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2021/5/7 11:16 AM Issue Sponsor Vol. 51 5 51| Issue Vol. 2021 | May 號執照登記為雜誌交寄 THE AMERICAN CHAMBER OF COMMERCE IN TAIWAN TAIWAN BUSINESS TOPICS May 2021 | Vol. 51 | Issue 5 中華郵政北台字第 5000 5_2020_Cover.indd 1

CONTENTS

NEWS AND VIEWS 6 President’s View

MAY 2021 VOLUME 51, NUMBER 5 High marks for the Chamber’s 一一○年五月號 stakeholders and friends By Andrew Wylegala

Publisher 發行人 Andrew Wylegala 魏立安 7 Editorial Senior Advisor 資深顧問 The Need for Continued, Expanded U.S. Don Shapiro 沙蕩 Senior Editor 資深編輯 Support Jeremy Olivier 歐嘉仁關係深化有賴美方穩健支持 Associate Editor 副編輯 Julia Bergström 尤麗雅 Art Director/ 美術主任/ 12 Taiwan Briefs Production Coordinator 後製統籌 Katia Chen 陳國梅 By Austin Babb and Jason Wu Cover Designer 封面設計 Grace Yang 楊慈安 Manager, Publications Sales & Marketing 廣告行銷經理 COVER SECTION Caroline Lee 李佳紋 Translation 翻譯台灣科技業的新挑戰 Kevin Chen, Andrew Wang Taiwan Tech’s New Challenges 陳又銘, 王先棠

American Chamber of Commerce in Taiwan 14 Taiwan’s Cybersecurity 129 MinSheng East Road, Section 3, Dilemma 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan The island’s world-leading ICT Tel: 2718-8226 Fax: 2718-8182 e-mail: [email protected] and semiconductor sectors website: http://www.amcham.com.tw 名稱：台灣美國商會工商雜誌 have come under the spotlight 發行所：台灣美國商會 following a series of high-profile 臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182 cyberattacks.

Taiwan Business Topics is a publication of the American By Jason Wu Chamber of Commerce in Taiwan. Contents are independent of and do not necessarily reflect the views of the support of a tightly knit, the Officers, Board of Governors, Supervisors or members. 20 Taiwan Tech’s Success © Copyright 2021 by the American Chamber of Commerce specialized local supply chain. in Taiwan. All rights reserved. Permission to reprint original Driven by Hidden material must be requested in writing from AmCham. By Angelica Oung Production done in-house, Printing by Farn Mei Printing Champions Co., Ltd. 登記字號：台誌第一零九六九號 While the world has become 22 Water Shortage Threatens 印刷所：帆美印刷股份有限公司經銷商：台灣英文雜誌社 increasingly familiar with Taiwan’s Tech Industry 台北市108台北市萬華區長沙街二段66號發行日期：中華民國一一○年五月 Taiwanese semiconductor Development 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961 giants like TSMC and UMC, By Angelica Oung these companies rely on Chairperson: CW Chin Vice Chairpersons: Fupei Wang, Timothy Shields Secretary: Daniel Tseng TAIWAN BUSINESS Treasurer: Angela Yu

2020-2021 Governors: C.W. Chin, Brian Sung, 26 Raising the Bar for Taiwan’s Supply Chains Timothy Shields, Fupei Wang, Roger Yee, Angela Yu. A growing emphasis on social and environmental 2021-2022 Governors: Justin Chin, Cynthia Chyn, Paulus Mok, Terry Tsao, responsibility among major U.S. corporations has Daniel Tseng. begun influencing the practices and operations of 2021 Supervisors: Max Chen, Shelley Chia, Seraphim Ma their Taiwanese supply chain partners as well. By Steven Crook COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Eric Lin, Angela Yang, Derek Yung; Banking/ Paulus Mok; Capital Markets/ Mandy Huang, Eric Jai, C.P. EXECUTIVE SUITE Liu; Chemical Manufacturers/ Charles Liang, Michael Wong; Cosmetics/ Abigail Lin; Defense/ Manohar Thyagaraj, Roger Yee; Digital Economy/ Max Chen, 30 Meet Peter Dernbach of Winkler Partners Renee Chou, Tai Chi Chuan; Energy/ Richard Freer, By Jeremy Olivier Randy Tsai; Human Resources/ Christine Chen, Carmen Law, David Tsai; Infrastructure/ Wayne Chin, Paul Lee; Insurance/ KT Lim, Mandy Shih, Linda Tsou; Intellectual Property & Licensing/ Jason Chen, Peter SPECIAL REPORT Dernbach, Vincent Shih; Marketing & Distribution/ (tba); Medical Devices/ Louis Ko, Jeffrey Wang; Pharmaceutical/ Justin Chin, Cellina Yeh, Serena 34 Taiwan Acacia’s Commercial Evolution Chow; Private Equity/ Echo Yeh; Public Health/ Joyce Lee, Pongo Peng, Tim Shields; Retail/ Ceasar Chen, Taiwan acacia is traditionally used as firewood, Mark Chen, Peggy Liao; Sustainable Development Goals/ Kenny Jeng, Lume Liao, Cosmas Lu, Fupei but Taiwan’s king of carton packaging, Caho Wang; Tax/ Heidi Liu, Cheli Liaw; Technology/ Cynthia Chen, and a team of innovative young people Chyn, Stella Lai, Angela Yu; Telecommunications & Media/ Thomas Ee, David Shin, Joanne Tsai; have developed methods to turn this neglected endemic hardwood into Transportation & Logistics/ (tba); Travel & Tourism/ Marvin Ma, Jason Yeh, Fiona Yuan. pricey bathtubs, customized guitars, and novel whiskey barrels. By Kuo-chen Lu and Chi-wei Lin, CommonWealth Magazine

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5 contents.indd 4 2021/5/6 9:37 PM MAY • VOLUME 51 NUMBER 5 46 Taiwan’s “Pineapple War”: Opportunity Amid an Industry Display Technologies Crisis China’s recent ban on pineapple imports from Taiwan provides an occasion for policymakers to rethink the island’s dependence on the Chi- nese market for agricultural exports. By Julia Bergström

INDUSTRY F CUS A Report on Taiwan’s Retail Industry Looking Ahead to the Post-pandemic Era

38 E-Commerce Grows Steadily in Taiwan Amid Pandemic COVID-19 has given a modest boost to online shopping in Taiwan, with platforms such as Momo, PChome, and Shopee strengthening their market positions. By Matthew Fulco 41 Entrepreneurs Navigate Taiwan’s Vast Retail Space A new cohort of young business owners is exploring how to create, import, and sell products that are attractive to Taiwan’s discerning consumers, using a variety of online and offline sales channels and strategies. By Jeremy Olivier including next-generation sizes and reduced thickness. SPONSORED CONTENT 24 People, Passion, and Today, we’re leveraging our fusion assets, glass science Possibilities: AbbVie’s Vision of expertise, and optical physics capabilities to drive the next Patient-Centric Healthcare round of display innovations – better images, ubiquitous

5 contents.indd 5 2021/5/6 9:37 PM PRESIDENT'S VIEW

High marks for the Chamber’s stakeholders and friends

Although 100-day reviews are typically the norm, I was supply chain issues with Washington’s National Economic tempted to use my inaugural President’s View as a self- Council. report on my first 30 days in Taiwan. But it would be more You notched high marks by continuing Chamber sup- fun to grade you, Dear Readers, with the following “report port for the landmark Taiwan Fellowship Act, which is card.” How have staff, members, and partners performed currently progressing through the U.S. Congress and was at breaking in their new Chamber president? mentioned by Senator Edward Markey, one of the bill’s Statistics (A+): With 700 attendees, including a record principal co-sponsors, in his video remarks at Hsieh Nien 157 governmental officials who were personally thanked Fan. In Taiwan, the Chamber continues engagement on for their contributions to fostering a friendly business envi- talent cultivation alongside the Gold Card Office by sur- ronment, you aced the Hsieh Nien Fan test for the 53rd veying the potential to sustain and develop 2020’s wave of straight year. You were voted “most popular” for your COVID-inspired migration to Taiwan. effective collaboration with AIT and other organizations in Summary Grade: Across the Chamber “curriculum” – preparing for the event. Impressive calculus by AmCham’s and shoehorned into a mere nine workdays – staff, board, resourceful staff (and friends at the Taipei Economic and members, and partners granted me a productive and Cultural Office (TECO) in Osaka) helped to shepherd uplifting welcome. Next semester we will redouble the pace President Wylegala into Taiwan and through quarantine, and offer additional tests. We will tackle a Board retreat to which finished just 48 hours before the April 21st banquet. set strategic goals and continue the process of rolling out Extra credit for spirited table-side networking, including our new AmCham Taiwan name and brand, culminating an impressive turnout of mayors and deputy mayors…and in our 70th anniversary celebration. I look forward to a head table with no fewer than two presidents – myself time with the AIT and our other core partners for consid- and Madame President Tsai – who are cat-loving, Cornell ering how to seize on the intense current interest in Taiwan alumni! within the U.S. and globally, perhaps via a modified set of Social Studies (A): You socialized the president via Doorknock engagements. Abetted by you, I have found events covering priority sectors banking and life sci- Taipei and Taiwan easy to navigate and dazzlingly hospi- ences. Last semester’s valedictorian, Leo Seewald, helped table. It is an honor to be engaged in significant work even the freshman president preview annual blockbuster Bio as I enjoy the privilege of a safe, relatively carefree, and ASIA-Taiwan, to be held online and at the Nangang Exhi- nostalgically normal daily existence, thanks to Taiwan’s bition Center from July 22, meeting prospective AmCham brilliant pandemic control. members in the process. Two meetings of the unique joint Homework: Accept my sincere thanks for the warm AmCham-ECCT Banking Committee advanced the pro- welcome by so many and my strong desire to continue con- duction of its 2021 White Paper and probed expanding necting with and learning from this remarkable AmCham the committee’s advocacy agenda from regulator to policy- community. Hope to see you at the next happy hour. No maker planes. Rounding out this subject, Officer and full need to have parents sign and return this report card. Board meetings and a memorable Hakka lunch with staff were equal parts governance training and team building. Government (A): Good work landing an extended discussion on April 29 between Board members and Minister of Economic Affairs Wang Mei-hua and her team to review sectoral and cross-cutting economic issues. Perhaps the Chamber will return the favor with focused briefings with Minister Wang regarding Economic Prosperity Partner- Andrew Wylegala ship Dialogue (EPPD) or Taiwan Investment Framework President, Agreement (TIFA) matters or her recent work on critical American Chamber of Commerce in Taiwan

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5 presidents view.indd 6 2021/5/6 9:38 PM E D I T O R I A L The Need for Continued, Expanded U.S. Support

n pre-recorded video remarks provided to AmCham Taiwan passed in March 2020, sets out to clarify UN General Assembly for its annual Hsieh Nien Fan banquet this year, U.S. Resolution 2758, which recognized the People’s Republic of I Senator Edward Markey lauded the Biden Administration China as the only legitimate representative of China at the United for its attention to upholding the U.S.’ important – if unoffi- Nations. It also seeks to counter the PRC’s attempts to use interna- cial – relationship with Taiwan. He noted that connections must tional organizations to strengthen its territorial claims to Taiwan. be deepened at the working levels as well, emphasizing that the Meanwhile, the Strategic Competition Act of 2021, a bill Taiwan Fellowship Act, a bill he recently reintroduced along with passed unanimously by the Senate Foreign Relations Committee Senator Marco Rubio and Representatives Ami Bera and Steve on April 21, aims to restore America’s leadership role in interna- Chabot, would help to achieve that goal. tional organizations and strengthen diplomatic efforts to respond The Taiwan Fellowship Act is based on the Mansfield Fellow- to the challenges posed by China. Regarding U.S. relations with ship Program, which sends federal employees to Japan for one Taiwan, it also states that no restrictions should be imposed on year to learn, study, and work. Extending such initiatives to interaction between officials representing the two partners. Taiwan, Markey said, “can lead to collaborations to tackle the These and other recent signals from Washington are deeply climate crisis, open up markets, and halt the march of authoritari- encouraging and offer a strong rebuttal to concerns that Trump’s anism we see throughout the region and throughout the world.” loss in last November’s election would result in a reversal of the That a progressive Democrat like Markey would be willing progress made in enhancing U.S.-Taiwan ties during his term to team up with the deeply conservative Rubio and Chabot to in office. As China shows no signs of wavering in its aggressive promote such a bill signifies the strong bipartisan consensus on behavior in the military and diplomatic spheres, robust and multi- Capitol Hill that Taiwan is one of America’s most valued partners pronged support from the U.S. becomes ever more essential. in the Indo-Pacific. Taiwan’s central importance to U.S. interests AmCham sincerely hopes that the current enthusiasm for in the region may be one of the only areas of agreement between improving Taiwan’s political status and international partic- America’s incredibly polarized major political parties. ipation continues and eventually expands to include further Besides the Taiwan Fellowship Act, other pieces of bipartisan, economic interdependence between the U.S. and Taiwan. Beyond bicameral legislation have continued to be introduced following strong words affirming U.S. support, the resumption of Trade the transition of presidential leadership from Donald Trump to and Investment Framework Agreement (TIFA) talks, discussion Joe Biden. In mid-April, the four co-chairs of the House of Repre- of a double taxation agreement, and eventually a U.S.-Taiwan sentatives’ Taiwan Caucus sponsored the Taiwan International bilateral trade agreement would provide a concrete demonstra- Solidarity Act. The bill, intended to amend the Taiwan Allies Inter- tion of the rock-solid commitment to Taiwan espoused by the national Protection and Enhancement Initiative (TAIPEI) Act Biden administration.

關係深化有賴美方穩健支持

為今年台灣美國商會年度謝年飯所預錄的致詞短片灣國際團結法案》。此法案旨在修正去年三月通過、希望釐清中，美國聯邦參議員Edward Markey對於拜登政府聯合國大會第2758號決議相關問題的《台灣友邦國際保護及在努力維繫與台灣之間非官方但重要的關係，表示稱加強倡議法》。聯合國第2758號決議承認中華人民共和國是許。他還說，在雙方代表實際互動層面，也應深化連結，好比中國在聯合國唯一合法代表。對於中華人民共和國屢屢試圖透最近他與聯邦參議員Marco Rubio、聯邦眾議員Ami Bera 及過各國際組織削弱台灣主權地位，新法案也做出因應。 Steve Chabot攜手再次提出的法案《台灣研究獎學金法》，同時，於4月21日獲得參院外交委員會一致通過的2021年即有助達到此一目標。《戰略競爭法案》，則希望恢復美國在國際組織的領導地位，《台灣研究獎學金法》是以支持美國聯邦政府人員赴日本強化外交作為，回應來自中國的挑戰。在美、台關係部份，法一年進行學習研修與工作的曼斯菲爾德研究獎學金為藍本。案內容也主張：雙方官員之間的互動，不應受到限制。 Markey 說，為台灣設置這樣的獎學金，「有助於強化彼此合近期這些來自華府的訊息，甚為鼓舞人心，而外界擔憂去作，共同因應氣候危機、開拓市場，也抵擋獨裁主義在區域乃年11月川普競選連任失敗，可能使他總統任內台美關係的進展至世界各處的擴張」。倒退，也顯得過慮。此刻，無論軍事或外交場域，中國都步步倡議革新的民主黨成員Markey，願意與極其保守的Rubio、進逼，美方堅強且管道多元的支持，對台灣更形重要。 Chabot兩位議員合作，推動這項法案，顯示國會兩黨對於支台灣美國商會殷切期盼：美方對於改善台灣政治處境、支持台灣這美國在印太區域最重要夥伴之一，已有強烈共識。體持台灣國際參與的熱忱，能夠長久延續，至終擴及美、台之認台灣對於維繫美國在區域的利益至關重要，恐怕是歧見甚深間在經濟領域更緊密的關係。在以明確言辭表述對台灣的支持的美國兩大政黨之間，少數仍保有共識的議題之一。之外，我們更樂見美國政府致力推動「貿易暨投資架構協定」除了《台灣研究獎學金法》，拜登接續川普執政以來，也（TIFA）會議的重啟、避免雙重課稅協定的研議，以及美台雙有兩黨共同參與、須經參眾兩院審議的其他法案陸續出現。四邊貿易協定的達成。如此一來，拜登政府對台灣的支持，更顯月中，眾議院「台灣連線」四位共同主席，就支持提出了《台得實質有力，堅定不移。

TAIWAN BUSINESS TOPICS • MAY 2021 7

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— BY AUSTIN BABB AND JASON WU —

MACROECONOMICS

EXPORTS CLIMB AS FOREX RESERVES FALL The International Monetary Fund (IMF) in April raised its forecast of Taiwan’s 2021 GDP growth to 4.7%, much higher than the 3.2% figure it provided last October. The organization’s biannual World Economic Outlook report cited a “stronger than anticipated rebound” of the global economy as the reason for its upward adjustment. The new projection surpasses both the 4.64% forecast by Taiwan’s Directorate General of Budget- ing, Accounting and Statistics (DBGAS) and the 4.53% predicted by Taiwan’s Central Bank. According to the IMF An unofficial delegation led by former U.S. Senator Chris Dodd visited Taiwan for three days in April, meeting not only President Tsai Ing-wen but also her dogs. report, Taiwan’s predicted growth ranks PHOTO: OFFICE OF THE PRESIDENT third among the “Four Asian Tigers,” after that of Hong Kong and Singapore. ation of Machinery Industry (TAMI). INTERNATIONAL The Taiwan Institute of Economic Electronic equipment exports soared Research (TIER) reports that Taiwan’s 135.2% year-on-year, according to GUIDELINES, VISIT SHOW March exports rose steadily to US$35 TAMI figures. IMPROVING U.S. TIES billion, 27.1% higher than the same After 21 months of consecutive U.S.-Taiwan relations are showing month a year earlier, driven by global growth, Taiwan’s foreign exchange further signs of strengthening as Wash- pandemic recovery and revitalized reserves posted a decline, falling to ington continues to make overt gestures demand. Machinery exports were espe- US$539 million due to capital outflows of support for Taiwan. The U.S. Depart- cially strong, standing at US$2.22 triggered by a rise in the yield of 10-year ment of State recently released an update billion, a 30.7% increase from March U.S. Treasury notes. The New Taiwan to guidelines regarding interactions 2020, according to the Taiwan Associ- dollar traded 0.79% weaker against the between American diplomats and their strengthening U.S. dollar, dropping to Taiwan counterparts. In a short press

TAIWAN STOCK EXCHANGE NT$28.531 in March. Defying specula- statement, the State Department high- PERFORMANCE tion, the U.S. stopped short of labeling lighted Taiwan as a “vibrant democracy Taiwan a currency manipulator, citing and an important security and economic THE LINE SHOWS CHANGES IN TRADE VALUE AND THE SHADED AREA CHANGES IN THE TAIEX INDEX. “insufficient evidence.” However, in the partner,” and said that the new guide-

POINTS NT$ BILLION latest U.S. Treasury Department foreign lines “liberalize guidance on contacts 17000 450,000 exchange report, the Treasury noted that with Taiwan.” Taiwan’s representa- 16000 400,000 it will begin “enhanced engagement” tive to the U.S. Hsiao Bi-khim and other 15000 350,000 with Taiwan to address the issue. Taiwanese officials and politicians took 14000 300,000 The Central Bank opted in March to to Twitter to welcome the State Depart- 13000 250,000 keep key interest rates unchanged due to ment’s decision. 12000 200,000 11000 150,000 the government’s continued expansion- Days later, an unofficial delegation 10000 100,000 ary fiscal operations. It was the fourth led by former U.S. senator Chris Dodd 9000 50,000 consecutive quarter the bank has main- arrived in Taiwan to express President 8000 0 tained its monetary policy, and the Biden’s support for the island. The dele- M decision was based on the lack of infla- gates, who also included former Deputy

DATA SOURCE: TWSE tionary pressure in Taiwan. Assistant Secretaries of State Richard

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Armitage and James Steinberg, as well as actions threaten regional peace and that Japan should consider the interests the State Department’s Office of Taiwan stability. It was the first time the two of Taiwan’s people and inform Taiwan Coordination Director Dan Biers, met allies had specifically referred to Taiwan of any changes in accordance with a with senior Taiwanese officials – includ- in an official statement since 1969. “Our 2014 bilateral memorandum on nuclear ing President Tsai – and affirmed the government is happy to see that the and radiation safety. According to the U.S.’s commitment to Taiwan’s self- United States and Japan are concerned MOFA, Taiwan is paying close atten- defense. At the meeting with Tsai, Dodd about the current situation of regional tion to the matter. In addition, Taiwan’s also brought up the new State Depart- security,” Taiwan’s foreign ministry said Atomic Energy Council has announced ment guidelines, noting that the updates in a statement. that it will allocate more than NT$500 will “explicitly and enthusiastically” Prior to the summit, Chinese foreign million (US$17.77 million) to monitor encourage visits by U.S. and Taiwan minister Wang Yi called his Japanese the waters around Taiwan. government officials. counterpart Toshimitsu Motegi and Taiwanese envoy to Japan Frank The delegation also met with six asked him to stop Japan from “heading Hsieh’s reluctance to condemn Japan’s members of the Legislative Yuan’s USA in the wrong direction” by interfering decision sparked outrage among activ- Caucus, which is composed of legis- with “China’s domestic affairs.” In a ist groups and politicians in Taiwan. lators from the ruling Democratic videoconference with a U.S. think tank Hsieh’s comments on Facebook were Progressive Party (DPP), the opposi- on April 24, Wang also warned that perceived by many as a defense of the tion Chinese Nationalist Party (KMT), playing the “Taiwan card” is “playing wastewater plan. The KMT criticized the and the Taiwan People’s Party (TPP), a with fire.” Tsai government for being “too soft” on third party formed by Taipei Mayor Ko Japan and urged that Hsieh be recalled Wen-je. During the meeting, delegates TAIWAN PROTESTS JAPAN for spreading misinformation. asked KMT lawmakers to discuss their WASTEWATER DECISION Taiwanese civic groups, including interpretation of the 1992 consensus – The Taiwanese government has the National Nuclear Abolition Action the vague formulation in which both expressed concern regarding Japan’s Platform (NNAAP) and anti-nuclear sides of the Taiwan Strait agree that there decision to begin releasing more than activists, voiced much stronger opposi- is “one China.” It is a central compo- one million metric tons of radioactive tion to Tokyo’s decision. The NNAAP nent of the KMT’s cross-Strait policy. wastewater from the destroyed Fuku- warned of potential environmental KMT legislator Chiang Wan-an later told shima Daiichi Nuclear Power Plant into contamination from the released radio- reporters that he had responded by clar- the ocean in 2023. Taiwan’s Ministry of active water while Japanese civic groups ifying that the consensus does not mean Foreign Affairs (MOFA) Spokesperson also condemned the government for “one country, two systems.” He referred Joanne Ou said during a press confer- making its decision without thorough to the consensus as a historical fact that ence on April 15 that Taiwan has lodged consideration of other non-threatening has contributed to stable cross-Strait a “solemn representation” concern- options. The Japanese government, for relations, but said the party is currently ing the Japanese decision. Ou added its part, has said that the water will be discussing how to revise it to better suit the current situation. ECONOMIC INDICATORS

TAIWAN MAJOR TOPIC US$ billion Year earlier IN BIDEN-SUGA SUMMIT Current Account Balance (Q4 2020) 27.3 17 Taiwan currently finds itself caught Foreign Trade Balance (Mar.) 3.7 2.9 in the middle of the U.S.-China political New Export Orders (Mar.) 53.7 40.3 rivalry. On April 16, U.S. President Joe Foreign Exchange Reserves (end Mar.) 539.0 480.4 Biden met with Japanese Prime Minis- ter Yoshihide Suga at the White House Unemployment (Feb.) 3.70% 3.70% for a bilateral summit, during which they Discount Rate (Mar.) 1.125% 1.125% discussed a range of regional and global Economic Growth Rate Q4 2020p 5.09% 3.69% issues. Following the meeting, Biden and Annual Change in Industrial Output (Feb.)p 2.96% 21.23% Suga issued a joint statement express- Annual Change in Industrial Output (Jan.-Dec. 2020)p 7.08% ing concern regarding China’s coercive Annual Change in Consumer Price Index (Feb.) 1.37% -0.21% actions toward its neighbors – includ- Annual Change in Consumer Price Index (Jan.-Dec. 2020) -0.24% ing Taiwan – and asserting that such P=PRELIMINARY SOURCES: MOEA, DGBAS, CBC, BOFT

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released over several decades after being treated and diluted. The Fukushima Daiichi plant was disabled by hydrogen explosions caused by the 2011 Tohoku earthquake and tsunami. The wastewater in question is said to contain Plutonium-239, tritium, and more than 50 other radionuclides. Environmental groups have argued that these radiation-emitting elements can pose severe health risks and damage human DNA.

DOMESTIC

LOCAL COVID OUTBREAK IN NORTHERN TAIWAN Taiwan’s first local COVID-19 case The derailment of Taroko Express No. 408 that occurred over the Tomb-Sweep- ing Festival holiday in early April killed 49 passengers and injured over 200

in several months was reported on April others. PHOTO: MARTTI CHEN 2 – the son of one of two China Airlines (CAL) cargo pilots who had tested the Central Epidemic Command Center swifter in vaccinating its employees than positive for the virus. By April 27, the (CECC) has begun conducting poly- CAL. As of April 22, 456 EVA employ- number of infected pilots had increased merase chain reaction (PCR) and ees had already been vaccinated, more to nine, and the wife of one became antibody tests of CAL’s 1,279 pilots. It than twice the number at CAL. Chen the second domestic infection from the has also dispatched special police and said a trial program is being rolled out outbreak. The following day, the Linkou healthcare experts to the airline’s quar- to reduce the length of quarantines for branch of Kang Chiao International antine facility to determine whether vaccinated foreign travelers, but details School reported that one of its students, its disease prevention measures were of the new program have yet to be a family member of one of the pilots, adequate. However, the CECC has yet released. had tested positive, forcing the school to to determine the infection source or any conduct all classes virtually until May link among the pilots. TRAIN DERAILMENT IN 5. A total of 193 people that the student CECC Commander Chen Shih- HUALIEN KILLS 49 had come into contact with were tested chung told the press on April 23 that On April 2, passenger train Taroko for the virus as well. EVA Airways Corp., Taiwan’s other Express No. 408 collided with a crane To help manage the new outbreak, major carrier, has been significantly truck near the Qingshui Tunnel in Hua- lien County. The resulting derailment

TAIWAN'S JAN.-MAR. 2021 TRADE FIGURES caused the death of 49 passengers, with (YEAR-ON-YEAR COMPARISON) more than 200 injured. Among those losing their lives were two American China/ apan ASEA TOTA women who were in Taiwan teaching English through the Fulbright Program. 42

31 The crane truck that caused the acci- 18.5 16 13.6 13.1 13.1 8.9 11.2 10.4 6.3 5.9 dent had been on the site of a Ministry of Transportation and Communications 2021 2020 2021 2020 2021 2020 86.1 68.1

61.3 (MOTC) construction project, located .S.A. Europe 50.8 on a steep hillside above the tunnel. The

13.7 truck’s operator, a subcontractor named

11 8.9 10.4 8.1 8.9 8.2 7.1 Lee Yi-hsiang and a migrant worker 2021 2021 2020 2021 2020 2020 he employed were using an excavator T: S Billion to remove the truck from some bushes Exports mports SO RCE: BOFT/MOEA when it slid down the hill and onto the

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tracks approximately one minute before presence when elected chairman last tions surfaced in November 2019, Xiang the train approached the tunnel. By year, noted that the only way for the and Kung were stopped at the Taoyuan then, it was too late to stop the train or KMT to regain public trust is to focus International Airport while trying to flee slow it in time. Lee has been charged on the spirit of the ROC Constitution Taiwan. by the Hualien District Prosecutor and when discussing cross-Strait matters. Prosecutors say that the couple had could face up to 12 years in prison. Such an approach, he said, would illicitly transferred around NT$740 Following the incident, MOTC emphasize Taiwanese values, such as million (approximately US$26 million), Minister Lin Chia-lung submitted his human rights, equality, freedom, democ- most of it coming from a Shanghai- resignation, and although both Premier racy, dignity, and security. based company that was dissolved after Su Tseng-chang and President Tsai Ing- Responding to Chiang’s announce- a Chinese court in 2018 found it to have wen initially refused to let him step ment, China’s Taiwan Affairs Office engaged in illegal activities. Xiang and down, Su finally approved the decision Spokeswoman Zhu Fenglian said that Kung are alleged to have helped the on April 15. Deputy MOTC Minister China would oppose any arrangement company launder money in Taiwan. Wang Kwo-tsai was named to succeed that “highlights divisions” between Lin. Wang has stated his support for the Taiwan and China, and that the KMT BUSINESS “enterprization” of the Taiwan Rail- should not do anything to change the ways Administration (TRA) – running 1992 consensus. TSMC RAISES CAPEX the agency more like a corporation with- TO MEET DEMAND out actually privatizing it – as a way to ALLEGED SPIES INDICTED The Taiwan Semiconductor Manu- improve safety and efficiency. FOR MONEY LAUNDERING facturing Co. (TSMC) announced plans The area damaged by the crash Xiang Xin, CEO of Hong Kong- on April 1 to raise capital expenditures, reopened on April 19. Among the registered company China Innovation committing an unprecedented US$100 several passengers on the first train to Investment Ltd., and his wife, alter- billion over the next three years to resume service on the line were former nate board member Kung Ching, were expand production capacity in response Minister Lin and TRA Acting Director- indicted in early April on charges of to ongoing global shortages of chips General Chi Wen-chung. money laundering. Xiang was accused and the strong demand for new tech- by self-professed former Chinese spy nologies. In a statement, the company CROSS-STRAIT William Wang Liqiang in late 2019 of said the funds would also be used “to being a Chinese intelligence officer who support the manufacturing and R&D of CHIANG CALLS FOR directed espionage activities in Taiwan advanced semiconductor technologies,” KMT-CCP TALKS and Hong Kong. After Wang’s accusa- and added that the company is “work- In late March, KMT Chairman ing closely with our customers to address Johnny Chiang announced that the their needs in a sustainable manner.” party had updated its stance regarding The chipmaker originally planned the “1992 consensus” to place greater to invest between US$25 billion and emphasis on the Republic of China US$28 billion in advanced semiconduc- (ROC) as a political entity. Noting that tor manufacturing in 2021. However, the new approach is intended to encour- despite TSMC’s foundries running at age cross-Strait dialogue, exchanges, more than 100% capacity, production coordination, and problem-solving, has still failed to meet the surging chip Chiang called for talks between the demand, the company said. KMT and the Chinese Communist Party TSMC is entering “another period (CCP). of higher growth,” according to the Given the KMT’s generally more company’s vice president and chief conciliatory approach to cross-Strait financial officer Wendell Huang. The relations, many Taiwanese have tended ongoing COVID-19 pandemic and the to view the party as being pro-CCP. The development of technologies such as prominent role of pro-unification hard- Chinese businessman Xiang Xin 5G and high-performance computing liners within the KMT’s ranks has added and his wife Kung Ching, who were devices are expected to accelerate and accused of being spies in 2019, have to that perception. Chiang, a moder- now been indicted on money-launder- transform global demand for semicon- ing charges in Taiwan. ate who was expected to be a reforming PHOTO: MARTTI CHEN ductors over the next few years.

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Taiwan’s Cybersecurity Dilemma

The island’s world-leading ICT and semiconductor sectors have come under the spotlight following a series of high-profile cyberattacks.

BY JASON WU

n late March, Taiwanese tech hard- leum Corporation have also alleg- ware giant Acer reportedly was the edly been hit by similar cyberattacks in victim of a ransomware attack – a recent months, indicating a growing and Itype of cyberattack in which money is disturbing trend. demanded in exchange for hacked sensi- The origins of ransomware can be tive data. According to media reports, traced back to 1989, when a Harvard- the perpetrators of the attack were a educated evolutionary biologist named hacker group thought to be located in Joseph L. Popp sent 20,000 floppy disks Russia that calls itself REvil (also known infected with a Trojan virus to attend- as Sodinokibi). It demanded Acer pay ees of the World Health Organiza- US$50 million – the highest amount ever tion’s global AIDS conference. The soft- requested in a such an attack anywhere – ware would encrypt or lock files on the and posted screenshots of hacked finan- 21 screenshots of what it claimed were victims’ hard drives, and a prompt would cial documents and confidential files on stolen MacBook schematics. As with the direct them to pay US$189 to a company its dark web-based data leaks blog. Acer Acer attack, REvil allegedly demanded whose address was a PO box in Panama was reported to have negotiated with US$50 million from Quanta to retrieve in order to regain access. REvil, offering a lower sum, which the the files. However, tech news website Such attacks have grown much more hackers refused. Bleeping Computer reported that neither sophisticated and frequent over the years, Around a month later, Quanta, Quanta nor Apple paid the ransom by with hackers commonly demanding Apple’s key Taiwanese supplier of the date REvil provided, and the group payment in cryptocurrency, known for MacBooks, became REvil’s second began publishing the files thereafter. its convenience and anonymity. Accord- Taiwanese ransomware target. The group Taiwanese electronics company ing to figures from IBM’s X-Force Threat posted on its blog a statement containing Compal and state-owned Chinese Petro- Intelligence Report, ransomware consti-

台灣的網路安全困境 5000 文 5000

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tuted 23% of all cyberattacks observed beyond mere monetary losses. Losing “When we adopt those technologies, we in 2020. control of important files and being need to constantly think about what we Ransomware attacks operate like locked out of systems can cause serious want to protect,” says Chen. “Compa- any other computer viruses, explains disruptions in business operations. nies moving everything online will only Oliver Wu, CEO of Taiwanese cyber- In addition, says Wu, publicity regard- give cyber predators more incentives” to security firm Gaia Technologies. Hack- ing ransomware attacks can negatively attack, he adds. ers plant malicious software in comput- impact a company’s reputation. Poor For Taiwanese semiconductor manu- ers, network systems, and databases via security records make businesses less facturers, cybersecurity is becoming an phishing scams (fraudulent emails, text attractive and reliable as potential busi- integral part of their business models. messages, and advertisements disguised ness partners, he says. Terry Tsao, global chief marketing offi- as legitimate links), virus-contaminated As Taiwan continues to advance cer and president of the Taiwan branch downloads, and webpage loopholes. in various high-tech fields, cybersecu- of SEMI, an industry association repre- According to IBM, more than 60% of rity becomes ever more important. Chen senting companies in the electronics the companies experiencing ransomware Hao-wei, president of NEX Foundation, manufacturing and design supply chain, attacks agree to make ransom payments, a nonprofit cybersecurity startup focused says that a major factor in the success of typically amounting to millions of on talent reciprocation, says cybersecu- Taiwan’s semiconductor industry is the dollars. But the damage to businesses rity is now a fundamental part of the trust it has built with customers by keep- inflicted by ransomware can extend development of high-end technologies. ing their information safe.

IMAGE CREDIT: GWEN HSIEH

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While ensuring that sensitive infor- Components like manufacturing equip- public utilities such as water and electric- mation will be protected is important ment, factory facilities, internal computer ity. Plants with more rudimentary infra- for customer relations in general, Tsao systems, and other critical parts of the structure are less prepared for cyber intru- provides a larger context for the indus- production process are all appealing sions, says IBM’s Hsieh, making them try’s reputation in this area. Because targets for cyber attackers. Moreover, “low hanging fruit for the attackers.” Taiwanese chipmakers are so criti- semiconductor fabs run non-stop, day In addition, fabless companies like cal to the global tech supply chain, he and night. Disturbances in their opera- MediaTek exchange large sums of data says, cybersecurity is no longer just a tion can have a severe impact on output and sensitive information with their part- company-level concern but is now also a and – given the current global chip short- ners in the supply chain ecosystem, a matter of national security. “If we don’t age – on the tech market more broadly. practice that makes preventing phishing have cybersecurity, we impact Taiwan When faced with enterprises like the emails, theft of credentials, and ransom- and the entire global economy,” he Taiwan Semiconductor Manufacturing ware attacks ever more of a challenge, cautions. Co. (TSMC), which are equipped with says Hsieh. Maintaining that defense is not easy, well-developed cyber defenses, attackers Having strong cybersecurity should however. Gwen Hsieh, security offerings opt to inflict indirect damage by target- be a given for a country like Taiwan with manager at IBM Taiwan, notes that cyber ing the weaker upstream and downstream such an irreplaceable role in the global threats pose unique challenges for the portions of the supply chain. These high-tech supply chain. On closer exami- operational technology (OT) of the semi- weaker targets include equipment manu- nation, however, Taiwan has been disap- conductor manufacturing supply chain. facturers, materials suppliers, and even pointingly underprepared for OT-related cyber threats. According to an IBM survey, around 81% of attacked companies did not have OT-specific incident- response plans, despite a 2000% increase in OT-related security incidents in 2019. Even more concerning, Hsieh says, many Taiwanese manufacturers are still using outdated Windows operating systems or, in some cases, second-hand computers. For Taiwanese companies, cybersecurity has always merely been “a nice thing to have” until an actual attack compels them to adopt a more serious approach, says Mika Yu, vice president of Infor- mation Security Service Digital United Inc. (ISSDU). Founded in 2004, ISSDU serves as the cybersecurity arm of local

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mobile telecommunications firm Far Eas- databases are wiped out during an attack. addition to offering security solutions, Tone and is the first Security Operation Lai Fu Trading, part of the Taipei- she says, IBM also provides cybersecu- Center established in Taiwan. Compa- based Rehfeldt Group, represents lead- rity training programs for both its clients’ nies simply don’t view investing in cyber- ing international suppliers of cybersecu- security teams as well as their corporate security investments as profitable, Yu rity systems, including FireEye and Deep executives and public relations personnel. adds, as they erroneously consider the Instinct from the U.S. Local Taiwanese companies are also costs of undergoing an attack to be much IBM’s Hsieh notes that her company coming up with their own home-grown cheaper. provides a comprehensive set of services cybersecurity solutions. Gaia Technol- Notwithstanding the inadequacies of to mitigate equipment shutdowns, ogies uses Web Application Firewalls many tech companies’ cybersecurity and disruptions to Overall Equipment Effec- (WAF) to block security breaches arising the growing sophistication of modern tiveness (OEE), damage to facilities, and from security loopholes in websites. The cyberattacks, Taiwan is home to numer- other OT-related cyberattacks. She says company’s distributed denial-of-service ous security solutions and services. Amer- that IBM’s incident response platform (DDoS) mitigation solutions mobilize ican software multinational Dell Technol- streamlines incident management and is global networks to suppress incoming ogies, for example, offers a data backup complemented by built-in response play- DDoS attacks. ISSDU, on the other hand, and recovery solution in the form of a books tailored to its clients’ businesses. offers machine learning and artificial data vault. The vault protects businesses’ It also replaces the traditional and static intelligence solutions to mitigate cyberat- most critical data in an exclusive and Excel Sheets used by many companies for tacks through analyzing collected data. encrypted environment and allows the security management with a more inte- SEMI Taiwan’s Tsao says that his secured data to be retrieved even when grated and visually accessible system. In association is working closely with the

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rest of the supply chain to build a Global Following that development, the cyber talent. More recently, the Minis- Industry Security Center and propose Executive Yuan announced this March try of Science and Technology hosted standards for data and information that it would establish a ministry of the “2021 Girls in Cyber Security Hack- protection. “We want to make sure our digital development next year with a athon” in Tainan, featuring 65 teams customers and suppliers are all on the mandate to “improve information secu- competing in information security and same page regarding cybersecurity so that rity and encourage related industry creative thinking challenges. the information flow for the entire supply growth.” Offices under the National Tsao says these efforts are tangi- chain is secure,” he says. Communications Commission, Industrial ble evidence that cybersecurity is now a The private sector is not alone in the Development Bureau, and Ministry of national priority and is seen as benefit- effort to strengthen Taiwan’s cyberse- Economic Affairs currently tasked with ing Taiwan’s high-tech and semiconduc- curity ecosystem; Taiwan’s government cybersecurity matters will be integrated tor industries. Traditionally, “Taiwan has also made headway in this area. In into an overarching cybersecurity depart- was more like a follower in the area of 2020, the Tsai administration priori- ment in the new ministry. cybersecurity,” he says. “But now, espe- tized strengthening cybersecurity as a To promote civic engagement in the cially for manufacturing, I think Taiwan major component of its Six Core Strate- push to bolster Taiwan’s cybersecurity, is starting to take the lead.” gic Industries initiative, complementing the government has hosted numerous Chen of NEX Foundation echoes Taiwan’s advancements in ICT, AIoT, and Hackathon events, such as the annual Tsao’s enthusiasm for the government’s semiconductor technologies. Presidential Cup aimed at cultivating new direction on cybersecurity. Govern- ment-organized events and competi- tions are “very effective in the way they incentivize and raise student’s interests in cybersecurity,” he says.

The missing piece

While both Tsao and Chen express optimism regarding Taiwan’s overall approach to cybersecurity, Chen notes that a culture of accountability is notice- ably absent from both its public and private sectors. Not only has cybersecurity been treated as an afterthought by many Taiwanese companies, Chen says, but building customer trust based on a strong cyber defense is not an ingrained concept for these companies. He notes that many President Tsai and Digital Minister Audrey Tang pose with participants in a Hack- companies in the U.S. proactively inform athon in 2020, one of many such events hosted by the government to cultivate cyber talent in Taiwan. PHOTO: MORI / OFFICE OF THE PRESIDENT

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their customers regarding personal data compromises and cybersecurity breaches. For those companies, “their branding is tied to cybersecurity,” says Chen. In contrast, he says, Taiwanese companies tend to conceal issues regarding cybersecurity until they are exposed by the media, and in many cases the companies deny such issues by writing them off as “system abnormalities.” To make matters worse, when cybersecurity firms present vulnerability analysis reports to their clients, many companies request two versions of the report: an original copy for the security team and a redacted version for the executives, says Chen. Whereas in other jurisdictions, CYBERSEC 2021, a global cybersecurity conference, was held in Taipei in early companies whose cyber defenses are May. President Tsai attended the event's opening and delivered the opening weak enough to invite an attack are held remarks. PHOTO: WANG YU CHING / OFFICE OF THE PRESIDENT legally liable, an absence of relevant government regulations in Taiwan can security breaches involving consumer or to long-term cyber talent recruitment and also explain the lack of accountability employee data. Violations can lead to cultivation, which many in the field agree in its cybersecurity regime. For example, fines of the larger of €10 million (US$12 is already a major challenge in and of in 2017 cyber attackers in the U.S. stole million) or 2% of the company’s annual itself. A lack of promising cybersecurity- terabytes worth of customer data from global turnover. related career opportunities in private credit reporting bureau Equifax. The In Taiwan, however, penalties companies and government drives young company eventually agreed to a US$575 imposed by the Executive Yuan for unre- talent away from this area. “The missing million global settlement with the Federal ported security breaches are capped part is after you graduate, where do you Trade Commission (FTC), a large part of at only NT$5 million. Chen says that go?” Chen says. “There’s not enough of a which was designated for compensating harsher regulations are needed to hold job market for those talents in Taiwan.” consumers affected by the data breach. Taiwanese companies accountable. Looking to the future, Chen indi- In the EU, the General Data Protec- Absent more punitive measures, Taiwan- cates that the ball is in Taiwan’s court. “I tion Regulations (GDPR) as well as local ese companies – including those in high- would say we have the opportunity and legislation impose harsh penalties on tech sectors – will continue to be compla- capability to build up an elite cyber force, non-compliant companies. Operators of cent and disregard the importance of but the culture is not there yet,” he says. critical infrastructure such as information cybersecurity, he says. “When companies are held accountable, technology and telecommunications in The lax approach to cybersecurity in the culture will start to change. Regula- Germany are legally obligated to report Taiwan also poses serious impediments tion will be the first step.”

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Taiwan Tech’s Success Driven by Hidden Champions

While the world has become increasingly familiar with Taiwanese semiconductor giants like TSMC and UMC, these companies rely on the support of a tightly knit, specialized local supply chain.

WinWay Technology Co. Vice President of BY ANGELICA OUNG Global Sales Jason Chen says that his company is constantly innovating to increase the precision of their products and processes. PHOTO: ANGELICA OUNG

ocated in Taiwan’s silicon strong- Kaohsiung’s Nanzi Technology Indus- South Korea’s Samsung is TSMC’s hold of Hsinchu County is a trial Park (formerly known as the Nanzih closest competitor in the foundry busi- world-class leader in the island’s Export Processing Zone), says that while ness, but the South Korean semicon- robustL semiconductor supply chain. The TSMC, Hon Hai Precision Industry Co., ductor chain relies more on the chae- company in question is not the well- and other tech titans get all the glory, bol structure of large conglomerates with known Taiwan Semiconductor Manufac- “hidden champions” like WinWay are centralized control. On the other hand, turing Co. (TSMC), nor is it the United just as important for the global competi- the approximately 700 companies that Microelectronics Corp. (UMC), Taiwan’s tiveness of Taiwan’s tech sector. make up the TSMC supply chain operate second-largest chipmaker. Yet WinWay “Maybe they’re not a big brand like independently, though they must work Technology Co. counts both TSMC Apple,” says Liu. “But they are world- closely with other companies within the and UMC among its customers, along beaters in their own right.” “ecosystem” to ensure that the supply with Advanced Micro Devices (AMD), Many Taiwanese companies are lead- chain is relentlessly optimized. NVIDIA, MediaTek, Realtek, Google, ing the way in different sectors of the A helpful analogy might be to think Tesla, and too many others to count. semiconductor industry, which is almost of a wafer that emerges from TSMC’s “When we do our job right,” says unimaginably complex, says Marco foundries as a very expensive, very deli- Jason Chen, WinWay’s vice president of Mezger, a memory, storage, and security cate cake. It is then “baked” in Dutch global sales, “it’s almost as if our product expert based in Taipei. company ASML’s EUV lithography never existed.” “The government made a good deci- machines – the “oven.” Before that cake WinWay is a maker of semiconduc- sion back in the 1970s to support the can be sold, however, it needs to be cut tor Automatic Test Equipment (ATE) – semiconductor industry,” says Mezger, into little squares and packaged. Only specifically, custom semiconductor testing who heads the management consulting then can it be used in anything from a interfaces. Their products are needed to firm APIS4 Management. “The foundry mobile phone to an electric car or any ensure that every chip going into a piece model was invented here, and a huge other smart device. of high-end electronics will work before number of small and medium-sized enter- The process, which has already it is soldered into the product. prises sprang up to support it. advanced in commercial terms to the Despite the fact that WinWay “Think about how long it would take 5-nanometer level, can go wrong for any employs fewer than 1,000 personnel and you to get from Texas to Arizona,” he number of reasons. The slightest fluctu- only began being traded on the Taipei says. “In Taiwan it takes just two-and- ation in electricity, for instance, could Exchange’s Emerging Stock Board last a-half hours to get from one end of the cause the wafers to become unusable. year, it holds the number-three spot in the country to the other.” At home, how would you test whether world’s logic IC-testing market and is the The sheer concentration of suppli- a cake has been cooked properly? One only Taiwanese company in the top 10. ers means offline exchanges and visits way would be to stick a knife or skewer More than 90% of its production capac- between companies can be fast and into it. This is essentially what WinWay ity is in Taiwan. convenient. “It’s the only place like it on specializes in, although at an incredibly Liu Chi-chuan, deputy director of the planet,” says Metzger. minute scale. The “skewers” are called

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“pogo pins” in the industry jargon, and cal and electrical specifications change in ment, China Grinding Wheel spun off to test a complicated chip, some test inter- the span of mere months. To survive and into Kinik Precision Grinding. faces contain as many as 20,000 of them. thrive, WinWay and other hidden cham- “I’ll always remember that in March WinWay focuses its operations on the pions in Taiwan’s semiconductor supply of 2000 we got our first order for high-end chip market. “It really doesn’t chain will have to stay incredibly agile. reclaimed wafers from TSMC,” Hsieh matter much if a chip in a cheap product “We work with our clients, such as IC noted in the Panorama report. fails,” says Chen. “A cheap toy is treated design houses, from the beginning of the Small can be beautiful. Kinik has as disposable.” However, if a Wi-Fi chip process,” says Chen. “The design has to under 2,000 employees. United Inte- in a US$500 high-end phone fails, the begin with the testing in mind.” grated Services (UISCO), an engineer- chipmaker is not just responsible for the Some of the companies that TSMC ing and construction firm that provides cost of the one-dollar chip, but for the now relies on to turn out its most cleanroom systems, only has 700 employ- whole defective phone. complex chips have surprisingly humble ees. Yet UISCO was recognized by TSMC In the testing process, multiple roots. Kinik, a manufacturer based in the as “an outstanding supplier” at the 20th chips are mounted onto the test inter- Yingge District of New Taipei City, origi- annual TSMC Supply Chain Manage- face, which is then connected to a test- nally got its start as a maker of tableware. ment Forum in December last year. ing platform provided by an automatic “Kinik has transformed itself every “With the support of our suppliers, test equipment manufacturer such as U.S. 20 years,” CEO Frank Hsieh told TSMC was able to lead the industry in company Teradyne. Testing is performed Taiwan Panorama magazine for a March volume production of 5-nanometer tech- at every step, from the silicon wafers to 2021 report. nology in 2020 and quickly improve the packaged chips, ready to mount. But In order to differentiate itself from yields despite the challenges of the global the sooner a defective chip is caught, the other tableware manufacturers, Kinik, pandemic,” J. K. Lin, TSMC’s Senior less extra cost it incurs down the road. then known as the Jin Ming Kiln Factory, Vice President of Information Technol- As disastrous as it would be to let a rebranded as China Grinding Wheel in ogy and Materials Management & Risk bad chip through, it’s equally important 1953 and started producing the abra- Management, said at the forum. “Look- not to throw out any good chips. “It’s sive wheels needed to support Taiwan’s ing ahead, TSMC will continue building all about the yield,” says Chen, taking first industrial growth spurt. However, a responsible supply chain and strengthen a pause before spelling the word out for profits eventually began to stagnate. The collaboration with supplier partners to emphasis: “Y-I-E-L-D.” company got in touch with the Industrial improve our competitiveness and move The ideal test interface should simu- Technology Research Institute (ITRI), the towards the next generation’s 3-nanome- late the way the chip would perform if same semi-governmental incubator that ter technology.” actually soldered into the final device. It birthed TSMC, and asked for help with The U.S., China, and to some extent should not introduce any extra variance its next transformation. ITRI then devel- the EU are trying to replicate Taiwan’s in performance. If the test socket is not oped a method to “refurbish” reclaimed success in the semiconductor industry. made to be extremely precise, perfectly wafers with high-precision diamond The global shortage of chips touched good chips could be mistakenly found wheels. With a NT$100 million invest- off by the COVID-19 pandemic of to be defective, reducing that all-impor- 2020 led President Joe Biden to remind tant yield. U.S. companies in April that “America When WinWay was founded in 2001, shouldn’t wait” when it comes to invest- TSMC was making 0.13-micron chips. ing in chipmaking. Bolstering America’s By 2004, the chips had shrunk to 90 semiconductor industry is in fact a large nanometers, then 10 nanometers in 2016, part of the Biden administration’s US$2.3 and finally to 5 nanometers in 2019. The trillion infrastructure plan. The world next “die shrink” – down to 3 nanome- can also expect China to continue honing ters – is on track to begin in the latter its chipmaking capabilities, as it has been half of 2022, while research and develop- increasingly cut off from the supply of ment has already begun on the 2-nano- high-end semiconductors, thanks in part meter process. to U.S. sanctions. Every decrease in the size of the “There’s no holding back for China,” chips is a new challenge for WinWay says APIS4’s Mezger. “Expect them to to improve the precision of their test- accelerate the development of their indig- ing interface. “We have no choice but enous supply chain.” to follow TSMC every step of the way,” Yet Taiwan’s small size and robust says Chen. “We have to go smaller, go and dense network of suppliers remains faster, go more precise.” unique. “The ecosystem’s not something The strength of a company like One of WinWay's chip test sockets. The that can be replicated overnight,” says WinWay is its ability to work very closely company's interfaces sometimes con- Mezger, indicating that any economy tain up to 20,000 "pogo pins" for test- with customers, since the cycle time for ing complicated chips. hoping to match Taiwan’s prowess will these chips is exceedingly short. Physi- PHOTO: ANGELICA OUNG have quite a bit of catching up to do.

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Water Shortage Threatens Taiwan’s Tech Industry Development

PHOTO: MARTTI CHEN

fter a year with no typhoons, Vice President of Semiconductors and confident that TSMC and other chipmak- Taiwan is currently experiencing Enabling Technologies at International ers – whose wafers are the foundation for its worst drought in more than Data Corp. (IDC), says that despite the world’s high-end electronics – will not Ahalf a century. Reservoirs revealed their efforts by TSMC to reduce and reuse allow production to be impacted by lack eerie secrets as the water level receded: water, chipmaking is fundamentally a of water. bridges, schools, and even whole aban- thirsty business. “That would simply not be an option doned villages were uncovered. As of “You use the water for purification given the value of their production,” says April, the worst-hit areas of Taichung in order to reduce contamination,” said Morales. “No matter what it takes, they and Miaoli Counties have been put on Morales. “So for very pure wafers, you will find that water. Even if they have to “Red Alert,” with rolling two-day water need thousands of metric tons of water a import it from Korea or Malaysia, they shutdowns being carried out every week, day.” will make it happen.” as well as additional restrictions for busi- Fortunately, contingency planning What will be more interesting to nesses. If the long-anticipated monsoon by the Ministry of Economic Affairs watch is how water shortage issues and “plum rains” in May and June do not (MOEA) Water Resource Agency paid other concerns over resources shape come, the entire west side of the island, off. A water pipeline that came online future investment in Taiwan. including the silicon stronghold of Hsin- in the nick of time in January this year “The climate is changing and we’re chu, is in danger of going into Red Alert. brings more than 20,000 metric tons going to see droughts like this more and Water trucks have been rolling into of water from relatively wet Taoyuan more often in Taiwan,” says Morales. the Hsinchu Science Park for months to parched Hsinchu every day. With- “For companies like TSMC, that will be now to supply the tech manufactur- out the pipeline, an emergency desali- a consideration as they diversify their ers there after they were asked to reduce nation plant, and the eight emergency footprint in capacity.” their use of the municipal water supply wells tapping into groundwater in the The world’s two big chipmak- by 13%. Chipmakers, including Taiwan’s area, the two Baoshan reservoirs in Hsin- ing titans, TSMC and South Korea’s world-leading Taiwan Semiconduc- chu County that supply the science park Samsung, both have major investment tor Manufacturing Co. (TSMC), are would already be dry. plans in Arizona. They are eyeing gener- big users, according to semiconductor Even as the countdown is in progress ous tax incentives, a highly educated local analyst Mario Morales. for how many days the water supply in talent pool fed by local universities, and, California-based Morales, Program the reservoirs will last, Morales says he is surprisingly, assured water resources.

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“Arizona might be largely desert, but for daily civilian use and only 10% for hot potato in Taiwan. While even govern- they have the infrastructure for the water industrial purposes. It’s a ratio that could ment officials agree that prices are low, to come from Texas, New Mexico, Colo- warrant adjustment to alleviate resource there seems to be no urgency to address rado, and California,” says Morales. uncertainty that might deter companies the matter politically. The Water Act was “They also have mountains that collect a from investing in Taiwan, says Morales. amended in 2016 to empower the Water good bit of snow in the winter.” “They grow excellent rice in Thai- Resource Agency to put a surcharge on Interestingly, despite this season’s land,” he notes, indicating that Taiwan large users using more than 1,000 cubic extreme drought and the specter of could import more rice from abroad meters a day, but five years and more more dry years to come, the aver- and divert water normally used for rice than 60 conferences later, there’s still no age annual rainfall in Taiwan has not cultivation to more valuable production timeline for implementation. decreased. What Taiwan is experienc- processes. “Eventually, we need to tackle this ing is a phenomenon called “interannual Another problem that needs to be problem,” says Chia, “Taiwan shouldn’t variability,” says climate expert Chia fixed is Taiwan’s underpricing of water, be a country with drought problems if we Hsin-hsing, general director of Taiwan says Chia. At NT$10 per cubic meter, it properly manage our water resources and Sustainable Environmental Engineering is just about the cheapest in the region. treat every drop as precious.” Consulting Co. Water prices in Singapore and Japan are “We are going to get more and more at least five times that amount. — By Angelica Oung years like this that are bone dry, inter- The idea of raising utility prices is a spersed with years where we’re going to have problems getting walloped by typhoon after typhoon,” says Chia. “We expect this unpredictability to get worse with climate change.” As for this year’s weather prospects, Chia says the nation should brace for a drier than usual monsoon season. “We are still affected by the tail end of this year’s La Niña effect,” she says. “Chances are we’ll get less rain than the average monsoon season.” As for the next typhoon season, which should start from July, Chia says it’s simply too soon to tell. Even for dry years, Taiwan is still “relatively blessed” with water resources, she says, arguing that the government should have done more, earlier, to upgrade Taiwan’s water infrastructure. “Most of our reservoirs are old and really clogged with silt. This prevents them from holding as much water as they should,” says Chia. “We should also make pipeline repair a priority so that we are not leaking water.” Despite the spotlight on industrial water use, the majority of Taiwan’s water actually goes toward another use: agriculture. Rice paddy culture floods the fields so that the plants that produce the rice that the nation is accustomed to eating can grow with their roots sitting in water. “We are still using irrigation ditches from the Japanese era,” says Chia. “The Council of Agriculture is also having difficulties convincing farmers to grow more drought-resistant crops.” Water-intensive sectors like semiconductor manufacturers in Hsinchu have had to In fact, 70% of Taiwan’s water is used begin using water trucks after they were forced to cut back use of the municipal water supply by 13%. for agriculture, while roughly 20% is PHOTO: MARTTI CHEN

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5 CoverStory.indd 23 2021/5/6 9:40 PM ADVERTORIAL

People, Passion, and Possibilities: AbbVie’s Vision of Patient-Centric Healthcare

ast May, research-based global biopharmaceutical firm AbbVie L finalized a transformative acquisition of Allergan, an Ireland- headquartered healthcare solutions provider. The transaction made AbbVie, a relatively young spinoff of the long- established Abbott Laboratories, the fifth largest biopharmaceutical company in the world. It further diversified the company’s robust product portfolio, expanded and strengthened its already robust R&D pipeline, and allowed AbbVie to offer innovative treatments to an even larger patient population that spans over 175 countries. This spring, as AbbVie celebrates the one-year anniversary of the acquisition, the company’s leaders are reflecting on its achievements over the past year and setting bold, forward-looking goals for the By acquiring Allergan during the pandemic last year, AbbVie became the world’s fifth largest future. pharmaceutical company. AbbVie Taiwan General Manager Velayutham Ramanathan notes that the main impetus behind the acquisition was to for clients and patients with Allergan to significantly reduced patient inflow. incorporate Allergan’s specialization in the Aesthetics operating as a global dedicated Both Lin and Ramanathan say that areas of medical aesthetics, eye care, and business. the integration process between AbbVie neuroscience into the AbbVie product line. Sean Lin, general manager of Allergan and Allergan has been very smooth not In addition to the newly added specialty Aesthetics Taiwan, says that this has only because of the synergy between the fields, key therapeutic areas of AbbVie’s provided the focus, independence and R&D capabilities and resources of the global portfolio include immunology, resources to seize significant growth two merging companies, but also because oncology, virology, gastroenterology, and opportunities in country and around the of the similarities in their principles and women’s health, among others. world including strengthening its pipeline. values. “This transaction enhances our ability “In just six months, Allergan Aesthetics AbbVie is known for providing to continue to deliver on our mission announced the acquisition of Luminera, a transparent and energetic working to make a remarkable impact on more enhancing our dermal filler portfolio,” he environment at the company. Ramanathan people’s lives,” says Ramanathan. “We added. notes that such an environment creates a now offer over 30 brands in more than Allergan Aesthetics has also been able strong value proposition for current and 10 therapeutic areas, covering more than to continue providing important services to prospective employees as it allows them 60 conditions globally, and will continue its broad client base, Lin says. Describing to collaborate and grow together with the to expand and diversify our product the company’s approach to its healthcare company. This in turn empowers them portfolio to do more for the communities professional customers called “Your to continue pushing forward innovative we serve.” Practice. Our Purpose,” he elaborated how solutions for patients to live better lives. AbbVie has chosen a unique path this embodies the commitment to being “We constantly invest in our people. Our for integrating Allergan into its existing responsive, providing thoughtful solutions Talent Philosophy features initiatives to organizational structure. Rather than and maintaining trust. Citing how medical help enhance our employees’ knowledge completely absorb it while assuming all of education continued in the wake of the and experiences so that they can grow its products, know-how, and employees, COVID-19 pandemic, Lin shared how their career and contribute at their highest AbbVie will maintain the Allergan brand virtual support was provided to customers, level. This philosophy guides the way name where it holds a distinct value recognizing the challenges they faced due we manage, develop, and lead high-

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performance teams and an accelerated of being a trusted partner to their “We are a new organization in the growth mindset.” stakeholders and consistently delivering biopharmaceutical field, but since our The integration has also expanded innovative, patient-centric healthcare founding in 2013, we have constantly professional opportunities for the team solutions to fulfill unmet clinical needs. been growing.” Ramanathan says. “We as Lin and Ramanathan continue to To do this, says Ramanathan, AbbVie are moving toward market leadership in work collaboratively to ensure business will continue its expansion efforts while all of the therapeutic areas included in continuity and employee satisfaction. sustaining its focus on innovative science our product portfolio. And we commit to The two leaders are now striving to and the advancement of its robust pipeline make remarkable impacts on patients as carry out in Taiwan, AbbVie’s vision well into the future. we move forward.”

5 0 00 0 0

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Raising the Bar for Taiwan’s Supply Chains

A growing emphasis on social and environmental responsibility among major U.S. corporations has begun influencing the practices and operations of their Taiwanese supply chain partners as well.

BY STEVEN CROOK

ast summer, President Tsai Ing- to the office furniture and related high-quality clients. wen announced that starting from industries, says that the majority of “Often the most non-compliant the first day of 2021, Taiwan Taiwanese companies he has dealt factories are family-run; they can wouldL allow the importation of U.S. with have been “more than willing be somewhat more obstinate,” says pork containing trace amounts of racto- to undergo the rigors involved with McNamee. “Also, safety is often the pamine. Some Taiwanese have decried achieving compliance.” He explains most striking issue in Taiwanese fac- the decision as submission to pressure that labor and environmental compli- tories, especially in SMEs [small and from Washington. ance typically goes hand-in-hand with medium-sized enterprises]. Machine That the debate over ractopamine other improvements, such as manufac- safety and training aren’t always ade- got heated was no surprise. Although turing efﬁciency and quality control, all quate.” To make matters worse, he moderate use of this leanness-enhancing of which tend to attract business from says, workers often neglect basic safety feed additive is approved by Codex Ali- mentarius, the UN-afﬁliated food safety body, ractopamine remains banned in much of the world, and pork is a key part of the Taiwanese diet. A story less often told concerns the ways in which American and other international standards are helping to make Taiwan’s factories greener and safer, local business practices more sustainable, and conditions for migrant workers more tolerable. From what Canadian entrepreneur Tom McNamee has seen, the push for social accountability and higher environmental standards is “mostly spearheaded by American companies, more specifically publicly traded companies.” McNamee, who in 1994 founded Hon Hai Precision Industry Co. (Foxconn), one of Apple's main suppliers, has come in Asia Specific Enterprises, a Tainan- for criticism regarding worker conditions at its factories. based provider of value-added services PHOTO: TOY W/SHUTTER STOCK

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standards such as wearing proper foot- wear or eye or hearing protection. McNamee readily admits that weak enforcement of workplace-safety and environmental rules in Taiwan adds to the burden on companies such as Asia Specific. “Yet I do think that enforcement has improved a lot, as the government now acts on anonymous tip-offs,” he says. “Even so, we conduct in-depth factory audits as part of our supplier vet- ting process. Boots on the ground are essential to verify compliance, but once companies become compliant, they tend to remain that way.” McNamee says that more enforcement measures, especially regarding conditions for foreign laborers, would make Taiwan an even better choice for outsourcing production. “On the other hand, the government’s strategy of con- centrating industry in industrial parks, with shared waste-management infrastructure and regular environmental compliance auditing, makes enforcement easier,” he says. Taiwanese companies have long played a key role in supply chains for Apple, Dell, Hewlett-Packard, and others, with electronics accounting for over 39% of Taiwan’s total exports during the first nine months of 2020. More than ever, consumers and activists are holding major brands Kaohsiung-based packaging and testing giant ASE has prioritized sustainability in its operations and facilities, including its "green" dormitory for female migrant workers, responsible for the non-sustainable or pictured above. unethical behavior of their upstream PHOTO: ASE partners – as Apple discovered to its cost in 2010. That year, a spate of buyers such as universities to use their Asked if Foxconn now treats its employee suicides at the vast factories leverage to hold brands accountable. workers better than in 2010, Chan in China where iPhones are assembled Apple has engineers and managers concedes that there have been improve- made headlines around the world. Both stationed at Foxconn facilities in China, ments. “Workers can enjoy sports Apple and Foxconn, the Taiwanese but according to Chan, their concern facilities, but they’re still expected to do company in charge of the production is speed and quality, not adherence 12-hour shifts, and sometimes they only lines, were forced into damage-control to Apple’s Supplier Code of Conduct. have one day off per month,” she says. mode. “Apple admits as much in its CSR [cor- Apple’s Supplier Code of Conduct “Apple has had one eye open and porate social responsibility] reports,” stipulates that workweeks should not one eye closed,” says Jenny Chan, she says. exceed 60 hours, including overtime, an assistant professor of sociology at Neither Apple nor Foxconn and that workers should have “at least Hong Kong Polytechnic University. responded to requests for comment. one day off every seven days except in “Also, Apple is not alone in causing However, on the Supplier Respon- emergencies or unusual situations.” such problems. We seek to open the sibility section of its website, Apple China’s labor law sets a 40-hour work- big black box of labor in global supply states: “We require suppliers to pro- week as the standard. chains.” vide fair working hours, a safe work Chan blames the problem of com- Chan co-authored the 2020 book site, and an environment free from pulsory overtime on ordering practices Dying for an iPhone: Apple, Fox- discrimination...regardless of a person’s and fluctuations in demand. Companies conn and the Lives of China’s Workers, job or location.” It adds that in 2019, like Apple operate just-in-time (JIT) and is an advisor to Electronics Watch the U.S. company performed 1,142 sup- inventory systems, in which goods and (EW), an NGO that asks public-sector plier assessments in 49 countries. raw materials are received only as they

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are needed in the manufacturing pro- make its facilities and procedures more operation.” cess. Consumers do not want to wait environmentally friendly and to win In recognition of their energy-saving for the latest iPhone. recognition for its efforts. and other “green” characteris- Chinese labor law limits overtime In each of the last five years, Dow tics, ASE’s buildings in Taiwan have – defined as working more than eight Jones Sustainability Indices (DJSI) received 16 EEWH and 8 LEED certiﬁ- hours in a single day – to 36 hours ranked ASE as the leader in the Semi- cates. EEHW is a homegrown system of per month. According to both Chan conductors and Semiconductor assessing sustainable architecture, while and China Labor Watch, this rule is Equipment Industry Group. Since 2016, the LEED certification system origi- ignored by Foxconn and others on a it has also been included in the DJSI nated in the U.S. massive scale. World Index, a selection of the top “We also face external challenges, To handle production spikes, agency 10% of the world’s 2,500 largest com- especially with regards to critical workers are deployed, and interns as panies judged by long-term economic, water and energy supply constraints in young as 16 years old come in from environmental, and social criteria. Taiwan, where our largest manufac- nearby vocational schools. Chan sees In 2020, ASE was one of 277 com- turing base resides,” Chou says. the use of interns as “illegal and uneth- panies around the world rated “Climate In Kaohsiung’s Nanzi Technology ical…a kind of forced student labor.” A,” and one of just 106 companies Industrial Park (known until earlier this “Large suppliers which have been graded “Water Security A” by CDP, an year as the Nanzih Export Processing under scrutiny have shown some NGO that helps investors manage their Zone), the company operates Taiwan’s improvement, but rights violations environmental impact. largest wastewater recycling facility. It remain frequent,” says Chan. “The “Several factors drive ASE’s green processes up to 30,000 metric tons of likes of Apple and Amazon don’t want efforts,” says ASE Group Senior Vice water per day, enabling the company to their reputations ruined and without President K.C. Chou. “The biggest is use every drop of water three times. media attention or watchdog action, the urgent need for our industry to “We’re exploring the use of smart there’s little motivation for U.S. com- reduce its global carbon footprint amid energy technologies and increasing our panies to tackle problems like student intensifying climate change. Our busi- investments in renewable energy,” says interns being forced to do night shifts ness activities, including building and Chou. “In 2019, ASE’s consumption of or work overtime.” manufacturing operations, are a sub- renewable electricity increased by 29% Nonetheless, Chan describes Fox- stantial contribution to greenhouse-gas compared with the previous year. As of conn as a better employer than many emissions.” 2019, seven of our manufacturing sites enterprises outside the supply-chain Pointing out that the industrial in China had achieved 100% renewable auditing system, “where conditions sector accounted for 48.9% of Taiwan’s electricity usage.”

could be even more inhumane, and total CO2 emissions in 2019, Chou ASE is working toward joining the even now owners sometimes take says that as ASE continues to expand RE100 initiative (a commitment by possession of employees’ identity docu- its production capacity, “It’s critical major companies to source 100% of ments, so they can’t suddenly quit.” In we accelerate our transition to green their power from renewable sources by this sense, she says, regulations imposed factories and pursue environmentally the end of 2050), Chou conﬁrms. by image-conscious brands “are not friendly initiatives across our entire ASE joined RBA in 2015. “Of RBA’s utterly useless.” An agreement signed this March between EW and the Responsible Busi- ness Alliance (RBA) has given Chan cause for cautious optimism. “RBA, which some companies have been using as a shield, has just agreed to work with EW on supply-chain issues,” she says. “There’s a multi-year action plan to come. I really welcome this breakthrough.” Like Foxconn, Kaohsiung-based ASE Group, the world’s largest pro- viders of independent semiconductor manufacturing services in assembly and testing, has also suffered highly negative publicity. In 2014, the company was dubbed a “serial water polluter” by Citizen of the Earth, Taiwan, an environmental justice foundation. Since then, ASE has striven to

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ensure responsible labor practices are followed on all tuna vessels,” says Lee. “FCF will continue working within its supply chain, with others in the industry, and through the Seafood Task Force [a non-profit coalition com- prising seafood processors, buyers, and retailers that focuses on issues sur- rounding labor and illegal fishing] to make responsible recruitment and treat- ment of all workers an ongoing top priority,” says Lee. According to Lee, FCF is committed to independent auditing and monitoring of its social responsibility program to ensure that all vessels it does business with are in full compliance with laws and policies in place to ensure the safety and protection of all workers. FCF strives to audit 20% of each fleet’s vessels annually, he says. The audits Migrant workers at ASE are recruited directly by the company. They thus do not need to pay fees to labor brokers. include visits with boat owners as well PHOTO: ASE as interviews with migrant fishermen. Since 2018, FCF has been involved 160-plus members, about 30% are our two of the fishing vessels subjected to in the assessment of purse-seiners – ves- customers,” Chou says. “We benefit by CBP Withhold Release Orders (WROs) sels that employ a kind of fishing net learning from and collaborating with had “known direct or indirect links” to that can be tightened to trap dense members who are customers, partners, one of the world’s leading tuna traders, schools of fish inside – so they can meet peers, and suppliers. We’ve adopted the Kaohsiung-based FCF Co., Ltd. standards set by the nonprofit Marine RBA Code of Conduct to strengthen FCF’s international profile grew Stewardship Council (MSC). The MSC, the social, ethical, and environmental in early 2020 when it purchased San in its own words, aims to “contribute responsibility of our supply chain, with Diego-headquartered Bumble Bee to the health of the world’s oceans by an expectation that our suppliers will Foods, which it has been supplying for recognizing and rewarding sustainable likewise act in accordance with the more than 30 years. FCF, which does fishing practices.” code.” not itself own any vessels, buys tuna According to Lee, MSC certification In keeping with the RBA code, but from around 600 fishing boats per year. is, “in terms of seafood sustainability, in striking contrast to large parts of FCF Sustainability Officer Fong Lee probably the gold standard. It covers Taiwan’s economy, migrant workers admits the company had previously 28 performance factors, including employed by ASE (in Taiwan or purchased tuna from at least two of the bycatch, all of which are audited by elsewhere) do not pay fees to labor bro- sanctioned vessels but emphasizes that experts.” kers. The company instead uses online it does not buy from any vessel subject However, an analysis conducted by job ads, employee referrals, and other to an active WRO. Paris-based NGO BLOOM last May channels to recruit workers directly. “About 95% of the global albacore of MSC certification recipients between catch goes to North America, so if a 2009 and 2017, found that the vast Improving fisheries vessel is subject to a WRO, we’re effec- majority (83%) were large-scale indus- tively unable to sell its fish anywhere,” trial fisheries that continue to use ASE’s reputation as an employer is he says. destructive fishing practices. BLOOM’s much better than that of Taiwan’s huge FCF resumed buying tuna from scientific director and lead author of the distant-water fishing fleet. Applying the Tunago No. 61, the subject of a WRO study, Frédéric Le Manach, denounced same law that allows it to ban cotton effective from February 4, 2019 until the MSC as “a marketing shield for the and tomatoes from Xinjiang, U.S. Cus- March 31, 2020, after the vessel went world’s industrial fishers.” toms & Border Protection (CBP) has through a social improvement program, No companies have been removed penalized four fishing vessels because was audited by a third-party entity, and from FCF’s list of approved suppliers forced labor onboard was suspected. adopted an action plan to address iden- since stricter policies were introduced. All four were Taiwanese-owned and/or tified issues. Those steps resulted in the However, Lee stresses, “we can’t risk flagged. WRO being lifted, Lee explains. letting things slide. We can’t water On August 18, 2020, environmental “We’re in complete agreement that down our policies, and we’ve structured NGO Greenpeace USA alleged that significant progress must be made to them to ensure their independence.”

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Meet Peter Dernbach of Winkler Partners

A lot has changed since lawyer Peter Dernbach first came to Taiwan in the mid-90s. Not only is it much easier and safer to get around without a car, but the legal system has also vastly improved, affording greater protection to intellectual property rightsholders and becoming more aligned with international norms and practices.

Meanwhile, Peter has gone through his own personal and professional transformation, working his way up from Associate at Winkler Partners’ predecessor, Qi Lin International Law Offices, to his current role as the firm’s Coordinating Partner. In recent years, he naturalized as a Taiwanese citizen and is frequently featured in local print and online media for his work with the firm. A long-time active AmCham member, Peter currently serves as co-chair of the Intellectual Property and Licensing Committee.

Peter sat down with TOPICS Senior Editor Jeremy Olivier in April to discuss his decision to come to Taiwan, how he chose law as a permanent career, and what distinguishes Winkler Partners from most other law firms. An abridged version of their conversation follows.

When did you ﬁrst come to Taiwan? How did you come to be inter- Other than that, I didn’t really know What was your impression of the island ested in pursuing a career in law? What how I would use my newly acquired lan- at that time? impact did your time in Taiwan have on guage skills. So, I began reaching out I first came to Taiwan in 1995 to that decision? to all the American lawyers in Taiwan study Chinese in what was then known My interest in a legal career started at that time, one of whom was Robin as the Inter-University Program (IUP), during my undergraduate studies at Winkler, the founder of our firm. He now known as the International Chinese George Washington University. My bach- showed me that there is actually a lot Language Program (ICLP) at National elor’s degree was in international affairs, that a lawyer licensed in the U.S. can do Taiwan University. and I observed that although many of working overseas. My ﬁrst impression of Taiwan was that the challenges that humans face are it was amazing, but I did feel at that time global in nature, the legal system of each How would you characterize Tai- that public transportation was very chal- country is different. I decided I would go wan’s current IP regime? What are some lenging. There was no MRT, and there to law school and focus on public inter- of the notable changes in that regime were no electronic displays at bus stops national law to see how countries and that you’ve witnessed since beginning showing you when the next bus would organizations can work across borders your law career here? come. All the signs were in Chinese, with on some of those global issues. I am really fortunate that my area little to no information in English. Early The connection to Taiwan was estab- of practice is intellectual property on, I bought a bicycle and began cycling lished when I traveled here that first rights and that I was in Taiwan while around town, despite it being quite dan- time in 1995. I had decided to take a the government was really focusing on gerous to ride on city streets. gap year between my second and third improving this area of its legal system. Fortunately, things have really years of law school but had no idea Having robust IP protection is essential improved over the years I’ve lived here. how these two unrelated interests would to strengthening Taiwan's international We now have a comprehensive MRT eventually come together. My thinking competitiveness and reputation, and it is system, bus routes on all of the major was that, as an American lawyer that equally important for all of the entrepre- thoroughfares, smartphone apps that was going to be admitted in an Amer- neurs and businesses operating here. tell you when the next bus will arrive, ican jurisdiction, I might occasionally In the time that I have been here, all and bike lanes on many city streets. have some Chinese-speaking clients. the major IP laws, including the Patent

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Act, Trademark Act, Copy- your talent, your life, your right Act, and Trade Secrets energy, and the time that Act, have been revised mul- you aren't spending in other tiple times. I would say the areas. biggest impact was made with the establishment in What advice would you 2008 of an IP Court, which give to young foreign profes- showed that the government sionals hoping to come work recognized the unique chal- in Taiwan? lenges of deciding IP cases I would suggest that and the benefit of having a they just get here and start specialized court to handle exploring. One of the great them. It has resulted in things about living in Taiwan a more consistent inter- is the incredible diversity pretation of the laws and here, but to see and experi- increased predictability in ence it, you need to get out how IP cases are adjudicated. Law firms tend to be more hierar- and find out where you can really create chical in nature. However, we realize the your own space, your own home, your What are some of the most pressing best ideas may come from anywhere. own place to thrive. Once you’ve done challenges in terms of improving IP pro- We want to be as inclusive and to get that initial legwork, you can really focus tection in Taiwan? as much input from as many of our col- on deepening your roots here. Some of the challenges that remain leagues as possible so that our team can today are particularly difficult to resolve learn quickly and do the best job it can. Winkler Partners promotes the con- because the world is increasingly flat With this philosophy, we are not only cept of “work-life integration.” What and increasingly digital. For example, learning as individual professionals, but does this mean and how is it applied at Taiwan has very strong copyright pro- we are also learning as a team. I think the law firm? tection, but most of the pirated content that in the end, this will be better for us We believe that work is a really cru- available to Taiwanese internet users and better for our clients. cial part of our lives, but it should be is hosted overseas. It can therefore integrated in a way that is supportive of be quite challenging to take effec- Did you have any mentors in the the life that we want to lead. We are for- tive enforcement action against the early stages of your career? How did tunate to be working in a professional infringing actors. their guidance shape you as a profes- services firm, meaning that everything Some of these issues are not specific sional? we do draws on our individual skills and to Taiwan; they affect countries around I've been fortunate to have a number abilities and interests. I think that this, the world. That’s just the nature of IP. of mentors throughout my career. The in it of itself, is inherently rewarding Rights owners are constantly inno- one I would like to highlight, though, is for most of us. But I also think that at vating, consumer behavior is constantly Robin Winkler. One of the things that I the end of the day, we want work to be changing, and the people who seek to think had the biggest impact on me and something that is meaningful for us and illegally take advantage of those trends on everyone at the firm is that Robin imbues us with the sense that we have for commercial gain will continue to believed in the need to articulate your made a positive contribution. innovate as well. vision. Robin had a vision of the type At Winkler Partners, we are proud of firm that he wanted to be a part of – to provide ways for colleagues to incor- How would you describe your that he wanted to create together with porate different aspects of their lives approach to management? How have other colleagues – and he put that down into their work. One of the longest- you developed and honed your manage- into writing upon the founding of Win- running and most important benefits ment style over time? kler Partners. we provide is on-site childcare, some- The leadership approach that I and The idea is that if we put our vision thing that is relatively uncommon at the other partners take at the firm is out there, we can get immediate feed- law firms. We appreciate that our col- to coordinate rather than manage. We back, and colleagues are able to engage leagues sometimes want to get married think that each of our colleagues – with us about whether or not it is some- and start families, and providing that whether they are a lawyer, an associate, thing they really believe in and want to space where parents can bring their kids a secretary, or a member of the finance achieve. allows them to focus on their work, free department – are all professionals and It is also very effective for recruiting from worry. what they need are the right environ- because we can share that document These kinds of things really do make ment and the right support. Providing with potential colleagues to gauge their us healthier and happier as people, them with these things empowers them interest in being a part of our team and which in turn improves the quality of to use their skills and abilities to help us what we do here. When you join a firm, the legal services we provide – a true achieve our desired goals. you are really contributing your skills, win-win situation.

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from Washington, including U.S. Senator Edward J. Markey of Mas- sachusetts, Counselor of the State Department Derek Chollet, and Com- merce Department Acting Deputy Assistant Secretary for Asia Richard Steffens, delivered video remarks affirming their commitment to deepening U.S.-Taiwan relations. President Tsai congratulated AmCham Taiwan on its 70th anniversary and thanked the Chamber for “always being a dependable partner to Taiwan and the United States during many critical junctures in our relationship.” She expressed gratitude to AmCham Taiwan and the US-Taiwan Business Council for establishing the US-Taiwan Bilateral Trade Agreement Coalition to promote BTA negotiations. Tsai also thanked Leo Seewald, 53rd Annual Hsieh Nien Fan a who had served as AmCham’s presi- Smashing Success dent on an interim basis since last fall,

mCham held its 2021 Hsieh of 157 government officials. It was a Nien Fan banquet at the Grand night of great food, numerous photo Hyatt Taipei on April 21 – its opportunities, and lasting connections A53rd such annual event and the first between attendees. to be hosted by the Chamber since its President Tsai Ing-wen delivered name change from “AmCham Taipei” the keynote speech, and additional to “AmCham Taiwan.” This year’s remarks were provided by AmCham Hsieh Nien Fan was attended by more Chairperson CW Chin and the Amer- than 691 AmCham members and their ican Institute in Taiwan Director Brent guests, and included a record number Christensen. This year, a few friends

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President Tsai poses with AIT Director Brent Christensen and AmCham Chairper- son CW Chin at the 53rd annual Hsieh Nien Fan.

ister of Economic Affairs Wang Mei- hua, Minister of Health and Welfare Chen Shih-chung, Minister of Finance Su Jain-rong, Minister of Justice Tsai Ching-hsiang, Deputy Minister of the Interior Chen Tsung-yen, Deputy Min- ister of Science and Technology Lin Minn-tsong, Chairman of the National Communications Commission Chen Yaw-shyang, and Chairperson of the Taiwan Council for U.S. Affairs Yang for playing a leading role in the busi- Security Council Wellington Koo, Jen-ni. For the first time in the Cham- ness community and contributing to the Secretary-General of the Executive ber’s history, representatives from U.S.-Taiwan partnership. At the same Yuan Lee Meng-yen, Secretary-Gen- Taiwan’s six municipalities attended time, she congratulated Andrew Wyle- eral of the Legislative Yuan Lin Chih- this event. They included New Taipei gala for taking on the role of the new chua, Minister without Portfolio John Mayor Hou Yu-ih, Taoyuan Mayor AmCham Taiwan President. Deng, National Development Council Cheng Wen-tsan, and deputy mayors Director Christensen in his speech Minister Kung Ming-hsin, Minister from Taipei, Taichung, Tainan, and praised AmCham members for playing of Foreign Affairs Joseph Wu, Min- Kaohsiung. a critical in the U.S.-Taiwan partnership. He emphasized that U.S.-Taiwan ties have never been stronger and expressed his belief that the two partners can work together to come up with innovative solutions to some of the world’s most pressing challenges. The Chamber’s role will become even more critical, Christensen said, “as this economic and commercial relationship continues to expand and develop.” Besides President Tsai and Former Vice President Chen Chien-jen, high-ranking Taiwanese officials in attendance included Secretary-Gen- eral of the Presidential Office David Lee, Secretary-General of the National

A HOST OF GENEROUS SPONSORS HELPED MAKE THE EVENT POSSIBLE:

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Taiwan Acacia’s Commercial Evolution

Taiwan acacia is traditionally used as firewood, but Taiwan’s king of carton packaging, Caho Chen, and a team of innovative young people have developed methods to turn this neglected endemic hardwood into pricey bathtubs, customized guitars, and novel whiskey barrels. How did they transform this once-cheap commodity into a sought-after luxury material?

BY KUO-CHEN LU AND CHI-WEI LIN, COMMONWEALTH MAGAZINE

aiwan acacia logs worth hun- an environmentally sustainable come- The packaging business generated dreds of millions of New Taiwan back for the logging industry, Lin says. stable revenue, but Chen became tired Dollars are stacked in heaps on Before 2017, Chen spent years of his nomadic life, desiring instead to theT premises of Sen Hsin Industrial Co. building a successful carton manufac- chase new business opportunities in Ltd. in Hsinchu County’s Xinfeng Vil- turing business in China. His factories an industry that did not focus so much lage. Inside the factory, a 5-axis CNC in Shanghai and Suzhou churned out on cost cutting. He wanted to found machining center from Italy that cost carton boxes for electronics products an enterprise in Taiwan that had the NT$6 million (about US$214,000) is such as monitors, laptops, consumer potential to sell value-added products processing a plank of this hardwood electronics, and LCD TVs, mainly for globally. Wood processing seemed a into parts for a guitar. Taiwanese customers. logical choice for Chen, who graduated The logs are sourced from low-eleva- tion mountains and forests in Taiwan. Also known as Formosan koa or Asian walnut, Taiwan acacia (Acacia con- fusa) is traditionally used as firewood and to make charcoal. But Lin Hwa- ching, director general of the Forestry Bureau under the Cabinet-level Council of Agriculture, sees much greater potential for this natural resource. Sen Hsin President Caho Chen, “the hidden champion of the carton industry, and a group of young people brought their creativity into play,” Lin says. “Formosan koa wood is being made into bathtubs that cost US$100,000 apiece, as well as guitars and ukuleles that are sold worldwide.” Thanks to Taiwan acacia - also known as Formosan koa - is traditionally used as firewood and to these new, high-end purposes for the make charcoal. However, the lumber from this endemic species has become prized for hardwood, there is an opportunity for its distinctive wavy grain pattern. PHOTO: PEI-YIN HSIEH

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Sen Hsin Industrial President Caho Chen decided in 2017 to transition from his carton-manufacturing business to wood processing, an industry that did not focus so much on cost cutting. PHOTO: PEI-YIN HSIEH

from the Woodworking Department When researching the wood, Chen that Chen hopes will gain a good inter- of National Hsinchu Senior Industrial found out that Taiwan was exporting national reputation. Vocational School. massive amounts of Formosan koa In the beginning, he participated in timber every year to China, where it High-tech carpentry trade shows in the U.S., touting what was processed into wooden flooring seemed the natural choice from a mar- for export to the U.S. Thanks to its One of the younger people that keting point of view – walnut, a very hardness, decorative grain patterns, Chen recruited for his team is Brand popular wood for making furniture. But and attractive color, this wood is also Manager Sun Chi-hao. Upon grad- an American customer quickly poured known abroad as Taiwanese ebony or uation from the Department of cold water on his expectations. “You red hickory. Environmental Engineering at National buy American walnut to process it in The wood was actually promoted to Chung Hsing University, Sun origi- Taiwan and then ship it back to the fame by a Chinese entrepreneur. Taiwan nally ran a musical instrument store in U.S.? We can do this ourselves. Why used to export more than 1,000 con- Hsinchu and had also gained some pop- would I want to buy it from Taiwan?” tainer loads of Formosan koa annually ularity moonlighting as a math teacher the customer asked, incredulous. to China, where the timber was pro- at a local cram school. The comment dashed Chen’s hopes cessed and then exported to the U.S. “The boss (Chen) told me that I and caused him to reconsider his Chen thought, why not turn Tai- shouldn’t work as a simple carpenter options. Clearly, processing American wanese wood into value-added final but should set my sights on the world, walnut in Taiwan for export was not a products himself? From then on, he building a woodworking industry with suitable model for boosting the profile embarked on a mission to promote Tai- a technological edge,” recalls Sun. of Taiwanese products in the world. He wanese wood products. That’s how all Eventually Chen convinced him to take needed to change direction. the Formosan koa that previously would the job as brand marketer. Four years ago, Chen was having a have been shipped to China found its Formosan koa is difﬁcult to plane or meal at a streetside eatery in Xinfeng way into the Sen Hsin warehouse. machine because its grain easily tears Village when he noticed a truck loaded Chen put together a team of twenty- or chips. Therefore, scientiﬁc and engi- with a heap of logs. The wood caught somethings and established two brands: neering expertise was vital for the team. his eye because of its varying bold and The Egg (egg design), which focuses on Vic Lin, vice president of Yongzai wavy grain patterns. After he stopped the domestic market, and the export Forestry Co., which grows Formosan the truck to ask, he learned that the brand Waveaffects, which showcases koa on the Hengchun Peninsula in cargo was Formosan koa. the wavy pattern of Taiwanese wood the south, points out that the tree is

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Sen Hsin Brand Manager Sun Chi-hao crafts a hand-made acoustic guitar out of Taiwan acacia. PHOTO: PEI-YIN HSIEH

an endemic species. Due to Taiwan’s acoustic string instruments such as gui- die, and then replant. However, if climatic conditions, which include tars and ukuleles. And thanks to the wood products are too cheap, there is typhoons in the summer and strong, wood’s decorative and wildly varying a lack of incentive to plant and manage cold winds in the winter, Formosan koa grain patterns, every instrument looks forests. Consequently, developing inno- is hard and does not easily break due distinctively different. vative applications and new markets to external forces but presents some A wooden bathtub will set you for home-grown timber is extremely challenges. “When your processing back US$100,000, a price that seems important. technology is not mature, you are not astronomical at first. But piecing Currently, Sen Hsin’s annual revenue only wasting time and effort, but you together an exquisitely sculpted from the wood business – just a few also risk the wood warping after use,” bathtub using joinery techniques million New Taiwan Dollars – pales Lin explains. instead of nails and screws, plus fol- in comparison to the NT$22 billion Sen Hsin spent three years lowing a structural design that is generated by paper packaging. But gui- researching ways to process Formosan leakproof, takes half a year. tars and bathtubs from Formosan koa, koa. “We were looking to turn what as well as beer with a smoked koa others regard as shortcomings into Fostering sustainable forestry aroma, are proving popular. The state- advantages,” says Chen. To solve the owned Taiwan Tobacco and Liquor warping problem, Chen and his team What does the development of this Corp. is even planning to age some of used mechanical calculation and adjust- niche industry mean for Taiwan? First, its whiskeys in Formosan koa barrels ment as well as structural design to by using home-grown wood, Taiwan to produce a spirit with a unique Tai- ensure that all wood pieces tightly lock can import less natural wood from wanese ﬂavor. together to form strong mechanical abroad, thus helping reduce logging Over the past four years, Sen Hsin connections. and preserve virgin forests. has continuously invested in the future, After achieving a breakthrough in Second, value-added wood products hoping to create business opportunities the processing technology, Sen Hsin ensure that domestic timber does not go worth more than NT$2 billion per year began to release various products such to waste. Formosan koa trees need to be by using wood from sustainably man- as tables, chairs, bathtubs, cups, hats, harvested when they are between 80 and aged forests in Taiwan. and even guitars. 100 years old or else they will rot away, The pleasant woody scent of releasing the carbon stored in them as Formosan koa hangs in the air carbon dioxide into the atmosphere. — This article is reprinted, with from a custom guitar that sells for An effective way of pulling carbon editing and updating, with permission NT$160,000. Thanks to its hardness from the atmosphere is to plant tree from the publisher. Translation from and density, Formosan koa has tonal seedlings, fell them when they have the original Chinese was done for qualities that make it a good choice for grown into mature trees before they CommonWealth by Susanne Ganz.

36 TAIWAN BUSINESS TOPICS • MAY 2021

Acacia.indd 36 2021/5/6 9:42 PM INDUSTRY A Report on Taiwan’s Retail Industry F CUS Looking Ahead to the Post-pandemic Era

iSTOCK PHOTO

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E-COMMERCE GROWS STEADILY IN TAIWAN AMID PANDEMIC

COVID-19 has given a modest boost to online shopping in Taiwan, with platforms such as Momo, PChome, and Shopee strengthening their market positions.

IN THIS REPORT BY MATTHEW FULCO

n a world struggling with the shift from offline to online,” she says. coronavirus pandemic, Taiwan is Growth was most brisk during the an outlier. The island nation has first and second quarters of the year, Istaved off the mercurial contagion, and especially during March and with dramatic implications for public April. Those two months saw Tai- • E-Commerce Grows Steadily in Taiwan health and the economy. wan’s sharpest uptick in COVID-19 Amid Pandemic p38 One of the biggest business sto- cases and were also the time when ries of the past year has been the the severity of the pandemic’s global abrupt shift in many countries impact became clear. from physical to online retail. For “In March and April, [Taiwanese] instance, the e-commerce market in people wanted to avoid face-to-face the U.S. grew 44% in 2020 while in contact,” says Jamie Lu, director of • Entrepreneurs Navigate Taiwan’s Vast Indonesia it expanded by 37%. Phys- public affairs at PChome, one of Tai- Retail Space p41 ical retailers have been the losers in wan’s largest e-commerce platforms. many cases, as the new shopping She says that PChome sold unusu- habits are here to stay. ally large quantities of goods used Taiwan’s e-commerce market for home entertainment during those (pure online platforms) in 2020 two months, including equipment for grew at a comparably modest pace home workouts, gaming consoles, of 16.2% to reach NT$241.2 billion speakers and big-screen televisions. (about US$8.6 billion), according After April, sales of those items sta- to Ministry of Economic Affairs bilized. (MOEA) data. That growth was At the same time, physical consistent with the double-digit retailers proved nimble, making the expansion of recent years, notes most of the opportunities afforded Emily Leung, a Hong Kong-based them by Taiwan’s effective contain- analyst at market research provider ment of COVID-19. For instance, Euromonitor. “Taiwan’s e-commerce they capitalized on strong consumer market has been growing steadily, demand during the popular Double but not as strongly as elsewhere in 11 (November 11) and Double 12 Asia where there has been a larger (December 12) shopping festivals.

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They also benefited from an NT$100 a TV shopping channel in 2005 before mance in 2020 as well, posting record million (US$3.3 million) government sub- expanding into online retail. Over the revenue of NT$43.9 billion, up 12.8% sidy program launched in April 2020 that years, Momo has developed strong rela- over 2019. The company’s push into helped physical retailers shift business tionships with suppliers, a top-notch mobile commerce helped drive that sales online, as well as the broader stim- logistics network, an engaging user inter- growth. Downloads of its mobile app ulus voucher program that distributed face, and a knack for identifying best- surpassed 5 million last year, with new NT$3,000 in vouchers to nearly all of selling products. users growing 50% on an annual basis. Taiwan’s 23.5 million people. The retail “Momo wins in every aspect of being While Momo and PChome focus on and food sectors benefited most from the a strong e-commerce platform,” says B2C business, Singapore-based Shopee program. Both sectors posted best-ever Sophie Chiu, an associate on the invest- (owned by NYSE-listed Sea Group) has monthly revenue in the second half of ment team of Taipei-based accelerator carved out a niche in Taiwan in the C2C 2020, according to the MOEA. AppWorks. segment, territory once dominated by Overall, reports the MOEA, Tai- Although Momo is part of the mas- Yahoo. “Shopee has replaced Yahoo’s wanese retailers’ online sales (which sive Fubon Financial Holding Group, presence in Taiwan,” says Leung. Com- includes both pure online platforms and “it has a strong start-up spirit and a lot pared to Yahoo, “it has better logistics the online sales of physical retailers) freedom to grow within the group,” Chiu and better promotions.” She adds that reached approximately NT$341.8 billion says. “Momo wants to prove themselves Yahoo terminated its shopping business in 2020, up 19% year-on-year. to be the key pillar in Fubon.” in Hong Kong last year, leaving Japan as “It seems COVID-19 has not only To that end, Momo has been ahead its only major e-commerce market. driven the operating performance of of the curve in Taiwan’s mobile shop- When Shopee arrived in Taiwan Taiwanese online retailers but also has ping market, says Euromonitor’s Cheung. in 2015, the e-commerce market was encouraged physical retailers – even small “They are pioneers of e-commerce already fairly mature. However, the Sin- businesses – to more actively develop in Taiwan,” she says. Momo quickly gapore-based company embarked on an their online businesses,” says Robin Hu, accrued users of its app with “very aggressive expansion strategy, starting a senior industry analyst at the Taipei- aggressive pricing strategies and lots of with C2C and then gradually moving based Market Intelligence & Consulting rebates.” into B2C later. Today many prominent Institute (MIC). Momo had an excellent 2020, with brands in Taiwan have flagship stores on revenue growing about 30% to NT$67.2 the platform. Shopee built a strong fol- Competition grows billion. The company had an especially lowing by initially offering delivery free strong fourth quarter, buoyed by its suc- of charge and then heavily promoting its Competition is intensifying in Tai- cess at the Double 12 shopping event, 24-hour delivery service. wan’s e-commerce market as demand for for which it posted record revenue of “Delivery is one of the key factors online retail grows. Several platforms NT$6.5 billion, an increase of 36% over that can convert a user” to a different stand out for their innovative business the previous year’s total. e-commerce platform, observes Chiu of strategies. One is Momo, which began as PChome turned in a strong perfor- AppWorks.

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Representatives of the PChome group and government partners at the launch of PChomeSEA, the Taiwanese e-commerce company's Southeast Asia subsidiary, in September last year. PHOTO: PCHOME ONLINE

Shopee offered customers the ability merce market has several potential ways pick-up and refund processes. This helps to pick up their purchases in convenience to grow. One is through a hybrid sales online retailers to enrich their product stores, which proved to be a huge hit. approach that makes use of both online categories and items,” Hu says. “Overall, “Taiwanese people are very convenience and offline platforms. This approach is physical retailers and online retailers driven,” Cheung says. sometimes called O2O (short for “online that adopt cooperative strategies will Interestingly, with the withdrawal of to offline”). Hu of MIC prefers the term share channels, product items, customer China’s Taobao from Taiwan due to com- OMO, short for “online merges with groups, logistics and other resources with pliance deficiencies, Shopee has moved offline.” each other to form an OMO trend.” in to capture the Chinese firm’s business. To alleviate the pandemic’s impact At the same time, Taiwan’s e-com- The Singaporean e-commerce platform, on physical retail channels, the industry merce platforms could potentially step with its C2C acumen, acts as a sort of has boosted investment in online chan- up cross-border business. With its large Taobao proxy, says Chiu. While Taobao nels, with an emphasis on live streaming. regional footprint covering every major can still sell directly to Taiwanese con- That shift has created more immediate Southeast Asian market, Shopee could sumers through its main website based in and direct interactions with customers, help Taiwanese merchants sell goods China, many Taiwanese reportedly prefer improving sales, Hu observes. overseas. “Shopee has a lot of resources to avoid that channel. Given the benefits to both sides, thanks to its overseas presence,” says “If you use a Taiwanese credit card “online retailers would like to have phys- AppWorks’ Chiu. instead of Alipay on Taobao, you have ical channels while physical retailers Among Taiwan’s homegrown e-com- to pay a 2-3% transaction fee,” which want to go online,” he says. As a result, merce players, both PChome and Momo is unpopular with price-conscious Tai- he expects that e-commerce vendors will have expanded to Southeast Asia. Both wanese consumers, says an industry increasingly direct customer flows to companies have long had a presence in source familiar with the matter. “Some physical retail stores while brick-and- Thailand. In fact, Momo is the Kingdom’s people may hesitate to buy goods on a mortar retailers will provide effective second largest TV shopping channel. platform expelled from Taiwan, too.” logistics and distribution services to In September 2020, PChome forayed e-commerce platforms. into Singapore, Vietnam, Indonesia, and Growth prospects “Physical retailers provide their Malaysia by partnering with large local diversified product categories and store e-commerce operators in those markets. Looking ahead, Taiwan’s e-com- resources for fast delivery and goods The name of its business in Southeast

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Asia is PChomeSEA. “We see a lot of opportunity in South- medium-sized enterprises “are serious PChomeSEA is reportedly off to a east Asia,” says PChome’s Lu. She notes and open” about exploring cross-border fast start, with Taiwanese instant noo- that Taiwan’s geographical position e-commerce opportunities in those mar- dles and hotpot products best sellers in allows it to sell Japanese and Korean kets. She adds that “PChome hopes Singapore and overall sales in Malaysia products, as well as those made in to play a key role in helping Taiwan’s growing fivefold between September and Taiwan, to ASEAN countries. e-commerce industry grow in Southeast December 2020. Lu says that Taiwan’s small and Asia.”

ENTREPRENEURS NAVIGATE TAIWAN’S VAST RETAIL SPACE

A new cohort of young business owners is exploring how to create, import, and sell products that are attractive to Taiwan’s discerning consumers, using a variety of online and offline sales channels and strategies.

BY JEREMY OLIVIER

or a small, independently owned able in Taiwan. She decided to turn this business, making a name for one- deficiency into a do-it-yourself project, self in the retail sector of any using the kitchen in their apartment to majorF economy is difficult. In Taiwan, make a simple exfoliating coffee scrub where consumerism is almost a religion from easy-to-find ingredients. and where the retail market has been “I remember the first time Mandy growing at an annual rate of 10-12% in made it at home and was trying it out in recent years thanks to a handful of pop- the shower,” says Roberts. “I heard her ular e-commerce platforms, standing out yelling, so I asked what was wrong. She as a new, unfamiliar brand is even more said ‘Nothing’s wrong! The scrub is awe- challenging. Yet more and more energetic some!’” young entrepreneurs are finding unique The two began making more of their ways to break into this saturated market, homemade concoction, giving extra bot- introducing niche products or a twist on tles away to friends. The feedback they existing, popular goods. got was overwhelmingly positive, and For husband and wife Joshua Rob- it gave them the idea to start selling the erts and Mandy Wu, co-founders of scrub as a packaged product in Taiwan. local skincare startup gabi+skin, the idea A bit of trial and error was involved to start a retail cosmetics business was in getting the company off the ground. purely accidental. Wu had been searching While both Roberts and Wu were well for products that were better suited for versed in branding given their respective Husband-and-wife team Joshua Roberts sensitive skin. After reading about all- backgrounds in design marketing and and Mandy Wu founded coffee-based skincare startup gabi+skin after Wu dis- natural coffee-based skincare online, she advertising, they didn’t have much in the covered that such products were difficult began searching Taipei’s drugstores and way of formal retail experience. When to find in Taiwan. e-commerce platforms, only to realize they first began selling their coffee scrub PHOTO: GABI+SKIN that such products were virtually unavail- at an outdoor market in Tianmu, they

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While most of gabi+skin's business is done in the online retail space, Roberts and Wu have also sold their products at local markets, as well as a pop-up shop in Eslite's Xinyi branch. PHOTO: GABI+SKIN

realized that one of the key ingredients, nity where they curate products to make “Taiwanese people have to see things coconut oil, solidifies in colder weather, sure they fit their quality and standards,” in real life before buying them,” says rendering the product difficult to use. says Chen. “We were lucky to be able to Wen Tu, co-founder of Rioni Group, They were forced back to the drawing join.” an advisory firm for foreign businesses board, tinkering with the formula to While online sales are a major com- looking to enter the Taiwan market. “It’s improve consistency. ponent of the business for gabi+skin and almost unheard of for them to buy some- In other ways, though, gabi+skin Empress Hot Sauce, both still note the thing online without having first seen it faced a relatively low barrier to entry. challenges involved. One major hurdle in person.” Certain aspects of Taiwan’s retail eco- is the hesitancy among many Taiwanese Tu also co-owns and operates a sep- system make it easier for new brands to consumers to make purchases online, arate e-commerce business with her develop a following. In particular, several especially from brands or sellers they’re Austrian business partner, Stefan Pellech, well-known e-commerce websites, such not already familiar with. selling pre-owned luxury watches from as local platforms PChome and Momo, Switzerland. She says that given the more as well as regional players like Singa- conservative approach to buying online pore’s Shopee and Hong Kong’s Pinkoi, in Taiwan, her company’s model would provide a convenient space for individ- be almost impossible without the help uals and companies to hawk their wares. of established players in the timepiece Like Amazon Marketplace in the U.S., industry. these websites allow third-party sellers “We collaborate with local retailers, to create their own individual stores and asking them if we can work with their provide pay-on-delivery and convenience watch expert, who can help our clients store shipping options that are popular by offering certain services,” Tu says. By with local consumers. making those connections, she says, she Roberts and Wu chose Pinkoi, which and Pellech are able to create a higher has a focus on original design products, level of trust in their brand and the prod- as the primary third-party sales channel ucts they are offering. for gabi+skin. So did Jane Chen and Alex Another important part of the mar- Denner, founders of artisanal condiments keting strategy, Tu says, is crafting an startup Empress Hot Sauce. interesting, compelling story for your “In Taiwan, being on these e-com- Empress Hot Sauce is the brainchild of brand. That not only builds consumer merce websites is incredibly important married business partners Alex Denner trust, but also increases word-of-mouth and Jane Chen, who launched the com- because they lend a trust factor to your pany last year. referrals, which are extremely impor- product, and Pinkoi is a trusted commu- PHOTO: EMPRESS HOT SAUCE tant for small businesses to grow in the

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Taiwan market. For their watch business, Denner explains, “I always bring back bers who had received bottles of the hot Tu and Pellech have interviewed both a ton of hot sauce because the craft hot sauce from them as gifts during the hol- watchmakers and collectors, who related sauce industry in the U.S. is so much idays. Some even asked for more. After their experiences in the industry and more robust than it is here. There’s really taking another half-year to fine-tune the imparted valuable knowledge. They then only one flavor of hot sauce here and I’m recipe for each sauce, the two decided synthesized the information they had col- used to a little bit more variety.” to incorporate, officially launching their lected into an attractive narrative for the He says that his eureka moment came business in July 2020. company. when he was walking through a local In addition to Empress’ brisk online “It’s a win-win situation,” Tu says. market one day and spotted mangos and business, Denner and Chen also travel “It’s not one-sided, like I’m just telling chilies sitting next to one another at a in person to various markets around you a bunch of information. You’re also stand. “It immediately made me think the island. They found that the tac- learning and connecting to the commu- of the mango habanero sauce that I had tics used to pull in potential customers nity through these stories.” at home and was trying to conserve,” offline were much different from those Denner and Chen of Empress Hot he says. “And basically, while I was used in e-commerce. At a recent event Sauce agree with that approach. “Sto- recipe testing for the chia seed pudding, I held by local business networking orga- rytelling is such a key piece of brand decided to give hot sauce a shot as well.” nization All Hands Taiwan, Denner marketing, even in the States,” Chen The new experiment seemed like a noted that he and Chen had started out says. “I’ve realized that one of our bene- nice way for Denner to make sure he just waiting behind their stand for cus- fits is we’re really honest in how we tell had several homemade varieties of his tomers to approach. When that did not our story. I think everyone understands favorite condiment on hand. Yet it didn’t prove very successful, he moved to the that we’re just two people trying to make strike him and Chen as being a potential front of the display and began calling out really good sauce and have fun while business idea until a couple of years ago, and offering samples to passersby, which we’re doing it.” when the couple started receiving positive worked a bit better. The couple had also benefited from feedback from friends and family mem- Roberts and Wu of gabi+skin also their modest experience in the food and beverage sector before starting Empress. After moving to Taipei in 2019 from New York, where Denner had been working as an accountant and Chen as a product manager, they began making chia seed pudding, which they then delivered to different offices around the city. The venture was relatively successful, but Chen noticed that their refrigerator at home was becoming filled with an increasing number of hot sauce bottles. “Every time I go back to the States,”

Jane Chen offers an Empress taste test to a customer, left. Chen and Denner sell their hot sauce at an open air market, right. PHOTO: EMPRESS HOT SAUCE

TAIWAN BUSINESS TOPICS • MAY 2021 43

5 IF.indd 43 2021/5/6 9:42 PM INDUSTRY F CUS ventured into offline sales with a pop-up during their time there netted overall pos- away from all of the bustling foot traffic shop at the Eslite Xinyi Store from itive results, Roberts says. of the nearby shopping area, but she says December 2020 until February this year. this location lent it an air of security and Like Denner and Chen, they took a more Going it alone exclusivity. passive approach to sales at first, but “The first thing I did was set up a noticed that the staff at other booths While maintaining both online and salon bed, and I provided my clients with were proactively approaching customers offline sales channels is possible with a five-star free facial that’s actually a to reel them in. While they didn’t feel small businesses that have sufficient cap- US$450 value,” Sun says. “Then I would, comfortable with such an aggressive ital and human resources, it’s much more throughout the process, teach them why approach, they knew they needed to do difficult to tackle for those operating my product is different and how they something different. as individuals. Such was the dilemma could improve their skincare routine so “While doing some research online, faced by Irene Sun, Taiwanese-American that the products are more effective.” we found some weird psychological founder and branch manager of iSkin She says that by using this approach, tactics, like ignoring customers and pre- Global, which imports and distributes as well as by chartering a new, English- tending that you’re busy” with other specialty skincare products from a manu- language chapter of the Rotary Club and people, Roberts says. “Nothing attracts facturer in the U.S. joining other business networking orga- a crowd like a crowd.” They also rear- “I started out with both e-commerce nizations, she was able to rack up an ranged their display to make it appear and through my brick-and-mortar store, impressive number of sales. In line with that certain items were being sold out and I was losing a lot of money,” Sun the observation by Tu of Rioni Group and also arranged for the sales staff at a says. “So I took down my e-commerce about Taiwanese consumers’ online neighboring shop to provide coupons for platform and solely focused on in-person spending habits, Sun says that a purely their customers to get a free gabi+skin sales, and just designed my entire busi- e-commerce approach may not have been sample upon completion of a sale. ness and marketing plan around that.” as effective, especially since the price Although sales at the pop-up shop Rather than opt for temporary sales point of the products she was selling was began waning at the end of gabi+skin’s channels like those used by gabi+skin and quite high. run in Eslite due to the cluster outbreak Empress Hot Sauce, Sun decided to rent “With e-commerce, I could only post of COVID-19 cases in Taoyuan earlier a storefront in Taipei’s Da’an District. videos and because my products are so this year, the various tactics they tried The shop was located in a small alley, expensive, the customer would have to pick and choose one or two products,” she says. “But in person, they’re getting the full experience, so they’ll be com- pelled to buy more.” Though Sun eventually exited the company she founded and returned to the U.S. last year, licensing her exclusive right to sell iSkin’s products in the Taiwan market, she offers encourage- ment to those who want to become retail entrepreneurs in Taiwan. “Don’t give up and don’t get intim- idated,” she says. “There are a lot of very local – usually very male – business owners who will try to talk down to you – and people can be very discouraging, but don’t worry. The market is very saturated, but if you keep trying and give yourself time, you’ll be fine.”

Irene Sun, founder and branch manager of iSkin Global, decided to launch and develop her small business entirely on her own, focusing solely on in- person sales at her brick-and-mortar store in Taipei. PHOTO: IRENE SUN

44 TAIWAN BUSINESS TOPICS • MAY 2021

5 IF.indd 44 2021/5/6 9:42 PM

SPECIAL REPORT

Taiwan’s “Pineapple War”: Opportunity Amid an Industry Crisis

China’s recent ban on pineapple imports from Taiwan provides an occasion for policymakers to rethink the island’s dependence on the Chinese market for agricultural exports.

BY JULIA BERGSTRÖM

n late February, just as Taiwan’s public backing. In response, local res- new, tougher inspections. pineapple season was set to begin, taurants created new pineapple dishes, If China’s goal was to hurt Taiwan China’s General Administration consumers went on a pineapple-buying financially, more discreet options were Iof Customs announced that it would craze, and in four days Taiwanese shop- available; a technical delay at its ports suspend the import of Taiwanese pine- pers had bought a year’s worth of would be enough to cause spoilage and apples beginning March 1. Taiwan pineapple exports to China. deter further exports. But claiming the President Tsai Ing-wen described the Taipei’s economic allies also rallied presence of disease and pests has the move as “ambush-like.” in support of Taiwanese pineapples. potential to do what delays do not: With exports to China accounting Japan ordered a record 10,000 tons of affect the international image and repu- for over 90% of Taiwan’s global pine- pineapples in March and Singapore an tation of Taiwanese pineapples. apple sales, addressing the issue was additional 25 tons. A week after Chi- Mark Hsieh, vice chairman of crucial for farmers and government na’s announcement, Taiwan's Council domestic food distributor Taitung alike. Soon after China announced the of Agriculture (COA) reached an agree- Enterprise Corp. and Commissioner of ban, Minister of Foreign Affairs Joseph ment with Australia to export six tons Great Giant Pineapple Corp., says that Wu launched a social media campaign of pineapples there in May. Taiwanese China’s decision to ban the pineapple urging consumers to buy “Freedom businesses operating overseas also imports was aimed at seeking publicity. Pineapples” – a reference to Austra- ordered 560 tons of pineapples from “China chose pineapples for an out- lia’s “Freedom Wine” movement, which the island. right ban because they are, dollar-wise, began after Beijing moved to punitively The message from all of this was the largest agricultural export and pine- raise import duties on Australian wine clear: This was not just about fruit. apples are something of a proxy for exports. Beijing claimed that the ban was a Taiwan,” says Hsieh. He says that In addition, the Tsai administration normal precaution to protect biosecu- imposing a ban on pineapples makes announced that the government would rity and prevent the import of pests – a for easy headlines and attracts atten- spend NT$1 billion (US$35.9 million) statement that was disputed by Tai- tion, which is why China chose that on measures to minimize the impact wanese authorities. COA Minister Chen route. “China wanted everyone to see on farmers and launched the “Support Chi-chung told reporters that the claims it,” he says. Agriculture, Eat Pineapples to Sup- were untrue and that 99.79% of pine- By all appearances, Taiwan’s port Taiwan” campaign to mobilize apples exported since 2020 had passed pineapple export market seems too eco-

46 TAIWAN BUSINESS TOPICS • MAY 2021

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nomically insignificant to be used as a Beijing responded by raising tariffs on sible, regardless of U.S. backing, and political tool. According to the COA, and hampering imports of several Aus- adds that Taiwan is at a lower risk of Taiwan produces around 420,000 tons tralian goods, including barley, coal, hard-hitting economic sanctions from of pineapple annually, 10% of which it wine, beef, and lobster. China than are other economies. exports. Moreover, agriculture accounts In both the Australian and Tai- “There is a real possibility of an for less than 2% of Taiwan’s US$710 wanese cases, China restricted access to armed conflict as a result of hardline billion economy, which is dominated its markets through regulatory means policies with Taiwan,” says Lin, who is by the tech sector. But farmers are an by banning goods. Such moves reveal also an assistant professor of Chinese important constituency in Taiwanese Beijing’s preference to use economic foreign and security policy at Georgia politics, particularly in the Democratic pressure to deter countries from inter- Tech. “But there is no possibility that Progressive Party (DPP) stronghold of fering with the pursuit of its interests. this could happen between China and southern Taiwan. According to Chen, the implications Australia. China is willing to take more Chen Kuan-ting, CEO of Taiwan of these incidents should not be taken hardline measures against Australia NextGen Foundation, a think tank ded- lightly. to deter it and other countries from icated to policy research and public “In Australia it’s wine; in Taiwan challenging Beijing’s interests. That’s advocacy, says the incident is evidence it’s pineapples, but it could be other why we have seen China avoid put- of Beijing’s ability to affect Taiwanese products and markets too,” says Chen. ting all its pressure on Taiwan. It gives voters, the democratic process, and “What if it's plastics or gasoline? The both sides an opportunity to remain at industrial production by impacting the president can’t come out with the peace.” export market. industry and say, ‘Let’s buy more plas- “After we successfully expanded our tics.’ The international community Toward a diversified market market in China, a lot of fruit growers needs to be aware of this manipulation were proud of this achievement and of trade issues. It can happen to any Nevertheless, the pineapple ban has said Taiwan should not be affected by country that isn’t meeting China’s stan- sparked an important debate domesti- a political agenda [when dealing with dards. It’s the idea of using trade as a cally over the decoupling of Taiwan’s China],” says Chen. “So when the DPP tool to make sure small and medium- agricultural industry from China. Tai- has a dispute with China, some farmers sized countries comply with China – tung Enterprise’s Hsieh notes with protest and suggest that politics are that’s the real threat.” concern the volatility of Taiwan’s fruit harming their exports.” Dalton Lin, executive editor at the exports. Overdependence on one market – news aggregation website Taiwan Secu- “If cross-Strait relations continue to particularly when that market is China rity Research, says he was not surprised be stalemated, agricultural exports are – makes exports susceptible to political by China’s pineapple ban, particularly at high risk because China could easily pressure, as exemplified by Austra- considering the Biden administra- hinder such sales either through regu- lia’s export troubles last year. When tion’s recent signals of support for latory bans or quarantine obstacles,” Canberra barred Huawei equipment Taiwan and the DPP’s less conciliatory Hsieh says. “Because of its short shelf from being used in its 5G network and approach to cross-Strait relations. He life, fresh fruit is a sitting duck when called for an independent probe into says the move is a signal from China logistics cannot be assured.” the origins of the COVID-19 pandemic, that circumventing Beijing is impos- According to the COA’s public relations division, the Council is wary of possible future bans from China and is TAIWAN'S TOP TEN AGRICULTURAL EXPORT MARKETS working to minimize risks. “If China restricts imports, it may cause significant fluctuations in 14 domestic production and sales prices 13 12 and affect farmers' incomes,” the COA 11 said in written responses provided to

USD$100 m i l l i o10 n 9 Taiwan Busines TOPICS. “The Council 8 is taking relevant measures, including 7 developing emerging markets, encour- 6 5 aging domestic consumption, adjusting 4 breeding and planting areas, and pro- 3 2 viding counseling, to expand the 1 channels of value-added products.” 0 Taiwan produces several varieties Ch i n a J a p a n of pineapples for sale domestically but Vi e t n a m Th a i l a n d M a l a y s i a Au s t r a l i a Ho n g K o n g Re p u b l i c o f Un i t e d St a t e s for its exports to China, it mainly sells K o r e a Th e Ph i l i p p i n e s Golden Diamond pineapples. The price SOURCE: COUNCIL OF AGRICULTURE of the Golden Diamond has risen over

TAIWAN BUSINESS TOPICS • MAY 2021 47

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the years, providing lucrative opportunities for Taiwanese farmers. But to increase its exports to countries like Japan, Taiwan needs other varieties to compete. Previous attempts to diversify the market for Taiwan’s pineapple exports have had limited success. In 2016, the state-funded fruit export company Mit- agri Co., Ltd. was established to import and export agricultural products and technology, facilitate overseas investment, and diversify the agricultural market. Hsieh points out that despite this and other efforts, reliance on China for agricultural sales has increased since 2016. Meanwhile, shipments to Japan have hardly changed, although not without reason. President Tsai poses with a Taiwan-grown pineapple. China's import ban on the fruit in Tariffs alone obstruct Taiwan’s March forced the government to reexamine Taiwan's agricultural trade policies. potential for competing with Southeast PHOTO: OFFICE OF THE PRESIDENT Asian fruit exporters. The Philippines, Southeast Asia’s largest pineapple pro- “As some countries have not yet thiness of such increases. ducer, has a free trade agreement opened the importation of fresh pine- Taiwan Security Research’s Lin with Japan, while Taiwanese agricul- apples, the Council actively assists the points out that the government’s tural exporters pay a 15.7% tax on processing industry in the production of response to the pineapple crisis, the goods they ship to Japan. More- pineapple drinks, dried fruit, and other although effective, was ad hoc. Agri- over, Filipino pineapples are year- diversified products in order to expand cultural goods are not core to Taiwan’s round products, whereas Taiwan’s are pineapple exports,” says the COA. economic vitality, which affords Taipei exported mainly between March and Chyungly Lee, Research Fellow the flexibility to respond in such an August. To compete, Taiwanese farmers at the National Cheng Chi Universi- impromptu manner. But considering the need to shift their focus from quantity ty’s Institute of International Relations, risk of future bans by China, Li argues to quality by producing more exclusive says Taiwanese farmers should adopt that Taipei should produce clearer poli- products with a longer shelf life and a more business-oriented mindset to cies moving forward. brand differentiation. avoid relying on a single export market. Additionally, if the government can Apart from tariffs, Taiwan’s agri- To trade on the global market, she says, assure growers that it cares about them cultural sector also faces issues such as you need to be aware of the risks. outside election season, the political expensive regulations regarding Max- “I hope that in the future, export influence associated with banning agri- imum Residue Limits (MRLs), labeling, farmers will understand the meaning cultural products would be reduced and export standards that diverge from of trade barriers – not just tariffs – even further, allowing pineapples to be international norms. The consequences and upgrade their knowledge on trade “just” fruit. Diversifying the market of these policies were felt as a delivery issues,” says Lee. “If we really are a by creating more high-quality products of two tons of pineapples to Australia player in international trade, we need could solve the dual issue of how to scheduled for March this year was to understand the rules of the game.” decouple the market from China and at suspended due to the packaging not Most Taiwanese farmers, how- the same time protect the wellbeing of meeting Australian standards. ever, are micro, small, or medium- farmers. In response to this issue, COA says sized enterprises that lack easy access Chen of NextGen agrees that a that it is currently “strengthening pes- to information. Darson Chiu, Research change in agricultural export policies ticide residue inspection and quality Fellow at the Taiwan Institute of Eco- is well-needed. To sustain the recent control for the export supply side to nomic Research (TIER), says that increase in exports of pineapples to ensure the safety and quality of pineap- the government needs to ask itself if Japan and other markets outside of ples for export.” farmers can be expected to eschew China, Taipei needs more convincing The COA adds that it is also sup- short-term profits in favor of long- arguments than merely defiance of Bei- porting department stores and term political and economic goals. He jing’s whims. supermarkets in export target mar- adds that the government may review “We need to diversify the market,” kets to organize Taiwan Agricultural what measures can be taken to protect says Chen. “If we really value the idea Product Festivals and other sales-pro- farmers, the reasons behind increases in of free trade, we shouldn’t trade on motion activities. demand, and the stability and trustwor- goodwill.”

48 TAIWAN BUSINESS TOPICS • MAY 2021

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