous; various wireless Taiwan In An Optimal Position In The technologies such as 5G, Bluetooth, Wi-Fi, system design challenges. To face this Semiconductor Industry new era, Cadence, a U.S.-headquartered and Zigbee will continue to be more computational software firm, has widely used. As everyone knows, Taiwan is not expanded the role of a traditional Only by being able to fully only a global leader in the manufacturing electronic design automation (EDA) tool accommodate these design needs can of silicon wafers, but its packaging and provider. By providing a comprehensive Cadence collaborate with companies testing capabilities are also world-class. platform that encompasses design and completing highly reliable designs. As Furthermore, Taiwan’s semiconductor analysis software, the company is helping an example, current interface speeds clusters and the complete upstream and businesses develop the next generation of of circuit boards can already reach downstream portions of its industrial innovative products. 112Gbps, ensuring SI requires robust supply chains are unmatched. Given Cadence Taiwan Country Manager electromagnetic (EM) analysis capabilities. Taiwan’s great strengths in this area, Brian Sung notes that as process Since the rise in temperature created says Brian Sung, Taiwanese industry nodes get smaller and heterogeneous by high frequencies can affect power will benefit from the diverse market integration requires ever more complex supply and SI, co-design analysis of heat/ demand and opportunities brought on design processes, the industry is now power/electromagnetism has also become by innovative applications, as well as the at a turning point in its system design necessary to achieve greater product movement of design needs to the Asia- evolution. Demand for the integration reliability. Pacific region and the reorganization of of system design and analysis software Complex system design requires semiconductor supply chains. will be greater than ever before. Given dependably powerful software, and Sung emphasized that right now this, Cadence has already broadened its individual point tools of the past are no is a critical moment for Taiwan’s horizons with a higher level view. The longer feasible if the aim is to accelerate semiconductor industry to take on the company has built a more complete full- development of the new generation opportunities it is presented with. To flow design platform with the mindset of of system design. Cadence has built a that end, Cadence continues to invest in "thinking beyond the chip" to help the full-flow platform integrating design, Taiwan, actively cultivating semiconductor industry solve the challenges associated construction, and analysis for digital and industry talent and strengthening its with developing next-generation 3D-IC, which can achieve the best design computational software capabilities. With products. results. At the same time, this is also its “thinking beyond the chip” mindset, Sung says that in terms of current Cadence's unique technical advantage. the company will maintain its dedication overall system design, “thinking beyond Beyond this, software must be able to offering complete flows and solutions, the chip” involves three major trends. to divide up and expand its computing enabling businesses to welcome global First, the More-than-Moore paradigm load to accommodate thousands of CPU market opportunities as part of the new will give rise to more three-dimensional cores and servers in order to keep pace system design era.

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Cadence advertorial.indd 16 2021/4/6 2:57 PM ISSUES

Wrapping up the 2020 White Paper Meetings

ast month, AmCham Taiwan concluded the third and make some headway in persuading the government to consider final meeting between its various industry committees adopting international standards for management of chemical L and representatives of relevant government agencies to products, as well as to work with the committee to help improve discuss progress on the 2020 White Paper issues. The meetings, the public image of the chemical industry. coordinated by the National Development Council and presided Other areas where progress appeared to be made included over by NDC Minister Kung Ming-hsin, were launched in 2018 the Transportation and Logistics Committee’s 2020 White Paper as a way of increasing collaboration between the Chamber and issue regarding expanding fiscal incentives for electric vehicle the Taiwanese government and to push for better communica- buyers. The Ministry of Transportation and Communications tion and resolution of industry and regulatory issues. (MOTC) representative cited its plans to extend the commodity In general, the overall tone and direction of the meetings, tax exemption for electric vehicle purchases, which was set which took place over three three-hour sessions, was positive. to expire at the end of 2021. The Intellectual Property and The benefit of having committee co-chairs and representatives Licensing Committee was invited by the National Communica- make their case face-to-face with their government counter- tions Commission (NCC) to join a working group composed of parts is that it allows for more in-depth discussion, and Minister the NCC, the Taiwan Intellectual Property Office (TIPO), and Kung worked hard to find common ground between the two the World Intellectual Property Organization (WIPO) to discuss sides, at times suggesting one-one-one meetings to hammer out difficult IPR issues. certain issues. Not all of the discussions proceeded equally smoothly, and Among the highlights of the NDC meetings was the Finan- there were some longstanding issues that continue to require cial Supervisory Commission’s (FSC) commitment to working further communication between industry and the regulators. with the Central Bank (CBC) to assist the Asset Management Chief among these is the Medical Devices Committee’s recom- Committee with resolving its issue regarding the issuance of mendation that the government accept the Medical Device multi-currency funds by privately placed securities investment Single Audit Program (MDSAP) audit report as a substitute trust enterprise funds (SITE). In addition, the FSC noted that for the current Establishment Inspection Report (EIR) for the it will release a directive by the end of March allowing foreign review and approval of new medical devices. AmCham hopes institutional investors (FINI) to invest in exchange traded notes that the relevant stakeholders of these issues can continue (ETN), helping to resolve one of the Capital Markets Commit- working together to achieve actionable solutions. tee’s 2020 issues. The Chamber is grateful to Minister Kung and his colleagues Some of the government representatives present at the meet- at the NDC for their assistance in arranging the quarterly White ings expressed an openness to establishing direct channels with Paper meetings, as well as to the various government agencies their private sector counterparts to continue discussing items for their time and willingness to communicate and work with where there appeared to be room for compromise or forward AmCham’s industry committees. AmCham looks forward to movement. Included among these items was the Technology continuing its advocacy work through its annual production of Committee’s request that the government avoid prescriptive the Taiwan White Papers and its collaboration with industry labeling of tech products – in particular, pre-loaded software and public sector partners. applications on mobile devices – for cybersecurity purposes. The Chemical Manufacturers Committee also appeared to — By Jeremy Olivier

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For Taiwan’s Defense, the Focus is on Asymmetric, Indigenous Capabilities

Military planners say asymmetric platforms will boost Taiwan’s overall warfighting capabilities, raising the cost to Beijing of an invasion.

BY MATTHEW FULCO

he People’s Republic of China this decade – in fact, in the next six after they have already made landfall. has been threatening to annex years.” Former National Security Advisor “I am committed to accelerating the Taiwan by force for seven decades. H.R. McMaster that same month told development of asymmetric capabili- TheT threat has not been credible until the committee that Taiwan is “the most ties under the Overall Defense Concept,” recently, with the ruling Communist significant flashpoint now that could President Tsai Ing-wen said last year, Party becoming increasingly emboldened lead to a large-scale war.” He marked the referring to the new ODC defense strat- by the country’s rapid military modern- period after 2022, when Beijing is set to egy first outlined in 2018. “This will be ization, rising nationalism, and a belief host the Winter Olympics, as the time of our number one priority.” that time is on its side. “greatest danger” for Taiwan. An asymmetric warfare strategy is In January 2019, Chinese leader Xi Taiwan is responding to the height- reasonable “because there will be a finan- Jinping said that “unification between ened Chinese threat by reorient- cial challenge for Taiwan to compete ship the two sides of the Strait is the great ing its defense strategy toward asym- to ship, aircraft to aircraft with China,” trend of history,” adding that “we make metric weapon systems that are small, says Roger Yee, founder and global pres- no promise to abandon the use of force.” mobile, lethal, and often relatively low- ident of Taipei-based security consul- Military planners in the U.S., Taiwan’s cost. They are intended to deter a more tancy Magna Imperium Consulting and primary security partner, have made powerful adversary or in the event of an former president of Raytheon Technolo- known their concern. In March, Admi- attack, turn Taiwan and its environs into gies Taiwan. ral Philip Davidson, the top U.S. mili- a “porcupine” that the People’s Libera- “There is a compelling argument that tary officer in the Asia-Pacific, said at a tion Army (PLA) cannot easily devour. in addition to making Taiwan a tough Senate Armed Services Committee hear- Further, Taiwan will increasingly focus on nut to crack as the porcupine strating that the “threat is manifest during defeating enemy forces at sea rather than egy rightly intends, Taiwan’s defenders

0 台灣國防重點：非對稱性戰力與國造武器 0 0 0 文長

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DEFENSE

highly mobile. you can sink at least half his invasion Rick Fisher, a senior fellow at the fleet and he is going to stay home.” International Strategy and Assessment At the same time, conventional weap- Center in Washington, DC, says that ons systems will continue to play an bolstering Taiwan’s missile arsenal would important role in Taiwan’s defense. “The help deter a PLA invasion. He suggests ODC is a useful platform but shouldn’t that Washington consider selling Taipei be viewed as immutable law on the direc- its new 550-kilometer range Precision tion Taiwan should go,” says Rupert Strike Missile (PrSM), which the U.S. Hammond-Chambers, managing direc- may deploy by 2023. tor of the BowerGroupAsia consultancy. “The main PLA invasion fleet will “2020’s sales of 66 F-16s is not consis- be gathering at the mouth of the Yang- tent with the ODC but is also essential if tze River,” Fisher says. “Once they start Taiwan is going to maintain a credible air south to Taiwan, they will come within defense and modern air force.” should also look outward – to reach out range of PrSM missiles equipped with It is important for Taiwan to modern- as far as possible across the Taiwan Strait anti-ship warheads. Show Xi Jinping that ize its military as older legacy systems to disrupt PLA capabilities,” says Grant Newsham, a senior fellow at the Center for Security Policy in Washington, DC, and a retired U.S. Marine officer. Elements of Taiwan’s recent arms purchases reflect that approach. For instance, the land-launched Harpoon missiles that the State Department approved for sale to Taiwan last October can hit Chinese warships at sea as well as ports from which they embark. In the same arms package, Taiwan purchased the High Mobility Artil- lery Rocket System (HIMARS), which has a range of up to 300 kilometers. That range is sufficient to strike coastal China from Taiwan or further inland if deployed on the Penghu archipelago, according to the Institute for National Defense Research (INDSR), a think tank affiliated with the Ministry of National Defense (MND). Both systems can be A harpoon anti-ship missile is launched from an M142 High Mobility Artillery Rocket System (HIMARS). mounted on military trucks and are thus PHOTO: WIKIPEDIA

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amortize, says Drew Thompson, a visiting senior research fellow at the National University of Singapore’s Lee Kuan Yew School of Public Policy and former director for China, Taiwan, and Mongo- lia in the Office of the U.S. Secretary of Defense. “The issue is how do you strike that balance between the asymmetric capabilities and the conventional ones that play a really important peacetime deterrent and morale role?” says Thompson, noting that Taiwan has to do both.

Made in Taiwan

While U.S. arms sales remain crucial to Taiwan’s security, the island is also Display model of Taiwan's Mystic Eye Vertical Takeoff and Landing (VTOL) beefing up its indigenous defense indus- unmanned aerial vehicle (UAV) developed by the National Chung-Shan Institute of try. Local media, citing military sources, Science and Technology. PHOTO: OFFICE OF THE PRESIDENT reported in February that Taiwan aims to accelerate production of several missile systems, including the surface-to-air Sky sonar systems for the sub. ity targets,” wrote Michael A. Hunzeker Bow (Tien Kung) III, the hypersonic anti- The subs differ from other asymmet- and Joseph Petrucelli of George Mason ship Brave Wind (Hsiung Feng) III, and ric weapons systems in Taiwan’s ODC University’s Schar School of Policy and the Sky Sword (Tien Chien) II, a radar- because of their high price tag. The Government in a 2019 commentary guided air-to-air missile. design phase of the IDS cost roughly published in The Diplomat. In addition, Taiwan’s submarine US$104 million, while building the However, submarines can be used to program – which aims to have eight vessels will entail an estimated US$16 protect the east side of Taiwan, which is diesel-electric submarines ready by 2030 billion. in the patrol circles of Chinese vessels, to replace the aging current fleet of four It is unclear whether the subs will be including the country’s new aircraft carri- – is making progress. In November, the effective as a deterrent. China has the ers, says Drew Thompson. “The PLA is Kaohsiung-based CSBC Corp., Taiwan world’s largest navy and experts say it is not particularly strong at anti-submarine (formerly known as the China Shipbuild- unlikely to be dissuaded from attacking warfare,” he adds. ing Corp.) began construction on the Taiwan by a modest submarine fleet. It will be important for Taiwan to prototype Indigenous Defense Subma- “Any conceivable invasion scenario ensure that it can balance funding for the rine (IDS) that it plans to deliver to the would begin with a preemptive strike subs with other defense requirements, Taiwan Navy by 2025. U.S. defense against Taiwan’s military forces, of which says BowerGroupAsia’s Hammond- manufacturers are supplying combat and IDS would be among the highest prior- Chambers. “While a special budget will

武器國造 00 00 05

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Taiwan's indigenous T-5 Brave Eagle advanced jet trainer, developed by the Aerospace Industrial Development Corp., takes off.

PHOTO: OFFICE OF THE PRESIDENT

be used to fund construction, it will not Assessment Center suggests that the U.S. Newsham of the Center for Security extend to lifecycle support,” he says. “So and its allies step in to help Taiwan meet Policy says that armed forces morale Taiwan will need to address that in long- its timeline on sub delivery. “Should we needs improvement, and Taiwan’s all- term support for the submarine force be encouraging allies to sell or lease their volunteer force is having trouble attract- through the annual budget to ensure it used submarines to help Taiwan update ing sufficient recruits. doesn’t deprive other services and capa- its training and build faster interim capa- To address the challenge, he urges bilities of funding,” he says. bilities? Absolutely.” Taiwan to focus less on weaponry and Another challenge is the length of more on personnel. “To attract good time it will take to deliver the subs. Only Enhancing readiness people – and those from a broader candi- two of Taiwan’s current four subs are date pool that otherwise would not operational. The Navy will want to see Several sources who spoke to Taiwan consider joining the military – you must the new subs delivered before the older Business TOPICS for this report spend money and treat them well,” he ones are retired. expressed concern about the Taiwan mili- says. Fisher of the International Strategy tary’s preparedness for actual conflict. He suggests Taiwan focus on profes-

000 0 提升備戰

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sional development for service members reserves is a task that cannot be done by help prepare for the reboot, the military – both while in uniform and afterwards. the armed forces alone,” he says. “It is a plans to send a three-person delegation One possibility would be to implement combined civil-military effort.” to Israel between July and September of legislation similar to America’s GI bill, Huang believes the reserves could be this year. The delegation will focus on the providing lifelong benefits for long-serv- optimized by only sending those who Israeli reservists’ call-up system, training personnel, such as post-service educa- have completed their volunteer military ing programs, and compensation. Taiwan tion assistance, housing loans, healthcare, service into combat. The others, who at chose to study Israel’s reserves because and secure pensions. present receive just 16 weeks of training, of the similarity of the two countries’ Strengthening the reserve forces could play supporting roles in hospitals, conscription systems, Han said. should also be a priority, Newsham civil defense, and elsewhere. Meanwhile, Huang notes that Chinese says. “Tens of thousands of reasonably In December, Han Gan-ming, chief leader Xi Jinping is busy trying to secure trained, competently led, and motivated of the MND’s All-out Defense Mobi- a third term for himself, and that Taiwan citizen soldiers augmenting Taiwan’s lization Office – the authority tasked will loom large in his calculations. regulars will exponentially multiply the with strengthening and coordinat- Indeed, Xi has been in power since 2012, challenges facing a PLA invasion force ing Taiwan’s reserves – announced that but has yet to achieve a breakthrough in that manages to get ashore.” Taiwan would begin a comprehensive cross-Strait relations. His 2015 meeting One source familiar with Taiwan’s overhaul of its reserve forces in 2022. To in Singapore with former president Ma military, who requested anonymity because of the sensitivity of the subject, questions whether the reserves are up to the task of repelling a PLA invasion. Under the current system, reservists are supposed to train every two years at a military base near their home to maintain their fundamental combat skills. “Are these people trained and ready to defend Taiwan in the event of a major conflict?” the source asks. “Some of them do not have adequate training in the use of small arms. Is Taiwan going to provide the necessary equipment to train these people, and to spend time training them?” Alexander Huang, a professor of strategy and wargaming at Tamkang University, says that the reserves face a bureaucratic bottleneck. “The MND thinks that all of the reserves should be Reservists undergoing marksmanship training. under its command, but mobilizing the PHOTO: OFFICE OF THE PRESIDENT

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Ying-jeou was largely symbolic. systems” – which is less a reality in the breakthrough with Beijing, Taiwan In the highly likely event that Xi former British colony following Beijing’s will have to steel itself for rocky waters secures a third term, he could face imposition of a draconian national secu- ahead. mounting pressure to bring Taiwan into rity law there. Both the ruling Demo- The more determined Taiwan is to China’s fold. That term would conclude cratic Progressive Party (DPP) and oppo- defend itself, the greater the chance that in 2027, which happens to be the centen- sition Kuomintang (KMT) have rejected stability can be maintained, says Yee of nial of the PLA, Huang observes. the one country, two systems formula. Magna Imperium Consulting. “China Cross-Strait tensions are likely to “How could the people in Taiwan has to be certain that they’re going to be intensify, as Xi’s China has shown no accept essentially the red terror that is absolutely successful if they escalate to willingness to compromise with Taiwan. happening in Hong Kong right now?” war. The political stakes would be too Beijing continues pressing Taipei to says Thompson of the National Univer- high if they fail,” he says. “A strong mili- accept the same formula by which Hong sity of Singapore. tary deterrent sends the message that fail- Kong is governed – “one country, two With little hope for a diplomatic ure is a distinct possibility.”

The army conducts live-fire drills during the 36th annual Han Kuang military exercises in 2020. PHOTO: OFFICE OF THE PRESIDENT

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Taiwan’s South China Sea Defense Challenge

The ROC’s two territories in the region have strategic and political significance, yet both are difficult to defend.

BY MATTHEW FULCO

aiwan’s Coast Guard in March Pratas are closer to Guangdong Prov- The Chinese military may have twice conducted live-fire drills ince than to Taiwan – about 260 kilome- been collecting intelligence while test- on the Pratas Islands – known ters from the city of Shantou – and come ing Taiwan’s response capabilities. inT Chinese as the “Dongsha” – located within Hong Kong’s airspace. The relentless incursions take a toll in the South China Sea 450 kilometers As cross-Strait tensions spiked last on Taiwan’s Air Force, which usually southwest of Kaohsiung. Such exercises year, Chinese military aircraft began responds by scrambling fighter jets. were rare in years past. The Pratas are routinely breaching Taiwan’s southwest Of perhaps greater importance is the tiny, without permanent inhabitants, and air defense identification zone (ADIZ) signaling represented by the incursions. remote. Among territories administered between the main island of Taiwan and Alexander Huang, a professor of strat- by Taiwan, only Itu Aba (Taiping Island), the Pratas. The People’s Liberation Army egy and wargaming at Tamkang Univer- part of the Spratly Island archipelago, is (PLA) flew 380 times into that part of sity, says the forays have a psychological more far-flung. Taiwan’s ADIZ last year, according to the impact on Taiwan’s domestic audience, Yet the Pratas’ geography makes them Institute for National Defense and Secu- as well as on political and military lead- vulnerable to Chinese coercion. Not only rity Research (INDSR), a think tank affil- ership in the U.S. To the domestic audi- are the islets far from Taiwan, they also iated with Taiwan’s Ministry of National ence, the PLA appears to be flexing its are flat and devoid of any natural defense Defense (MND). It was the most incur- muscles. The signal to Washington is that positions. Beijing claims the Pratas along sions since 1996, when China fired the PLA can monitor and perhaps disrupt with almost all of the 3.5 million-square- missiles into the waters near Taiwan to the activity of U.S. forces in the area. kilometer South China Sea, where it has intimidate voters ahead of the country’s For Taiwan, the message is grim. built many military installations. The first direct presidential election. “The PLA could take the Pratas pretty

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easily, even if there are Taiwan Marines “a certain military usefulness,” News- rium Consulting. stationed there,” says Grant Newsham, ham says. From the islands, PLA missiles The heaviest blow would be political, a senior fellow at the Center for Secu- could “reach out quite a ways.” though, says Drew Thompson, a former rity Policy in Washington, DC. “They At the same time, China could disrupt Pentagon official who is now a visiting may not even need to attack; just seal the shipping routes that run through the senior research fellow at the National place off” with an air and sea blockade. Taiwan Strait and Bashi Channel. “China University of Singapore’s Lee Kuan Yew Occupying the Pratas would not be a could create a choke point and control School of Public Policy. “I question the military game changer for the PRC, but how things moved in that area,” says strategic relevance in terms of the defense it would facilitate surveillance and intel- Roger Yee, global president of Taipei- of Taiwan’s homeland of Itu Aba and ligence collection. There would also be based security consultancy Magna Impe- Dongsha [Pratas],” Thompson says. “Kinmen and Matsu are much more relevant.” From a political standpoint, however, losing the South China Sea territories “would be a tremendous embarrassment for the leadership [of Taiwan] and the military,” he says.

Known unknowns

Compared to the Pratas, Itu Aba looks more secure for now. China will likely approach the largest Spratly island more cautiously than the Pratas, says Tamkang University’s Huang. He notes that the area has four claimants: the Phil- ippines and Vietnam as well as China and Taiwan. That complicates Beijing’s calculations. Further, China already has installations near Itu Aba. That is not to say Itu Aba is devoid of strategic value. Quite the opposite, as much of Taiwan’s energy supply travels on the sea lanes near the Spratlys. Taiwan also has fishing rights in the surrounding exclusive economic zone – the area of sea that stretches 200 nautical miles from the coast of the island and grants Taiwan GRAPHIC: WIKIPEDIA

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special rights to certain marine resources – and substantial energy reserves, such as hydrocarbons, may exist below the seabed. In March, Defense Minister Chiu Kuo-cheng said Taiwan had beefed up its defense of Itu Aba in response to China’s aggression in the region. “My goal is for us to be ready at all times,” he told Taiwanese lawmakers. Still, Taiwan has not deployed Marines to Itu Aba as it has to the Pratas. No military troops have been stationed there since 2000, when they were replaced with Coast Guard personnel to lower tensions in the area. Taiwan dispatched Marines to the Pratas last year amid media reports that China was planning a massive military exercise on Hainan Island simulating capture of the islands. Wang Ting-yu, a Democratic Progressive Party lawmaker on the Legislative Yuan’s Foreign Affairs and National Defense Commit- tee, told The South China Morning Post that the Marines are U.S.-trained and capable of anti-landing and anti-para- chute operations. Hong Kong-related tensions may also be affecting Beijing’s approach to the Pratas. Last August, five Hongkongers fleeing the city following Beijing’s imposition of a draconian national security law reportedly reached the Pratas by boat. Taiwan’s Coast Guard intercepted them and brought them to a detention facility Satellite images of Taiwan-administered Pratas (Dongsha) Island, top, and Itu Aba in Kaohsiung. (Taiping Island), below. Hong Kong Security Secretary John PHOTO: WIKIPEDIA

已知的未知數 000 5 00 5

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activity was inevitable” given Beijing’s sovereignty claim and the icy state of cross-Strait relations, says Ross Darrell Feingold, a Taipei-based political risk analyst. “It puts enormous pressure on Taiwan’s civilian leadership and national security apparatus, and might be a precursor to the establishment by China of a South China Sea ADIZ.” According to Chinese-language CommonWealth Magazine, Taiwan’s military is prepared for a PLA attack on the Pratas. Under the “Border Defense Battle Plan,” the Navy would deploy a task force combining Navy and Marine units to carry out amphibious attacks on enemy forces occupying the islands, CommonWealth said in an August Military personnel boarding a C-130 Hercules transport aircraft on Itu Aba (Taiping Island). report. Reinforcements would arrive on PHOTO: WIKIPEDIA Navy C-130 transport planes. Beijing might opt for gray-zone tactics Lee called on Taiwan to send the indi- In October, Hong Kong air traf- instead to test Taiwan’s mettle, says viduals back to the former British colony fic controllers advised a civilian aircraft Tamkang University’s Huang. “They “after going through legitimate proce- chartered by Taiwan’s military not to could send boats of fishermen who request dures” and suggested that the five may enter the airspace over the Pratas because to land on the islands. But it would be face criminal charges in Hong Kong. “If of “dangerous activities” happening hard to tell if they are really fishermen.” they are suspected of committing crimes below 26,000 feet, according to the Civil Beyond Taiwan’s own military read- in Hong Kong, do not harbor criminals,” Aeronautics Administration (CAA). iness, the U.S. can play a critical role in he said. The pilot of the plane, which was carry- deterring Chinese aggression, says News- After that incident – and as tensions ing supplies to the 250 Taiwanese Coast ham of the Center for Security Policy. He rose between the U.S. and China in the Guard officers stationed on the islands, notes that Washington has a wide variety South China Sea – Taiwan deployed its eventually flew the aircraft back to Kaoh- of policy tools it can leverage to influence domestically made Albatross drones to siung after the air traffic controllers Chinese behavior. both the Pratas and Itu Aba. The MND would not say when the activities in ques- “The U.S. would have to respond, told reporters that that the unmanned tion would end. and it can make that clear to China,” he aerial vehicles (UAV) would enhance “While the increased pace of Chinese says. “Would China want to be restricted reconnaissance capabilities in the South activity [near the Pratas] in the fourth from the global financial system? Because China Sea and strengthen the Coast quarter of 2020 might be linked to the that’s an option the U.S. has as long as Guard’s defense of the two islets. boat departures from Hong Kong, such the U.S. dollar reigns supreme.”

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Improving Urban Life Through Smart City Projects

A visiting Henry Luce Fellow looks at the progress Taiwan has made on its urban digitization efforts and what is needed to make those programs more effective and equitable for all citizens.

BY ROMAN SHEMAKOV

ver the past five years, Taiwan as a major catalyst for the next stage of the application of more than a dozen has placed “smart cities” – Taiwan’s economic development. She successful smart city technologies, from urban centers that run on data commended domestic companies for city lights and parking to long-distance collectedO through sensors and other actively investing in developing the arti- medical diagnosis. electronic means – at the forefront of its ﬁcial intelligence of things (AIoT), while “Taiwan smart city projects are car- national digitization strategy. citing the ASVDA project and other ried out with both ‘top-down’ and Smart city experiments are ubiq- government efforts to create test fields ‘bottom-up’ approaches,” says Lin. uitous at both the national and local to push that development forward. “Not only is the central government levels. The National Development ASVDA has taken the lead in the committed to introducing new tech- Council (NDC) launched the Asia Sil- national digitization campaign. The nologies to develop smart city projects, icon Valley Development Agency agency’s stated mission is to “pursue but local governments are also invited (ASVDA) in 2016 to incubate technical a new economic model for sustainable to design their own smart city projects solutions useful for all municipalities, development based on the core values and apply for national subsidies if nec- and in the same year Taipei began its of innovation, employment, and equi- essary.” Smart Taipei initiative. Each major city table distribution.” Smart Taipei has become one of the now also has a similar program. “ASVDA functions like a cross- most successful local digitization efforts These initiatives are part of a ministry platform,” explains Joseph in Taiwan and in the world. One Hong national vision of a “modern city” Chun-ju Lin, a senior specialist at the Kong-based executive goes so far as to – one responsive to the needs of its citi- NDC’s Department of Industrial Devel- say that “other governments should zens and based on advanced technology opment. “It works with industries to look to Taipei as the foundation to and a high degree of transparency. The pilot test new technologies for cities, develop any smart city initiative.” projects mainly focus on connecting get feedback, and eventually make The initiative was launched by private firms with public needs, while those technologies advanced enough to Taipei Mayor Ko Wen-je and works educating the rest of the government on export overseas, including Southeast directly with companies to test, what the term “smart” should mean in Asian countries.” develop, and incubate technical solu- practice. Since another NDC department is tions at the neighborhood level. It is a Imbuing cities with technology has responsible for urban planning as a prime example both of how technology become a central part of the national whole, “our focus is purely on intro- can solve urban problems and how dif- strategy. At a 2018 conference, Presi- ducing new technologies into smart city ficult it is to integrate these solutions dent Tsai Ing-wen described smart cities projects,” Lin says. ASVDA has guided into long-term, scalable plans.

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With a budget of NT$40 million In just five years, Smart Taipei has across Taiwan are not collaborating on (US$1.4 million) and an office of 22 incubated more than 200 technical their digital strategies, says Lee. people, Smart Taipei has embraced solutions. “Smart Taipei has recently Additionally, all such projects remain the goal of making Taipei “more liv- founded, and they have already done vulnerable to changes in the political able and sustainable,” says Leo Chen- incredible work for the city,” says Ste- winds. “Each mayor has different pri- yu Lee, the program’s director. “It does phen Liu, executive director at Turing orities and thinks about smart cities this by serving as a bridge between pri- Drive, a Taipei-based autonomous bus differently,” Lee says. “In the world of vate companies and public needs, and company. “They facilitated contact elections, the long-term future of every consulting for city departments on their with all the relevant government agen- project is perpetually uncertain.” technical vision.” cies so we could test our autonomous Smart Taipei offers valuable les- Smart Taipei helps companies vehicles.” sons for how to place citizens before focused on healthcare, housing, edu- This spirit of experimentation can be technology, and a warning of what cation, transportation, and finance a double-edged sword. To ensure that could happen if the experimentation partner with relevant city depart- relevant technical solutions are created is not integrated nationally. Imagine ments to test their products quickly to address community needs, failure is a collaborative framework where an and cheaply. If the product works and a constant reality. Lee of Smart Taipei urban puzzle in Kaohsiung could be solves an existing problem, it has the explains that “in the past five years, partly funded by Taipei and resolved potential to become a city-wide policy. out of more than 200 projects, only 10 in Taitung. The initiative is based on open data have become city policies.” But 10 rele- Integrating technology within cities and a constant public-private feedback vant solutions could radically transform in a productive way requires long-term, loop. In essence, Taipei has been made life in Taipei, a city of almost three mil- large-scale planning. The greatest suc- into a living urban lab with citizens at lion people. cess of Smart Taipei and the NDC is its center. As Taipei integrates solutions and that they have defined and institution- “Smart Taipei has truly figured out learns from its failures, however, the alized collective values around data and how to design technology for the com- Smart Taipei lab remains isolated from technology: transparency, inclusion, and munity,” says Jordan Kostelac, director the rest of the country. Lee admits competitiveness. But very few of the of property technology for multina- that it is still “difficult to cooperate proposed new technologies have actu- tional real estate firm JLL in Hong with other cities.” In essence, each city ally been adopted, and even fewer have Kong. in Taiwan has its own funding and led to signiﬁcant change in city life. “It takes away the tech-messiah fan- method for developing a smart city, and Isolated technological solutions will tasy of monopoly, allows for trial in a is working separately to solve identical never be the final answer. Individual competitive way, and is grounded in problems. “Either because of differ- “smart” solutions for specific com- radical transparency.” ences in resources or mentality,” cities munity issues can be akin to putting

PHOTO: SMART TAIPEI

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a band-aid on problems that require national collaboration. Smart projects can provide a semblance of improving urban life by coming up with shiny solutions without fully addressing the structural concerns. It is important to ask what fundamental difference easier parking, smart streetlights, and faster vending machines are making for city residents. “When it comes to urban planning, technology is rarely the issue; it is the people and the system” that matter, Lee concludes. The problem is primarily with the national planning landscape, says Lee Image of Turing Autonomous Bus software. Wei-feng, an urban planner and CEO of PHOTO: TURING DRIVE Taipei-based consulting firm Paul Hsu & Partners. “In Taiwan, private devel- opers control everything. They usually the values of effective digitization. It look like 100 years from now – not just buy land in two-hectare chunks and has the “world’s best sensor manu- in one election cycle. build it out to their preference.” facturing, system integration industry So, while the existing smart city solu- (semiconductors), and communication — Roman Shemakov’s book The tions can solve small problems, they infrastructure,” says Paul Hsu & Part- Digital Transformation of Property can’t address multi-jurisdictional ques- ners’ Lee. “The only piece missing is the in Greater China: Finance, 5G, AI, tions like emissions or urban-rural political and business will to coordinate and Blockchain, co-authored by Paul inequality. As Paul Hsu, senior advisor all national urban functions together.” Shulte and Dean Sun, is now avail- to Paul Hsu & Partners, has been To ensure that development is equi- able for preorder. It discusses the tools emphasizing for the past two decades, table and scalable, it will be vital through which national planning, pri- it is just as important to have smart vil- to bring all the digitization projects vate firms, and public input should be lages as it is to have smart cities. around Taiwan together, base them integrated. The author thanks George Taiwan finds itself in a golden on the model Smart Taipei pioneered, Yin, Amanda Yeh, Libby Hoffenberg, moment for designing technology and ground them in national urban plan- Halo Lanhart, and Paul Schulte for cities in tandem. It has articulated ning, and imagine what cities should support in making this article possible.

PHOTO: ASVDA

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smart city.indd 31 2021/4/1 10:24 PM Challenges in Evaluating the Progress

n one prominent international ranking of how well municipalities have developed themselves into Ismart cities, Taipei is positioned in eighth place, while in another it is 26th. One survey gives Taipei its highest score for environmental policies, and another considers it one of its lowest. The discrepancy reflects the arbitrary nature of these indices and the impreci- sion with which the term “smart city” tends to be discussed. Debates about communities have been turned into a technological competition, mostly PHOTO: SMART TAIPEI concerned with products best able to extract value on the margins of society. ally improves urban services and one expresses a commonplace concern: Focusing exclusively on technology that fundamentally changes the fabric “How do we make sure cities don’t may cause structural urban problems of urban life. Consider the difference become advanced infrastructure for sur- to be ignored and lead to inequitable between projects that merely make veillance?” development. As Taiwan accelerates traffic lights more responsive and those Although the threat of mass-scale its path to digitize previously ana- that develop autonomous public trans- surveillance is well founded, the cult logue infrastructure, experts see long- portation to make road-centric design of privacy has just as much poten- term, interdepartmental planning as the obsolete. Or the difference between tial to threaten a community. Fear of only way to ensure that technology is firms that simply help construction data tracking played significantly into working to benefit its citizens. companies source material faster and the rapid spread of COVID-19 in the At its core, a city is two things: those that are creating completely new, U.S. Perhaps there should be less con- values and engineering. Values are the sustainable materials to build with. One cern about whether data is collected, principles inhabitants choose to struc- kind of digitization brings marginal and more about how it is collected, ture their life around. Engineering is efficiency. The other involves progress by whom, and for what purpose. Is the glue that enables those principles to toward an overarching goal. my data being used to protect those in be achieved. In a city that serves its cit- Unfortunately, all urban digitiza- power or hold them accountable? Is it izens’ needs, infrastructure embodies tion projects have been lumped under a helping to keep my neighbors healthy these principles. But if technology is not single category, making it nearly impos- or to arrest them? properly anchored in what is important sible to distinguish their usefulness to “Technology itself is neutral – poli- to residents of the city, the potential society and long-term prospects. Tech tics imbues it with purpose,” Moss-Pultz impact could be negative. companies are incentivized to inflate points out. “The problem is that there is Calling the term “smart city” an how revolutionary their tech is, the a point of no return. If you don’t focus “abstraction and obfuscation,” Jordan venture capitalists promote this charac- on values, discuss limits, and create Kostelac, property technology director terization to boost valuations, and the transparency around technology early for JLL in Hong Kong, asks: “How public rarely has the chance to examine on, it will become too late.” could you be rising on a smart city the details. No one has the chance to ask Global “smart city” indices seem index when the basic human needs are why their city is spending tens of mil- focused on whether a city is becoming not being filled and vice versa?” lions of dollars upgrading the light posts more “efficient” through technology, “We should be asking if the tech is around the neighborhood with wi-fi. often failing to scrutinize what that just a veneer or is it actually being used Value-extracting services have become efficiency means. The goal of urban to better serve the constituent needs of conflated with value-creating services. planning should not be to imple- your residents,” Kostelac continues. This raises the question of what kind ment the same off-the-shelf technical “That’s where ‘smart’ gets confused of value is created and for whom. For improvements in every part of the with technology for technology’s sake.” example, a technology that feeds all world; it should be to give citizens the “Smart” is now being used to describe internet traffic directly into the local ability to craft communities that suit virtually every city service, yet usually police station may bring more prob- them. It is the only way to make sure denotes little more than a given ser- lems than solutions. The same is true of we have cities that are diverse, unique, vice being connected to the internet, run a system that allows property owners to and resilient, rather than simply remotely, or becoming partly automated. evict their residents at will. “smart.” A much clearer distinction is needed Sean Moss-Pultz, CEO of Taipei- between technology that margin- based blockchain company Bitmark, — By Roman Shemakov

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Taiwan’s Changing Auto Industry

iSTOCK PHOTO

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THE TAIWAN AUTO INDUSTRY’S BLOCKBUSTER YEAR

Taiwan’s car market eperienced substantial sales growth in , recording the highest number of units sold in years. et global headwinds and Taiwan’s relative lack of an E market could slow the momentum in .

IN THIS REPORT BY AUSTIN BABB AND JASON WU

020 was a traumatic year During the pandemic, many con- for the global automobile sumers turned to private transport to industry. Factory shutdowns avoid crowded MRT cars and buses. 2and dealership closures became com- “People didn’t want to take public monplace as consumers were forced, transportation due to the virus,” says through travel restrictions and strict Chen. “People went to work and sent • The Taiwan Auto Industry’s Blockbuster quarantine measures, to remain at kids to school by cars.” During the Year p34 home. Global automakers suffered first eight months of 2020, Taipei’s unprecedented losses. Overall car MRT ridership plummeted, falling sales declined 19% in the United 20.66% in March and 28.77% in States, 13% in Japan, and 10% in April from the same months a year • Taiwan’s EV Supply Chain Cranks into High Canada – and by as much as 48.35% earlier. Similarly, passenger use of Gear p37 in Indonesia and 61% in Germany. buses dropped 25% between January While the global car industry and March. struggled, however, Taiwan’s Restrictions on international domestic car market experienced travel also gave rise to increased • Automakers’ Reliance on Taiwan Chips miraculous growth. According to the domestic tourism, another factor Sparks Discussion p39 Taiwan Transportation Vehicles Man- driving Taiwan’s record car sales. ufacturers Association (TTVMA), the Given Taiwan’s relative safety amid island’s car sales grew 4% year-on- the pandemic, citizens found an year to more than 457,000 units in incentive to buy cars for domestic 2020. It was the highest number of travel. Since consumers had saved up vehicles sold since 2005. money from not traveling overseas, The Taiwanese auto industry’s “naturally you will have a lot of car success in pandemic-stricken 2020 buyers,” says TTVMA’s Chen. came from a combination of fac- Coincidentally, rising demand tors ranging from changing consumer for private transport was met by the behavior to the expiration of a gov- launch of several new car models. ernment subsidy for trading in old Throughout 2020, Toyota, Nissan, vehicles, explains TTVMA Secretary- and Ford introduced new models General Chen Min-teh. with autonomous driving features

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that were appealing to consumers. its export sales – never a large proportion August; total production during that “These are not fully automated vehi- of the total – took a heavy toll due to period declined by a substantial 27.6%. cles, of course,” Chen says. “But they are weakened international demand during The drop in Taiwan’s automobile equipped with level 1 and level 2 auto- the pandemic. In August 2020, Taiwan’s manufacturing last year was compounded mated systems.” He adds that hands-off total car exports totaled 14,009 units, by a long-term shift in consumer prefer- features such as automatic steering, accel- 20.7% lower than the same period pre- ences from domestic to imported vehicles. erating, and braking are very popular vious year. By December, the figure was In 2004, sales of imported cars stood among younger consumers. All of these 19,133 units, 41% lower than in 2019. at 61,882 units – 13.6% of Taiwan’s innovations increased people’s willingness Kozui Motors, which is licensed 484,292 cars sold that year. In 2010, the to buy cars. Chen calls it “the ‘new car’ to build Toyota models for Taiwan’s market share of imports rose to 22.9% phenomenon.” domestic market, also produces more and later to 37.8% in 2015. In 2020, Taiwan’s record car sales in 2020 can than 95% of Taiwan’s vehicles for imported cars took up nearly half of the also be credited to the expiration of a export, which mainly go to the Middle year’s car market. vehicle scrappage policy introduced by East and only recently to North Africa. Darren Liang, an analyst at the the government in 2015. The policy was “People [in those areas] were scared to Taiwan Institute for Economic Research implemented to reduce the number of go outside due to the pandemic, and (TIER), ascribes this trend toward older, less fuel-efficient cars on the road. exports took a hit,” says Chen. imported cars to their decreasing cost. In 2016, the number of such cars stood The pandemic also led to supply Two decades ago, the New Taiwan dollar at 4.35 million units – a staggering 55% chain disruptions, which further shrunk traded at nearly NT$30 against the U.S. of all automobiles on the road. Under the Taiwan’s car manufacturing capacity. dollar (USD). Today, the exchange rate is policy, consumers received a NT$50,000 Automobile parts used by Taiwanese car- around NT$28 per USD, a nearly 10% (US$1,750) rebate on new car purchases makers are predominantly imported, change in value. Imported cars became for trading in vehicles six years or older. with most supplies coming from China more attractive to Taiwanese consumers The five-year program ended last and Japan. as their currency appreciated. In addi- December, although the Executive Yuan “The pandemic situation became tion, since Taiwan’s admission to the plans to extend the benefit another five severe around February and March,” World Trade Organization in 2002, tar- years. Many people, unaware of the Chen says. “Due to factory shutdowns, iffs on imported vehicles have also been extension, rushed to trade in their old auto parts from China and Japan stopped drastically reduced from nearly 30% to vehicles for new ones before the end of coming into Taiwan, which hampered the current 17.5%, effectively lowering the year. TTVMA figures show that in manufacturing.” the price tag on foreign cars. 2020 Taiwan saw an 18% year-on-year According to TTVMA figures, Tai- Greater variety has also contributed to increase in vehicle disposals through the wan’s total automobile production in the shift in consumer preferences toward program. 2020 dropped 2.26% to 245,000 units imported vehicles, according to the Although Taiwan’s automobile – the lowest since 2010. Supply chain TTVMA. Foreign automakers’ assembly industry excelled in the domestic market, disruptions peaked between May and lines are flexible enough to develop more

N R I

Total omestic mported Mar et share dom. Mar et Share imp. 600000 100

90 500000 80

70 400000 60

300000 50

200000 30

20 100000 10

0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

SO RCE: TT MA

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TTVMA Secretary General Chen Min-teh says that the addition of level 1 and 2 automated systems in Ford's latest Kuga model was a big draw for younger Taiwanese drivers last year. PHOTO: FORD LIO HO

models than those of Taiwanese man- semiconductor production for the U.S. domestic industry is propelled more by ufacturers. It takes about half a year auto industry. Matt Blunt, former Mis- consumer demand than by government for foreign producers to introduce new souri governor and current president of incentives. models, while Taiwanese firms can take the American Automotive Policy Council, Nevertheless, MIC’s Ho notes that up to two to three years to do so. In addi- said that the shortage of chips would demand for EVs is growing in Taiwan, tion, foreign automakers’ ability to adapt continue to be an issue for U.S. auto though further development of this to the latest consumer trends gives them manufacturers through the first half of industry is hampered by a lack of overall a distinct advantage over their Taiwanese the year. Furthermore, market researcher planning, specifically in terms of EV counterparts. The increased competi- IHS Markit predicts that the shortage charging stations in residential buildings tiveness of imported cars thus poses an would result in as many as one million and public places. (See the accompanying “existential threat” to domestic producers fewer American-made light vehicles in story for more on the EV market). and their supply chains, Chen warns. Q1 2020. If similar trends continue, Tai- Taiwan’s Environmental Protection wan’s auto industry could be significantly Administration proposed a plan in 2017 Looking ahead impacted in 2021. to ban the sales of fossil fuel-powered Electronic vehicles (EV) in Taiwan cars by 2040. However, rising concerns TIER predicts Taiwan will expe- may also see slower growth in 2021. over the plan’s impact on supply chains rience an annual GDP growth rate of Lucy Ho, a senior industry analyst at forced the government to suspend it in 4.3% in 2021, and analysts are now pon- the government-affiliated Market Intel- 2019. Tu Chia-wei, another industry ana- dering the extent to which Taiwan’s auto ligence & Consulting Institute (MIC), lyst at MIC, says that in terms of moving industry will contribute to that perfor- notes that “compared to other countries, toward a zero-carbon economy, Taiwan mance. the Taiwan government seems to be less needs to act fast. Darren Liang of TIER suggests that aggressive in promoting the switch from “In the long run, governments around Taiwan’s auto-industry sales will decrease traditional vehicles to new energy vehi- the world are striving to achieve their by about 3% in 2021, citing the global cles in terms of incentives or subsidies net-zero carbon emission goal and the shortage of automotive chips and the over the years.” clock is ticking,” Tu says. Given the evo- high base as a result of the strong record This lack of inducements could be lution of smart technologies such as 5G, in 2020. detrimental to the development of Tai- AI, and EV, he notes, there is a “lesson High overseas demand for Taiwanese wan’s EV industry, as EV makers in many for the automobile industry that indus- automotive chips might also affect the countries are still heavily reliant on them trial transformation and value-added Taiwan auto industry’s 2021 sales. In for sales growth. Unlike the fossil-fuel technologies must be [implemented] February, the Biden administration urged auto industry, however, Taiwan at present before net-zero emissions can become a Taiwan to ramp up automotive-grade does not produce many EVs. Thus, the reality.”

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TAIWAN’S EV SUPPLY CHAIN CRANKS INTO HIGH GEAR

Taiwan has a relatively complete supply chain for electric vehicle components, and companies such as Tesla rely heavily on Taiwanese suppliers for a majority of their E parts. et the island has not produced a viable E brand to contend in the global market.

BY ANGELICA OUNG

zizi Tucker first came to Taiwan in 2007 while working for a little-known Electric Vehicle (EV) Astartup called Tesla Motors. A senior supply development engineer, Tucker was assigned to look for parts and components to build Tesla’s very first vehicle, the Tesla Roadster. “If you’re looking for components for a gasoline car, you had go-to suppliers,” says Tucker. “But for a lot of the EV components, there was no existing supply chain.” What Tesla’s team found in Taiwan were highly adaptable small and medium- sized businesses that were able to make the parts to Tesla’s specifications. Azizi Tucker first came to Taiwan as a senior supply engineer for Tesla. He now heads “It was a great match between his own Taiwan-based EV components company, XING Mobility. volume, quality, and flexibility,” Tucker PHOTO: XING MOBILITY says. “Tesla set up a motor factory in 2008 and through that factory we were than 11 million EVs will be on the road jected to rise sharply, Taiwan’s place as able to source a lot more components worldwide by 2025. The Biden adminis- a component supplier seems assured. from there on out.” tration has taken bold moves to improve But more and more people are starting When it debuted in 2008, the Road- the charging infrastructure for EVs, to ask whether it’s possible for Taiwan ster contained around 30-40% Taiwanese investing US$2 billion to build 500,000 to do more than supply components to components. charging locations. Germany plans to foreign EV makers. If so many of the Today Taiwan is a more integral build a million public charging stations components and key technologies used part of the global EV supply chain than and make EV charging available at all in modern EVs come from Taiwan, why ever. Companies such as Chang Chun gas stations. U.S. car manufacturer Gen- isn’t there a “Taiwanese Tesla” that can Group, a petrochemical conglomerate eral Motors says it aspires to produce put the whole car together? that produces copper foils for lithium-ion only electric vehicles by 2035. There are certainly opportunities batteries, and Hota Industrial Manufac- “This is a policy-driven trend,” says for Taiwan to play a role beyond sup- turing Co., the sole supplier of reduction Shih, who specializes in automobile elec- plying components, says Shih, who cites gears to Tesla, are struggling to keep up tronics. “Last year there were 1.2 million the developing trend toward integrating with burgeoning demand. EVs sold in China and 1.4 million sold in hardware and software in different According to Annie Shih, a deputy Europe. We are seeing the beginning of a aspects of the EV. division director at the Industrial Tech- global EV boom.” “The whole electric car is changing,” nology Research Institute (ITRI), more As global demand for EVs is pro- she says. “There is tremendous innova-

TAIWAN BUSINESS TOPICS • APRIL 2021 37

4 IF.indd 37 2021/4/1 10:25 PM INDUSTRY F CUS tion with the chassis that can lead to the development of embedding the software in the hardware to create a seamless in- vehicle human-machine interface (HMI).” Taiwan’s traditional strengths in the Information Communication Tech- nology (ICT) industry means Taiwanese companies are well-suited to incorporate “smart” features into every part of the car. “Even a power module has to be smart,” says Shih, referring to the electronic component that houses the semiconductor devices powering different parts of the vehicle. If Tesla is the Apple of EVs, Tai- wan’s Hon Hai Precision Industry Co. is attempting to become the Android with Hon Hai last year launched the MIH open platform for EV development, which allows its MIH open platform for EV develop- different Taiwanese EV components producers to collaborate. ment. Launched in October last year, the PHOTO: HON HAI PRECISION INDUSTRY CO. platform, which has attracted more than 1,000 companies to join, provides a stan- received permission to test self-driving moving on to producing systems. dard through which different component cars in California.” The Taiwanese EV supply chain has makers can collaborate. In fact, Huang says, it is impera- progressed from making components In February, Hon Hai announced tive for Taiwan to come up with its own to making subsystems, says Huang. plans to partner with EV maker Fisker, brand, and time is of the essence. This means putting parts into complete another California-based startup. Shih “Without our own EV brand, we modules such as the drive train or the of ITRI says that such international col- do not have a voice in the international suspension. The more complete the solu- laborations are the key to success for market,” he says, estimating that Taiwan tion, the higher the value manufacturers Taiwanese EVs. has about three years to “seize this can generate. Put those systems together, “Our market is not so large,” she opportunity.” Huang notes that around and you’ve just made an electric car. notes. “There’s a need to work with 500,000 cars are currently sold on the Huang points to the growing number international brands to access interna- domestic market annually, and that given of tech companies designing their own tional markets.” However, this does not the correct government policy direction, EVs, noting that in the future many mean that purely domestic EV brands 100,000 of those could be EVs – enough more such companies will lack their own cannot prosper. to support a domestic brand. production facilities. A would-be EV “There’s a real opportunity with niche The importance of such a brand, company could simply come to Taiwan EVs here in Taiwan,” says Shih, citing argues Huang, is that it would complete and order subsystems off a menu, he says. “smaller delivery vehicles, farm vehicles, the Taiwanese EV supply chain, demon- If Taiwan is really poised to become or logistics vehicles.” strating that Taiwan has the ability to an EV one-stop shop, why hasn’t a strong One advantage that Taiwan has in offer the most complete solutions for any Taiwanese EV brand yet emerged? being small is the ability to develop a company seeking to build an EV. “I think it’s because the Taiwanese comprehensive EV charging infrastruc- To that end, TAITRA is holding the are too mild, too good, too polite, ture. “We have a population density of first 2035 E-Mobility Taiwan Show in too thrifty, too accommodating,” says 649 people per square kilometer here October. The “2035” in that title alludes Huang. “We’ve got the skill; we just lack in Taiwan,” says Shih. “Compared to to the year many markets plan to phase the will.” He urges companies to come America, it’s much easier to cover the out fossil fuel vehicles. By bringing together to make Taiwan the “world’s EV island in a complete network of charging together Taiwanese EV suppliers and solution provider.” stations.” international car companies and sup- James Huang, chairman of the Taiwan pliers, Huang hopes to catalyze the Putting in the effort External Trade Development Council process of consolidating the island’s EV (TAITRA), disagrees that Taiwan’s small supply chain into a Taiwanese EV one- Taiwan’s success in the EV supply domestic market limits the possibility of a stop shop. chain was far from an accident. Com- strong house brand for passenger sedans. “Taiwan has the hardware supply panies such as Delta Electronics, the As an example, Huang points to Viet- chain and the software capability,” nation’s leading power and thermal man- nam’s Vinfast. “They launched as a Huang says. “It’s time to combine the agement solutions provider, have been car company just three years ago and two.” He suggests that Taiwan begin hard at work ever since Tesla came focused on EVs with an eye to the export sourcing batteries from business partners calling, even if it meant continuous losses market,” he says. “They’ve already Korea and China, while simultaneously in the early years.

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“A decade ago, the perception was After leaving Tesla in 2012, Azizi nies are moving too slowly,” says Tucker. that the Tesla is a rich man’s toy, but the Tucker decided to stay in Taiwan and “They’re waiting for orders rather than market has finally matured,” says Huang. start his own EV business. He is now the generating products.” This approach “Delta quietly toiled for more than a chief technical officer of XING Mobility, could cause potential clientele to look decade, but their EV department didn’t a maker of drive train subsystems for elsewhere, he says. start making money until last year.” niche EVs. “Customers are not experts in EV. Now that Delta’s perseverance has “You say 'niche,' but it's a very large They don’t know what to order. They paid off, the rewards are only going to market – twice as big as for passenger don’t even know what’s technically pos- multiply in the coming years. The com- cars,” says Tucker. “A niche EV can be sible.” pany estimates it will capture 10% of anything from a garbage truck to a 2-kilo- Ironically, in order for Taiwan to suc- the US$3 billion total available market gram AGV (automatic guided vehicle).” ceed as an EV powerhouse, it needs to in power and traction components for Tucker says that XING Mobility is embrace failure, says Tucker. “We need EVs this year. By 2030, that global mulling whether to join the MIH alliance. to build a tolerance for failure. Pick a market is estimated to grow to US$33 In the meantime, he sees both potential couple of safe bets and be experimental billion a year, and Delta aims to main- and pitfalls in Taiwan’s EV future. with the rest,” he says. “This is a mindset tain that 10% share. “The potential is large, but compa- shift that needs to happen.”

AUTOMAKERS’ RELIANCE ON TAIWAN CHIPS SPARKS DISCUSSION

n unepected surge in demand left car manufacturers in some major markets scrambling to make up for a shortage of automotive chips, which are produced mostly in Taiwan. ow governments are eploring how to reduce dependence on the island’s chipmakers.

BY JENS KASTNER

aiwan’s key foreign policy catch- phrase “Taiwan can help” has become a lot more relevant lately, especiallyT regarding the global automobile industry. Top officials and businesses from the U.S., Europe, and Japan have called on Taiwan’s government to aid with easing a shortage of semiconductors for motor vehicles. The chips facilitate a wide range of functions, including motor management and assisted driving. This issue has raised concerns among leaders and businesses in these countries that the auto industry may have become overly reliant on Taiwanese chipmakers – especially the Taiwan Semiconductor Manufacturing Co. (TSMC). The notion gained particular attention in Germany German automakers have been dealing with a shortage of chips that facilitate numer- when the country’s economics minister, ous in-vehicle functions. PHOTO: VW

TAIWAN BUSINESS TOPICS • APRIL 2021 39

4 IF.indd 39 2021/4/1 10:25 PM INDUSTRY F CUS Peter Altmaier, in late January made ries are increasingly being pushed out of shift to remote work, schooling, and the unusual move of sending a letter to the global supply chain as a result of the entertainment modes. his Taiwanese counterpart, Wang Mei- recently departed Trump administration’s “After [Minister of Economic Affairs] hua. In the letter, Altmaier asked Wang moves to restrict China’s high-tech sector. Wang received Altmaier’s letter, she called to push TSMC to ramp up semicon- An additional, more recent factor in a meeting of Taiwanese stakeholders, ductor production to meet demand from creating the current shortage is that auto- including TSMC, and the general feeling German automakers. makers in the U.S., Europe, and Japan, was one of perplexity,” says an industry The current crisis has been a long anticipating lower consumer demand for professional who wishes to remain anon- time coming. Decades of breakneck glo- cars last year, drastically reduced their ymous. “No one knew exactly what balization have led to a situation in orders for chips. In response, semicon- semiconductors were needed by which which automotive semiconductors are ductor manufacturers began work on automakers, since TSMC’s business part- mainly developed by European compa- fulfilling the high competing demand ners are not Volkswagen and Daimler but nies such as NXP, STM, and Infineon from makers of consumer electronics, as their suppliers, such as Bosch and Conti- and partly manufactured in Asia – mostly individuals, businesses, and governments nental.” by TSMC. Meanwhile, Chinese found- across the world were forced to abruptly The industry professional says that the situation became more complicated when, following a virtual meeting between American and Taiwanese semiconductor firms and government officials in early February, the U.S. side produced a state- ment thanking Taiwan’s chipmakers for agreeing to prioritize auto chips in order to address the shortage. That seemed to indicate that U.S. car companies would be given preference over those from Europe or Japan, he says. Reflecting the urgency of the situation, U.S. President Joe Biden later that month signed an executive order to review U.S. supply chains in key industries, including semiconductors. Then in early March, American automaker Gen- eral Motors announced that due to the chip shortage, it has decided to keep two of its U.S. assembly plants closed until at least mid-April, while several of its other factories in various locations will remain closed or run at reduced capacity over the next several months. Meanwhile, Ford has said that a lack of chips could force it to cut production by up to 20% in the first quarter of this year. According to Taiwan’s semi-official Market Intelligence & Consulting Insti- tute (MIC), the current shortage mainly involves chips installed on the auxil- iary driving systems or cockpit platforms of vehicles. These systems provide users with information on car and road conditions quickly, thereby improving driving safety. Except for systems-on- chips (SoC) that are used in advanced driver-assistance systems (ADAS), the chip categories in question do not require advanced manufacturing processes. The current chip shortage mainly involves chips for systems that provide drivers with information on car and road conditions. These systems improve the car's safety. “This means that in addition to PHOTO: VW TSMC, UMC and Power Semiconductor

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Manufacturing Co. (PSMC) are also able tion of significant investment incentives,” to undertake foundry services for some says Wolfgang Weber, chairman of the automotive chips,” says Wen Liu, an German Electrical and Electronic Man- industry analyst at MIC. “However, with ufacurers' Association ZVEI. “While it the semiconductor production cycle nor- is certain that demand for auto chips mally being one to two months and with will increase sharply in the coming years production at full capacity, even if Tai- amid the advent of connected driving, the wanese foundries were to increase the acute shortage of auto semiconductors supply of automotive chips, they would will largely be overcome in the second still only be able to partly meet the needs quarter of this year,” he adds. of automakers in the short term,” he says. Weber explained that any Taiwanese- Market researcher IHS Markit has owned foundry in Germany would be forecast that global automobile produc- faced with high electricity costs, an tion will drop by one million cars this important factor in its decision, given year as a result of the chip shortage. This that the air purifying systems used in issue has in part also prompted Euro- foundry cleanrooms (facilities equipped ZVEI Chairman Wolfgang Weber predicts pean carmakers Volkswagen and Daimler with HEPA filters to keep them clear of that the chip shortage will be mostly resolved by Q2 2021. to begin furloughing employees at sev- dust and particulate matter) are major PHOTO: ZVEI eral plants. As a result, Europe’s political consumers of electricity. leadership has increasingly been dis- Matt Kendall, Chief Telecoms Editor cussing how to restore the European at the UK-based Economist Intelligence February filed for regulatory approval in microchip sector to its former glory. Unit, notes that semiconductor design the U.S. to set up a leading-edge semicon- Once a hub of semiconductor factories, and manufacturing is a very intricate and ductor manufacturing facility in Texas. the continent currently accounts for less complicated process that requires huge Taiwanese media reported in early March than 10% of global chip production. investments in physical capital and highly that TSMC was looking to set up six To kick things into gear, the Euro- skilled labor. manufacturing plants inside its planned pean Commission has introduced plans “Not only would the EU already be Arizona campus. to launch an alliance on microelectronics playing catch-up, but it also has to con- “It makes sense for TSMC and Sam- by the end of Q1 this year with an ini- tend with the fact that the likes of the sung to expand their foundries in tial investment of as much as €30 billion. U.S., China, and Japan all have similar Arizona and Texas respectively,” says German economics minister Altmaier, for aspirations of self-sufficiency,” Ken- Kleinhans. “But the question as to what his part, said that this strategic endeavor dall says. “The EU would need to out- their business cases would be in Europe could trigger additional investments of manoeuvre countries that are already is still unanswered, given that auto chips up to €50 billion. devoting huge amounts of resources account for only 3-5% of TSMC’s overall In addition, the French finance min- to semiconductor manufacturing, so it revenue.” istry noted that the EU is considering would take years rather than months for Kleinhans notes that the ongoing building an advanced semiconductor the EU to build up the kind of capability attempt by Taiwan’s silicon wafer man- factory in Europe with the possible it needs,” he says. ufacturer GlobalWafers to acquire involvement of TSMC and South Korea’s According to Jan-Peter Kleinhans, a Germany-based Siltronic also does not Samsung. The proposed initiative paral- semiconductor expert at the Berlin-based bode well for European politicians’ quest lels an ongoing push by Chinese makers think tank Stiftung Neue Verantwortung, to reduce semiconductor reliance on of electric vehicle batteries to set up European tech industries’ heavy focus on Taiwan. large production facilities in Germany in microcontrollers, power electronics, and Siltronic in December agreed to Glo- order to better serve Europe's expanding sensors for auto and industrial robotics balWafers’ offer of €3.75 billion, and market for new energy vehicles. translates into demand for chips of 40 the deal is currently pending regulatory However, TSMC representatives nanometers or larger. TSMC’s cutting approval. The acquisition would make have since pointed out that the com- edge 7 and 5nm chips are mainly des- GlobalWafers the world’s second-largest pany would first have to consider several tined for consumer electronics, such as wafer producer in a highly consolidated factors, including customer needs, and premium-brand smartphones. market. Currently, just five companies European industry observers expressed Kleinhans adds that unlike in the U.S., in this sector have a combined output of doubt that establishing a TSMC fab in where the presence of a major fabless over 90%. Europe would be as straightforward as chip-design sector for consumer elec- “Siltronic is the sole supplier of Chinese EV battery factories. tronics means there is a business case for certain silicon wafers for some Euro- “Whether a company providing the establishment of foundries, Europe pean chipmakers, so its acquisition by foundry services will decide to set up a lacks a comparable tech ecosystem. a Taiwanese competitor obviously has plant here will depend on the contracts it The desire to break into the U.S. repercussions for Europe’s so-called has with its customers and to what extent market is strong among the Asian semi- technological sovereignty in semiconduc- the political support will lead to alloca- conductor giants. Samsung Foundry in tors,” Kleinhans says.

TAIWAN BUSINESS TOPICS • APRIL 2021 41

4 IF.indd 41 2021/4/1 10:26 PM ADVERTORIAL Taoyuan Aerotropolis: Bringing Taiwan’s Industrial Advantages to the World

aoyuan City, the gateway to harmonize the development of the airport Taiwan, occupies a core strategic and Taoyuan City, allowing the two to T position in terms of industrial coexist, prosper, and grow together. internationalization, transformational Taoyuan is adjacent to the Greater development, and logistics management, Taipei area, the political and economic and links Taiwan to the global market center of Taiwan. Transportation is via sea and air transport. The Taiwanese convenient, it is home to several industry government’s “Taoyuan Aerotropolis clusters, and its supply chains are Project” reappropriates usage of the complete. Taoyuan is a young, vibrant 4,564-hectare area of land surrounding emerging city in Taiwan, full of hope and the Taoyuan International Airport through excellent conditions. In addition to the urban planning. airport, Taoyuan also neighbors the Far The plan is intended to help Glory Free Trade Zone, Taipei Harbor, accommodate the surge in industry needs, Keelung Harbor, and other international enhance the airport’s competitiveness, commercial ports. It also boasts access Taoyuan City Mayor Cheng Wen-tsan and promote Taoyuan’s overall development, to the Taiwan Railway, High Speed Taoyuan Aerotropolis Co. Ltd. Chairman and move forward Taiwan’s industrial Rail, Airport MRT, and other options in Chen Shyi-Jen transformation. The Aerotropolis, Taiwan’s comprehensive transportation the Forward-Looking Infrastructure network, totally connecting domestic and Chung-shan Institute of Science and Development Program, and the Asia international transportation systems. Technology (NCSIST) as well as its 17 Silicon Valley Development Plan constitute Taoyuan also hosts large traditional colleges and universities cultivate close the trifecta of Taoyuan’s development. and high-tech industries, diverse and to 25,000 young learners every year. The Aerotropolis project aims to make complete industrial areas, and intense Through the use of educational resources Taoyuan Airport “intelligent,” establish a industrial cluster development and from the neighboring Taipei and Hsinchu robust smart city, and introduce airport- innovation. It is a tech-focused city with areas and cooperation with government, related industries. Such efforts will give an annual production value of NT$2.932 academia, and industry, the city produces rise to good investment results and would trillion. In addition, Taoyuan’s National a steady flow of strong talent. The Taoyuan Aerotropolis Project Taoyuan Aerotropolis construction plans complements the existing industrial resources and combines the benefits of its superior industries to implement the plan. The project applies a low pollution, low energy consumption, low water usage, and high value-added (three low, one high) industrial approach, driving industrial development through airport economics and promoting the complementary advancement of the airport and the city to push forward Taiwan’s economic development. Since the project began, the Taoyuan Aerotropolis Co. Ltd. has actively organized various investment attraction activities and through communication with the business community, has helped companies better understand the project. Through its investment attraction strategy and marketing efforts, the company has achieved a breakthrough in this area. As of the end of 2020, the Aerotropolis had signed memorandums of understanding with 41 domestic and international firms

42 TAIWAN BUSINESS TOPICS • APRIL 2021

Aerotropoli advertorial.indd 42 2021/4/1 10:26 PM ADVERTORIAL

and academic organizations. These MOUs introduce to the project the six major emerging and intelligent industries of AI/ big data/cloud computing, autonomous vehicles, international logistics, biomedical technology, aviation subsidies, and green energy, fully putting “airport economics” into practice. Given the location of the Executive Yuan’s Asia Silicon Development project in Taoyuan, a spot in the Aerotropolis next to the Taoyuan Sports Park station (A19) on the Airport MRT was selected to launch the Asia Silicon Valley Innovation Map of daily activities and locations in Taipei, New Taipei, and Research Center as a way to increase and Taoyuan cities, all within one hour of each other the importance of Taoyuan City’s industrial R&D and advancement. and smart maintenance and operation). Center, the project will integrate domestic The center will combine smart IoT These systems will complement the 5G, IoT, and other high-tech innovative and innovative R&D, and will have as the customized service provided by Taoyuan capabilities. Meanwhile, a smart core of its development innovation and City Government’s single-point-of- operations management platform will be sharing, enterprise benchmarking, research contact service window, offering an used to attract international companies and development, smart architecture, excellent investment environment that will and innovative industries to establish a and convenient service. In addition, it transform it into a model venue for smart presence in the center. Furthermore, close will include six smart systems (smart applications. cooperation between major multinational office, smart environment, smart life, To improve promotion of the Asia and domestic firms will be facilitated smart energy conservation, smart data, Silicon Valley Research and Development through the center’s clustering effect.

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TAIWAN BUSINESS TOPICS • APRIL 2021 43

Aerotropoli advertorial.indd 43 2021/4/1 10:26 PM EXECUTIVE SUITE

Meet Fupei Wang of Ogilvy

Public relations is a challenging business, says Ogilvy Taiwan Managing Director Fupei Wang, but as long as you are an effective communicator, find interest in your clients’ work, are adaptable in your approach, and like people, success comes naturally. This is something she’s learned during her 25 years as a PR professional at Ogilvy.

Wang, who also currently serves as Vice Chairperson of AmCham Tai- wan, took time out of her busy schedule in March to talk to TOPICS Senior Editor Jeremy Olivier about how she got started in her career, her views on Taiwan’s PR environment, and what she’s learned in her many years helping to lead the Chamber.

Before starting at Ogilvy, you got What would you say makes for a And lastly, you need to be people- your MBA from the Rotterdam School successful PR professional? oriented. You don’t have to be a social of Management. How did that prepare In my view, there are five major butterfly, but you need to have an you for your career at the company? characteristics PR professionals interest in people and human behavior. Actually, my undergraduate degree working in an agency must possess to was also in business management. After be successful. First is communication How would you describe Taiwan’s that I worked as a teaching assistant ability, which does not only mean being PR environment? at my alma mater, Fu Jen University, able to speak and convey yourself well, I would say that this market is very and then as a reporter for a business but also to be able to listen to the view- international in that there are a lot of magazine, which was an enjoyable points and pain points of your clients. multinational companies, which know experience. Secondly, PR professionals need what PR is and how to use it to their I then went to study for my MBA in to have a sense of curiosity. Working advantage. Yet there is also a need Rotterdam in 1995. It was an English- in this industry for so many years, I to recognize and deal with the local taught program – a very well-known have met all kinds of clients from dif- context, to have the on-the-ground con- one – where students from 30 to 40 different industries, and in order to really nections. Many international PR firms ferent nationalities gathered to study understand their needs, you need to be have come and gone in Taiwan, but business. I learned a lot during that interested in what they do. Ogilvy has stuck around because it is program. The third characteristic, which is able to have both an international per- When I came back to Taiwan, I ini- connected to the second, is a willing- spective and a deep understanding of tially didn’t plan to work in PR, but ness to learn. If a wind power firm or a the local situation. during my job search, I met Joseph Pai, semiconductor company comes to your To give an example, one of our cli- the chairman of Ogilvy PR at that time. agency asking you to help them educate ents is an offshore wind developer. To He told me that with my background, your market on their importance to it, create a successful PR campaign in PR would be a good career choice. you need to be ready to dig into all of Taiwan, we needed to take into account Whereas most people in the PR business the technical information and terms and and engage with all of the relevant majored in communications in college, really learn about their field. local stakeholders – not just the media, my industry reporting experience meant The fourth is agility because clients but also the government, industry and I already understood business very well, are constantly changing their minds. business associations, environmental and I knew how to talk to managers. You need to be flexible enough to adapt groups, and fishing associations, among That was 25 years ago, and I haven’t to their needs and adjust the direction others. looked back since. of the campaign at will. One important facet of our work –

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not just in Taiwan, but worldwide staff from thinking critically – is the change from traditional about the problem and coming up mediums to social and digital with their own solution – it limits channels. In the past, PR firms their room for growth. So, we as did a lot of their work through senior managers sometimes need face-to-face meetings with stake- to take a step back and let our holders and reporters, but more employees become more involved. and more of the work we do nowadays leverages social media. You’ve served in several We even use LINE and are different leadership roles at exploring how to use Clubhouse, AmCham since 2012, including which is turning out to be quite a your current role as a Vice Chair- powerful platform. person and Board Governor. What about the organization What are companies’ biggest has kept you committed over the needs for PR assistance – and are years? they aware of those needs and This is a very good organi- open to such assistance? What zation to be involved with, and are the main differences in how through serving on the Board, I multinational and local companies have a small PR team, and they hire us have been able to meet and work col- approach PR? on retainer to fulfill any other PR needs. laboratively with a range of senior In the PR profession, we are invari- Local companies may have an idea executives. ably helping companies with pursuing of what PR is for, but in the early In addition, the boards of directors one of two major objectives: one is to stages you really need to educate them. of multinational companies are usu- promote their image and the other is to They usually have a larger PR depart- ally based in the U.S. or Europe – not protect it. The first involves things like ment and are probably coming to us for at the affiliate or subsidiary in Taiwan. product promotion and getting people project-based work or for PR training. So, before I began my leadership roles familiar with the client’s brand, while Most of the time it’s just a matter of at AmCham, I didn’t fully understand the other refers to crisis management. communication – starting a dialogue how a board operates. This experi- Now, company image can also with the client to determine what their ence has been very instructive for me involve different things. One aspect needs are and how we can help them. in that regard. As I’ve served in this is what we call employer branding – capacity for almost 10 years, I can con- building up the organization’s reputation How would you describe your tribute my knowledge and experience to as a good place to work. This is impor- approach to management? What do AmCham’s board as well. tant in Taiwan, where finding the right you consider to be your strengths? Being in AmCham has also really talent is becoming more of a challenge. What areas would you like to improve? opened my mind to issues regarding Another aspect is thought leader- I would say I’m a very positive international trade and business. As ship – crafting an image of the head of thinker and quite open-minded. When country managers, many of us focus on the company as an informed opinion my staff come to me with suggestions, company-level issues and don’t really leader and an authority in their field. I’m always open to dialogue and to lis- get into the details of the trade rela- This may include strategic placement of tening to their opinions. I’ve been told tionship between Taiwan and the U.S. articles written by the leader, as well as I’m quite sincere in my interactions, so This position has helped get me more arranging for interviews and speaking that despite my seniority at the com- familiarized with those issues, which is opportunities. pany, employees are not nervous when something I’ve benefited from. More recently, an important part of a they need to come talk to me. company’s public image is its corporate However, I am also very focused on How do you like to spend your lei- social responsibility (CSR) – nowadays efficiency because that is important in sure time? increasingly referred to as sustainable our industry. We are similar to a law I like being active and staying in development goals (SDG). Doing good firm in that all of our work is charged shape. I really enjoy taking Zumba and for the community and for society helps hourly, so being efficient equals good dance classes, and I also go to the gym the company build awareness and a results for the client and good business quite often. I would say I exercise at good reputation among the public. for us. least four to five times a week. Whether companies are aware of The emphasis on efficiency is also an On the weekends, I like to go to see their PR needs depends on the type of area I’d like to improve on as a man- art and museum exhibitions or read organization. I would say that multi- ager, though. I’ve become very good at books. Sometimes, I get invited to give national companies are generally more recognizing clients’ issues and coming presentations or speeches for local uni- knowledgeable about how to work with up with solutions very quickly. But versities or NGOs. That’s my personal PR agencies. They probably already doing this every time discourages my CSR!

TAIWAN BUSINESS TOPICS • APRIL 2021 45

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