BUSINESS SWEDEN

TAIWAN’S TURNING TIDE EXPLORING THE NEXT HORIZON FOR ASIA’S HIDDEN MANUFACTURING POWERHOUSE ’S TURNINGFORTSÄTT TIDE SURFA EXPLORING THE NEXT HORIZON FOR ASIA’S PÅHIDDEN TILLVÄXTVÅGEN MANUFACTURING POWERHOUSE MARKNADSINSIKT APRIL 2017

Layout/grafik:Layout/Graphics Business Sweden Communications Foto:Business Sid Sweden 1, www.istockphoto.com. Marcom & Digitalisation Sid 3, Anders Thessing, www.thessing.se Tryck:Photos Åtta45, 2017 Page 1, 5, 8, iStock by Getty Images

2 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE EXECUTIVE ­SUMMARY

Taiwan’s manufacturing competence and footprint is often underesti- mated. This island off the coast of China is where some of the world’s most high-tech goods are produced, and it is home to global OEMs and ODMs headquartered here. Taiwan is also a very important investor in both China and Southeast Asia. Given new realities on the ground in the APAC region – from trade barriers to shifting labour costs, digitalisation and increased demands on sustainability – Swedish suppliers have a new role to play in helping Tai- wanese manufacturers manage change. Sweden has more global manufacturing companies per capita than any other country in the world. These Swedish companies, and the sub-sup- VLAD MÅNSSON pliers that enabled them to thrive, are experts at providing innovative and Market Manager, Taiwan high-tech equipment, solutions and services where productivity and sus- tainability go hand in hand. The purpose of this report is to reflect on the impact of recent trade war developments on the APAC supply chain in relation to Taiwan’s man- ufacturing base in Asia. In addition, Business Sweden provides strategic recommendations for how Swedish companies can match their offering to the fast-changing needs of Taiwanese manufacturers.

The report provides analysis and insights into the following topics: 1. Taiwan’s key manufacturing sectors 2. Overview of Taiwan’s FDI and manufacturing output in China, South East Asia and India 3. The impact of trade wars and the Southbound Policy 4. Purchasing needs and trends among Taiwanese manufacturers in key sectors 5. Opportunities for Swedish companies and recommendations for approaching Taiwanese companies in Asia

2 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 3 TAIWAN: A HIDDEN ­POWERHOUSE IN ASIA’S SUPPLY CHAIN

Made in Taiwan was once among the most , Lite-On, Qisda, familiar product tags in the world. From the and Siliconware Precision Industries, as well as 1960s and onwards, this label would come to the computer brands Acer and . represent the island’s robust manufacturing Taiwan is ahead of other markets in terms of capacity and, by 1990, Taiwan had cemented state-of-the-art semiconductor technology. The its position as one of the four Asian Tiger IC foundry manufacturing sector accounts for economies. While other fast-growing Asian almost 70% of the global market share which economies went on to attract global attention, underpins Taiwan’s strong position in the semi- Taiwan has remained an influential player and conductor market. TSMC – the global leader in now has a GDP per capita that is among the top IC foundry – has more than 50% of global mar- 30 in the world. ket share and is an important manufacturing That said, despite an accelerating tech sec- partner for global brands such as Apple, AMD, tor, many of Taiwan’s recent achievements have , and Huawei.2 In 2019, the been hidden from view with much progress tak- company invested USD 1 billion to build the ing place behind the scenes – particularly in world’s first 5 nm semiconductor factory in the manufacturing arena. For example, only Taiwan. a minority of people are aware that Taiwan is For PCs and other , Taiwanese OEM home to more suppliers of components for the and OMD manufacturers have strong part- Apple iPhone than any other market or country. nerships with global ICT brands such as Dell, When it comes to the ICT scene, Taiwan HP, and Microsoft. But that’s not all. offers integrated supply chains and signifi- Tech giants including Facebook, Amazon and cant manufacturing capabilities for hardware. Google all source from Taiwanese suppliers for According to Thomson Reuters,1 13 of the top servers, power systems, industrial PCs for data 100 Global Technology Leaders are Taiwanese centres and smart warehouses. companies, which is the second highest ranking Moreover, Microsoft, AWS and Google have after the United States. announced plans to invest in AI and ­large- ­ scale data centres in Taiwan, as a way of lev- SEMICONDUCTORS: THE BEDROCK eraging the benefits of Taiwan’s highly skilled OF TAIWAN’S ICT SCENE talent base and integrated value chain in ICT The is the foundation manufacturing. of Taiwan’s ICT value chain where IC (Integrated Circuit) foundries require intensive capital investment. No fewer than 11 of the 13 companies featured in the Thomson Reuters ranking are in the semiconductor business including ASE, Nanya, TSMC, UMC, Powertech and the OEMs/OMDs ,

4 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE CASE STUDY

TAIWAN A KEY SUPPLIER FOR APPLE’S IPHONE

According to Apple’s list of the top 200 suppliers of 2019,3 Taiwanese manufacturers account for 46 of those companies. This is the highest share of all supplying countries surpassing China (41) and USA and Japan (38). Thanks to a broad spectrum of suppliers covering OEM manu­ facturing, semiconductors and other key ­components, Taiwan is closely tied to the Apple supply chain.

TAIWAN’S KEY SUPPLIERS FOR IPHONE, 2019

OEM , Pegatron,Quanta, MANUFACTURING Wistron, Compal, Inventec

SEMICONDUCTOR TSMC, ASE

CAMERA Largon Optronics, GSEO

Catcher, TPK, Yageo, Delta, COMPONENT Merry, Foxlink

4 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 5 A DIVERSE LANDSCAPE: Bicycles is yet another interesting ­segment. FROM FUNCTIONAL Accounting for over 50% of medium- and TEXTILES AND BICYCLES high-end bicycle manufacturing globally, Giant Manufactur- TO AUTOMOTIVE PARTS it is no coincidence that Taiwan is known ing, the famous as “the bicycle kingdom”. Millions of bikes bicycle brand, invested USD 17 Taiwan’s high-tech manufacturing capabilities are built every year either in Taiwan or in million in Taiwan cover a diverse landscape and functional textiles ­Taiwanese-­owned factories such as Giant to build a new is a good example. In this field, Taiwan has and Merida. automated­ produc­tion line in captured no less than 70% of the fast-expanding Automotive parts is undoubtedly an Taichung, Taiwan. global market which, in turn, accounts for 10% ­important sector for Taiwanese players. Here, of the total textiles market. globally competitive SMEs export parts to Although Taiwan did not have a team com- the big car manufacturers worldwide, offer- peting in the 2018 FIFA World Cup in Russia ing a broad portfolio and high flexibility in it was widely represented on the playing fields. their sales approach. Taiwan is also well-­ The uniforms worn by the athletes from the vast positioned in the global shift toward electric majority of the 32 participating nations were ­vehicles thanks to its robust ICT manufactur- made by Taiwanese companies, most notably ing ­capability. Some 20 Taiwanese companies for prominent international brands such as Nike are key suppliers of components for the Tesla and Adidas. ­Roadster model. Taiwan has also been a major supplier of fab- Taiwan’s competitiveness and importance rics made from recycled materials, mainly PET on the world stage is only expected to grow. bottles. About 50% of these materials are now By forging strong relationships with many recycled. This share is expected to increase to of the world’s most innovative and ­valuable 60–70% in the next few years as increased envi- brands, Taiwanese companies have staked ronmental awareness continues to drive interna- their claim as frontrunners in the field of tional demand. ­high-tech manufacturing.

6 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE CASE STUDY

HELPING TESLA BREAK GROUND IN E-MOBILITY

In the days when Tesla was virtually unknown in the , the company was struggling to break into the tightly knit automotive supply chain. Tesla then sent a team of engi­ neers to Taiwan to look for parts and components for its first commercial vehicle – the Tesla Roadster. As Azizi Tucker, CTO of XING Mobility and a former Tesla employee responsible for supply and development in Asia, has pointed out,4 Taiwanese auto parts suppliers are mainly small and medium sized family-owned companies. This facili­ tates a highly flexible supply chain. While China, Thailand and Japan all pride themselves on advanced automotive sectors, ­Taiwanese suppliers offer important advantages when it comes to ­engineering development, prototyping and production. Taiwanese companies are also well-positioned as key suppli­ ers for both electric and smart vehicles of the future. Again, this is due to Taiwan’s large and flexible auto parts supply chain and strengths in electronics manufacturing.

TAIWAN’S KEY SUPPLIERS FOR TESLA

Power System

Mechanical Motor parts

Screw & Touch Fastener Panel

Electronic Gear & parts Shaft

6 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 7 8 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE GROWING THE ­FOOTPRINT IN ASIA

TAIWAN IS AN IMPORTANT STRONG PRESENCE REGIONAL FDI INVESTOR THROUGHOUT ASIA

Asia is the most popular investment destination As a way of expanding to global markets and ECLAT is the for Taiwanese companies. Since 1952, there have lowering manufacturing costs, Taiwanese market leader in been approximately 50,000 investment cases and manufacturers have proactively penetrated most functional fabrics USD 238 billion of accumulated FDI flowing of Asia’s manufacturing sectors. Electronic parts with 1,800 employees in from Taiwan to other Asian countries. In terms and components, computers, optical products Taiwan and 16,200 of total investment volume, Taiwan’s FDI in and textiles are typical areas attracting FDI people overseas. Asia is 2.7 times more than the total investment from Taiwan. As much as 72% of Taiwan’s FDI The company focuses on vertical amount for all other regions combined. in Asia is destined for manufacturing. This integration of the After 1980, due to the significant appreci- is five times more than the capital flows into textile supply ation of the Taiwanese dollar, high produc- Asia’s finance and insurance industry, which is chain. ECLAT has tion costs and rising awareness of environmen- the second most important sector for Taiwan’s an R&D centre and a fabrics plant in tal protection, Taiwanese businessmen began FDI. In short, Taiwanese manufacturers have Tawain with a to invest abroad and mainly in Southeast Asia. established a firm presence and significant capacity of 8 Since 1990, Taiwan’s government has allowed production capacity throughout the Asia region. million yards per ­Taiwanese companies to invest in China. month. Two further plants are As a result, China has gradually become the located in Vietnam biggest overseas investment destination for and Cambodia. ­Taiwanese companies.5

8 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 9 FOOTPRINT OF TAIWANESE ­MANUFACTURERS IN ASIA

FDI >190 USD bn FDI 9–15 USD bn FDI <5 USD bn

Pegatron Inventec CHINA Giant FDI cases: 45,129 Compal FDI amount USD bn: 190.5 Quanta Taiwan companies Wistron hire around 2,600,000 Foxconn employees in China

Teco Asus INDIA Maxxis FDI cases: 95 Msi FDI amount USD bn: 0.7 Acer Foxconn Delta

Electronic Parts and Components Manufacturing Elite Computers, Electronic and Chinsan Electronic THAILAND Optical Products Manufacturing Lite-On FDI cases: 532 Delta FDI amount USD bn: 3.8 Kinpo Electronics Machinery and Equipment Manufacturing

Rubber Products Manufacturing

Benq Plastic Products MALAYSIA Manufacturing Well Region Group FDI cases: 424 FDI amount USD bn: 3.2 Electrical Equipment Manufacturing

Fabricated Metal Products Manufacturing

PTI Basic Metal Ase Group SINGAPORE Manufacturing UMC FDI cases: 621 TSMC FDI amount USD bn: 13.9 Textile

Manufacturing Not Elsewhere Classified

10 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE Ardentec SOUTH KOREA Fair Friend Group FDI cases: 231 Ase Group FDI amount USD bn: 1.6

Foxconn JAPAN UMC FDI cases: 801 SAS FDI amount USD bn: 9.2

Formosa Plastics VIETNAM Pou Chen Group FDI cases: 231 Far Eastern New Century FDI amount USD bn: 1.6 Compal VPIC Eclat

Acer PHILIPPINES New Kinpo Group FDI cases: 225 FDI amount USD bn: 2 Teco

Pou Chen Group INDONESIA Maxxis FDI cases: 299 Makalot Industrial FDI amount USD bn: 1.5 Nan Ya Plastic Transcolor

10 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 11 Most of our large ­procurement “decisions are taken in Taiwan. ­

CHINA companies and Taiwan’s government has China is by far Taiwan’s largest overseas identified Indonesia, Malaysia, the Philippines, investment destination. Taiwanese companies Thailand, Vietnam and India as prioritised have approximately 2.6 million employees in markets. Among all the South East Asian coun- China. Since 1991, Taiwan has invested USD tries, Singapore and Vietnam are the top two 190.5 billion in China with more than 45,000 countries in terms of total investment figures. investment cases. In 2011, Taiwan’s investment in Singapore is by far Taiwan’s largest trading China reached a peak, however, the FDI amount partner among the 18 New Southbound Pol- decreased from 2015 to 2018 at a CAGR of -6.51%. icy countries and stands to play a pivotal role as a This means that China has become an impor- gateway for Taiwanese enterprises into ASEAN tant production base for Taiwanese OEM/ODM and South Asian markets. The FDI amount is enterprises. Electronic parts, computers and opti- around USD 13.9 billion. The semiconductor-re- cal products are all key industries attracting lated corporations such as TSMC, ASE, and PTI investment from Taiwanese companies in China. are the main Taiwanese investors in Singapore. The top 5 Taiwanese electronic manufacturing Taiwanese companies have invested USD 10.4 giants Foxconn, Quanta, Pegatron, Inventec and billion in Vietnam since 1952. Here, textile and Compal produce 90% of laptops exported to the basic metals manufacturing are two important USA from China. industries attracting Taiwanese investments. ECLAT, FENC and VPIC Group are some of NORTH EAST ASIA the well-known companies investing in ­Vietnam. Taiwan has been actively investing in Japan since However, petrochemical companies, shoemak- 2009 with USD 8.2 billion and 801 investment ers and electronics manufacturers have also projects to date. Electronic parts and components built factories in Vietnam as demonstrated by manufacturing as well as machinery and equip- ­Formosa plastic group, Pou Chen ­Corporation ment manufacturing are two leading investment and Compal. 78% of Taiwanese companies invest areas. The acquisition of Japan’s Sharp by in Vietnam due to low labour costs while 60% Taiwan’s Foxconn is one of the most well-known are attracted by rising demand in Vietnam’s Delta is the investment cases. In 2018, UMC acquired all the ­domestic market. provider for total shares of Mie Semiconductor Limited. Thailand is another major destination for energy saving Taiwan and South Korea’s products are in a Taiwanese investments with an FDI level of solutions. Power electronics competitive situation. There are only 231 accu- USD 3.8 billion. Electronic parts and compo- accounts for 50% mulated investment cases resulting in USD 1.6 nents manufacturing as well as computers, elec- of revenue. It is billion from Taiwan to South Korea. Taiwan- tronics and optical products manufacturing 16% and 33% for automation ese enterprises are investing to a lesser degree in are key industries where Taiwanese companies product and South Korea which only accounts for 1% of Tai- invest. Delta and Taiwan Chinsan Electronic infrastructure wan’s total FDI. Industrial use Thailand as a production base products respec- and then export products worldwide. tively. Its produc- SOUTH EAST ASIA tion bases are in Taiwanese companies such as BENQ and Taiwan, China, The New Southbound Policy was launched Region Group went to Malaysia to invest and India, and Thai- in 2016 to strengthen Taiwan’s contacts with expand their production capacity. In Indonesia, land. In 2019, 70% countries in the surrounding region. South East rubber and plastics manufacturing are the two of its products are made in China. Asia is a key consumer market for Taiwanese main sectors attracting Taiwanese companies.

12 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE MAXXIS and KENDA both have factories in Taiwanese companies are also forming Indonesia that produce tires for motorcycles industrial clusters in India. In Delhi, for exam- and bicycles. ple, they are focused on telecommunications, In the Philippines, Taiwanese compa- market development, marketing and the ser- nies have invested USD 2 billion as a result of vice industries. The cluster in Mumbai is mainly 225 investment cases. These investments have engaged in telecommunications, trade, trans- increased markedly in recent years primar- portation and related services. Chennai and ily due to rising labour costs in China. Acer, Ahmedabad are focused primarily on manufac- TECO and Yulon all have a strong presence in turing fields such as shoes and tires. the Philippines. The electronics company Kinpo Taiwanese companies are undoubtedly Electronics Inc. has three factories in the Philip- expanding their presence in India. ASUS, MSI, pines and is a supplier to Dyson. ACER and Delta are already established in the market and Foxconn announced in 2019 that it INDIA would invest an extra USD 200 million in India. In the past, the comparatively low level of investments in India by Taiwanese businesses has hinged on significant cultural and language differences. However, India is now booming and, therefore, has become an investment hotspot for Taiwanese companies, particularly in manufacturing. In 2018, Taiwanese companies submitted applications for 21 investment projects in India. Total investments in that year accounted for more than 50% of Taiwan’s accumulated total foreign investment to India between 1952 and 2018.

12 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 13 DIVERSIFYING THE APAC SUPPLY CHAIN

RISK MITIGATION: TAIWANESE US-CHINA TRADE WAR SPEEDS COMPANIES IN ASIA STEP UP UP THE DIVERSIFYING PROCESS EFFORTS TO DIVERSIFY THE The US-China Trade war has resulted in the SUPPLY CHAIN imposition of an additional 10–25 % duty on In the wake of rising labour costs and a more products from China with an annual trade uncertain investment environment in China, value of approximately USD 550 billion. some Taiwanese companies have moved Electrical equipment, ICT products and ­production in recent years from China to semiconductors are the top segments where Taiwan, or to Southeast Asia, primarily in Taiwanese companies are most impacted. textile, machinery and computer electronics-­ As demonstrated by the 2017 list of the top related industries. 500 private companies in China by export

EXAMPLES OF TAIWANESE MANUFACTURERS’ RELOCATION OF PRODUCTION IN ASIA

Foxconn Delta Wistron Lite-On

Compal Foxconn Amtran

Quanta Computer Johnson Pegatron Giant Sercom Delta Adlink Wistron

Pegatron Textile Adlink Pou Chen Group

Machinery and Merry Equipment Primax Delta New Kinpo Group Computer, Electronics Chicony and Electrical Quanta Computer

14 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE value, no fewer than 10 Taiwanese companies TOP 20 EXPORTERS IN CHINA EXPORT, rank among the top 20 exporters. Their total USD BILLION export value is USD 17.8 billion from China, 28,9 which represents approximately 62% of the total export value from the top 20 exporters, all according to data released by the Ministry of Commerce of China. Others 11,1 As Taiwanese companies have been ­heavily engaged in Chinese foreign trade, Taiwan is among the economies most affected by the U.S.-China trade war. Bloomberg estimates the Inventec 0,8 trade impact to be 1.6% of Taiwan’s output of Wistron 0,9 Gross Value Added, which is tied up in China’s exports to the U.S. Pegatron 3,7 Computers, electronics, metals and chemi- 6 cals will suffer the highest impact. The trade Quanta 4,2 Taiwanese result of Taiwan and China’s exports to the U.S. companies­ 62% reflects the negative impact of the US-China 62% of total exports trade war. Taiwan’s export value to the U.S. has among top 20 grown in the 12 months since July 2018 with 16% Foxconn 8,3 ­private export- YoY. At the same time, a negative export trend ers in China for goods from Taiwan to China developed in are Taiwanese the 12 months following July 2018 with -5% YoY.7 ­companies Total

EXPORT VALUE TO THE UNITED STATES, BILLION USD YoY % (SUM 201809~201908 / SUM 201709-201808 -1) 55

50

45 -6.6% 40 China export to US

T ¥ $ T R R 35 A D A E ST WAR 9.3% 15 SEA export to US

10

5 17.5% TW export to the US 0

2017-092017-102017-112017-122018-012018-022018-032018-042018-052018-062018-072018-082018-092018-102018-112018-122019-012019-022019-032019-042019-052019-062019-072019-08

14 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 15 TAIWAN’S GOVERNMENT companies returning to Taiwan, it provides ENCOURAGES customised, one-stop-shop assistance related to MANUFACTURERS TO land purchasing, water and electricity supply, RESHORE OPERATIONS access to capital, simplified processes for recrui- ting migrant workers as well as taxation benefits. As a way of incentivising Taiwanese companies According to the Taiwanese government, abroad to repatriate operations to Taiwan, the more than 100 Taiwanese companies are com- government has been promoting the three-year mitted to bringing production back to Taiwan (2019–2021) programme “Action Plan for with total planned investments approaching Welcoming Overseas Taiwanese Businesses to USD 20 billion in 2019. More than 80 compa- Return to Invest in Taiwan”. nies have publicly announced reshoring plans The plan is addressed to Taiwanese compa- under the incentive programme, of which 56% nies competing in global supply chains with are computer and electronics suppliers and 15% high-value products and components. For are machinery and equipment manufacturers.

CONFIRMED NEW INVESTMENTS BY TAIWANESE­ COMPANIES MOVING BACK PRODUCTION­ TO TAIWAN, BY INDUSTRY SECTOR.­ THE INVESTMENTS TOTAL MORE THAN USD 20 BILLION.

6% 6% 4%

15% >20 Computer, Electronics, Electrical USD bn 56% Consumer Products Food, Wood, Paper, Textile 6% Machinery and Equipment Medical Device 7% Metal and Metal Products Chemicals and Non-Metallic products

16 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE The investments in reshoring are expected to drive companies to upgrade to automated and smart manufacturing and re-establish the indu- strial supply chain in Taiwan. This will provide a significant boost to Taiwan’s future industrial competitiveness and economic growth. For the more labour-intensive sectors, the Taiwan government has put forward the New Southbound Policy. Launched in 2016, the policy encourages Taiwanese companies to diversify their supply chains in SEA rather than relying heavily on operations in China. Taiwa- nese companies in textile machinery, dyeing pigments and dyeing machinery have announ- ced plans to move to Vietnam. Given Taiwan’s political challenges, limi- ted access to Free Trade Agreements will have a bearing on where companies decide to move next. Taiwan has fewer FTAs than other Asian countries and it is not part of the Comprehen- sive and Progressive Agreement for Trans-­Pacific Partnership, CPTPP, which is one of the most important FTAs in the region. The 11 member countries of CPTPP account for 13.6 percent of global GDP and 24% of Taiwan’s foreign trade. In order to reduce the burden of future tariffs, companies in sectors such as textiles, metals, bicycles, building materials, petroche- micals and rubber may consider establishing production in at least one of the CPTPP mem- ber countries. Textiles production in Vietnam is a typical example of this trend.

More companies are moving production “from China due to the US–China trade war. The high value added industries tend to come back to Taiwan while low value-add industries tend to go to South East Asia. Taiwan Ministry of Economic Affairs

16 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 17 HOW CAN SWEDISH ­COMPANIES ADAPT?

In a dynamic, global and constantly changing WHAT ARE THE NEW manufacturing landscape, setting up operations BUSINESS OPPORTUNITIES? closer to customers, decision-makers and other In 2019, Taiwanese companies have announced The Taiwanese ICT key stakeholders is more important than ever. the move of production of high-end and company Pega- As a first step, Swedish companies need to value-­­added products back to Taiwan at a total tron, one of the thoroughly assess how their business will be investment value of USD 19 billion. In other top 10 exporters in China and the impacted by ongoing shifts in the APAC supply words, a new horizon is opening up for Swedish second biggest chain and plan proactively. suppliers of factory machinery, equipment and EMS/ODM How can current business operations in Asia software. company in the world, is planning be sustained in the long term? What is the best In addition to the Taiwanese investments, to invest USD 500 course of action to safeguard continued growth several multinational companies have announ- million in Taiwan and strengthened presence in the region? These ced investments in new manufacturing plants to build a new R&D are questions that must be addressed in order to in Taiwan. In mid-2019, the US-based chip centre and expand output by setting arrive at tomorrow’s winning strategies. maker Inc., which supp- up new production lies dynamic random-access memory (DRAM) lines for high value chips, announced a major investment of USD products in IoT. SET THE COURSE, 2.1 billion. STAY IN THE GAME Besides offering machinery and equipment to these new Taiwanese plants, opportunities are In this transformational phase for APAC, emerging for industrial services providers. The Business Sweden’s analysis puts an overwhel- same is true of South- and South East Asia where ming emphasis on the first-mover advantage. some Taiwanese manufacturers plan to relocate Global manufacturers are already redrawing and set up new production plants for making less Foxconn is a the map and change is coming down the road. expensive and less high-value added products. leading technol- ogy solutions Working out your next steps – sooner rather provider with than later – is the best way to avoid losing SMART TECHNOLOGIES unique manufac- ground to competitors. FOR SMART FACTORIES turing capabilities. If you are a supplier to other manufacturers, Golden opportunities now await. As Taiwan’s Foxconn’s revenue comes from for example, what is the likelihood that your global manufacturing brands decide to reshore computers, customers will relocate manufacturing facilities or relocate, they are likely to upgrade plants and communication and headquarters? Where will they be tempted to machinery with state-of-the-art technologies and . With a go? Proactive thinking will not only sustain your and solutions that will boost competitiveness. worldwide market presence in Asia but also help you to uncover new Interestingly, the shifting business climate in share of 40%, it is opportunities and avenues for business growth. Asia is paving the way for a smart manufacturing the no.1 manufac- Reinforcing your presence closer to key manu- transition that, under any circumstances, will be turer of electron- ics worldwide. 75% facturing clients and supporting them through vital in the future. This is an important window of its electronics the process of change will be paramount. Iden- for Swedish equipment suppliers, automation assembly capacity tifying and mapping their needs and potential experts, device manufacturers and system inte- is based in China, relocation in the market will provide a solid basis grators. Moreover, Sweden’s advanced clean tech with around 1 million employees. for your company’s APAC strategy beyond 2020. solutions and know-how in sustainability will be

18 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE highly relevant for Taiwanese manufacturers. of practices need in Asia. New materials, waste Sweden has decades-long experience of lever- reduction, sustainable production methods and aging new technologies with a view to optimise lower energy consumption are all critical chal- AUO Electronics, industrial operations. Bringing connectivity, lenges. Digital tools and support functions to the Taiwanese ICT digitised processes, world class ICT solutions monitor sustainability performance will also be company and the and automation to Taiwan is an opportunity in high demand. fourth biggest TFT-LCD in the that shouldn’t be missed. world plans to TECH SAVVY TAIWANESE invest USD 1.3 THE SUSTAINABILITY EDGE COMPANIES ARE READY TO INVEST billion in Taiwan. Taiwanese manufacturers are facing increased Taiwanese tech companies are showing an AUO wants to demands on sustainability from more and more increasing willingness to invest in the future expand and customers. Reducing material waste and energy in order to strengthen their competitiveness in upgrade its current production line consumption are just two urgent issues that Asia. Manufacturers in Taiwan, which are often with automated Business Sweden has identified for Taiwan. considered to be tech savvy, are investing in and smart manu- In addition, sustainable production materials core technology and value-added services from facturing to produce high-end and tools for optimising overall efficiency will IoT providers in everything from smart home panels for automo- be in high demand. As such, Sweden’s tried and solutions to healthcare applications. tive and gaming tested solutions and technologies that enhance This presents another great opportunity for applications. sustainability can play a pivotal role in the next Swedish specialists who can help Taiwanese growth phase of Taiwanese manufacturers. manufacturers upgrade products and service Sweden’s early adoption of clean tech solu- offerings by supplying new materials, key com- tions provides a template for others to follow ponents, digital solutions and tools for that take and is perfectly aligned with the transformation efficiency to the next level.

KEY CONSIDERATIONS FOR SWEDISH COMPANIES

UNDERSTAND MAP SITUATION TAKE ACTION! IMPLICATIONS­

1. Where will the 1. How big is the new 1. Develop strategy and ­production move? ­opportunity and ­action plan including what’s the strategy meetings with the ­clients 2. How big is the to approach­ it? to probe needs, set ­investment? up local presence and 2. Where to set up the ­adaption of organization! 3. What’s the timeline to ­presence in order be build new production? close to the decision 2. Be aware of the timeline 4. What products and making? and act now! ­functions will be moved? 3. How to adapt your ­organization in order to fit the ­diversification and for after market support?

18 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 19 WHAT’S THE BEST WAY FORWARD? 4 Steps for leveraging opportunities­ in Taiwan:

APPROACH KEY RAMP UP DECISION MAKERS COLLABORATION AT TAIWAN BETWEEN APAC HEADQUARTERS MARKETS Taiwanese manufacturers are expanding Although most key procurement stake- and diversifying their global and Asian holders are based in Taiwan, it is worth manufacturing presence. However, most keeping in mind that local factories may be of them make the majority of their pur- end users. This gives Swedish companies a chasing decisions at their headquarters in good reason to strategically locate opera- Taiwan. This is also where major R&D tions in individual Asian markets, and to centres are located. As a Swedish supplier, maximise collaboration between internal While most you should consider setting up or reinforc- divisions. Managing sales leads, project “key procure- ing existing operations in Taiwan and delivery, logistics and aftermarket services ment stakehol- deploy local staff. Approach Taiwanese should be streamlined across APAC. ders are based customers either in procurement depart- in Taiwan, local ments for equipment or R&D centres for factories are core technology collaboration. TARGET MAJOR DEALS end-users. AND BE AWARE OF Our Taiwanese THE TIMELINE customers CONSIDER HIRING Keeping a close eye on how clients are have foot- CHINESE/TAIWANESE- shifting their manufacturing footprint in prints across SPEAKING STAFF Asia will be critical going forward. Swedish APAC. That’s There is a strong likelihood that key stake- companies need to assess the size and why we hire holders in the local APAC markets are timeline of large new investments, and the Taiwanese-­ Taiwanese. Hiring Chinese/Taiwanese business opportunities that arise from new speaking local (local dialect) speaking staff in Asia makes factory facilities and production lines. sales staff. good business sense. At the very least, this Mapping these movements will allow you Swedish avenue should be considered in order to to approach stakeholders and business equipment provide relevant service. opportunities at the ideal moment in time. manufacturer

BUSINESS OPPORTUNITIES FOR SWEDISH COMPANIES

Manufacturing Smart & Sustainable Solutions ­bundled High tech solutions,­ equipment & ­automated ­manufacturing with hardware to new materials­ and machinery ­manufacturing solutions ­create high-value key ­components solutions added products for high value ­products

20 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE CONCLUSION

Taiwanese manufacturers are entering a new accelerating R&D. Altogether, this new scenario phase of investment in the APAC region with a presents promising opportunities for Swedish view to safeguard competitiveness in the global suppliers of equipment and services in Taiwan. supply chain. They are boosting capacity and Now is also the opportune moment to engage in upgrading “smart manufacturing” capabilities. new research projects and collaborations. As a result, the Taiwanese value chain across Standing on the sidelines is not an option. Asia is set to become more diversified than ever. Swedish companies need to plan ahead and pre- Companies such as Delta, ASUS and Acer pare for shifting supply chains in APAC or else all have production facilities and operations risk being outrun by global competitors. This in more than one Asian country. The com- requires careful mapping of customer move- bined impact of the U.S.-China trade war ments and investments in the region and closer and ­government incentives to reshore man- relationships than ever with key stakeholders at ufacturing to Taiwan is prompting Taiwan- Taiwanese manufacturing companies. ese manufacturers to either 1) move opera- Machines and equipment, digital infrastruc- tions for high-value products back to Taiwan, ture and technology, intelligent devices and sus- or, 2) move manufacturing to South East Asia tainability solutions – all of these items are on for products where access to Free Trade Agree- the shopping list of Taiwanese manufactur- ments and affordable wages is critical for future ers. The prospects for Swedish suppliers offering competitiveness. any of these are bright, but only if they choose At the same time, Taiwanese manufactur- to breathe new life into their APAC strategies ers are expanding their global presence and without delay.

KEY TAKEAWAY FOR SWEDISH COMPANIES Standing on the sidelines is not an option. Swedish companies need to plan ahead and prepare for shifting supply chains in APAC or else risk being outrun by global competitors.

20 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE TAIWAN’S TURNING TIDE | 21 ABOUT BUSINESS SWEDEN APAC

Business Sweden’s purpose is to help Swedish companies grow global sales and international companies invest and expand in Sweden. Swedish companies can trust us to shorten time to market, find new revenue streams, and 4 7 minimise risks. 8 We offer strategic advice and hands-on sup- 5 port in more than 44 markets. Business Sweden 1 is owned by the Swedish Government and indu- 6 stry, a partnership that provides access to con- 3 tacts and networks at all levels. 10 Business Sweden has been present in APAC 14 for many decades with 15 local offices throug- 2 9 hout the region. Business Sweden has been active in Taiwan since 1991. Over the years we have built a strong and successful network of 11 local business leaders and decision makers in 12 order to promote Swedish competitiveness on the Taiwanese market. Let us help you grow 13 where the markets are growing.

15 OFFICES IN APAC

1 Dehli 6 11 Kuala Lumpur 2 Bangalore 7 Seoul 12 Singapore 3 Hong Kong 8 Tokyo 13 Jakarta 15 4 Beijing 9 Bangkok 14 Manila 5 10 Hanoi 15 Sydney

THE AUTHORS

COKA LIU CHAYAN CHANG SIN-YI SUN PHILIP LAURIZOHN Project Manager Consultant Consultant Associate Taiwan Taiwan Taiwan Taiwan

22 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE BUSINESS SWEDEN

FOOTNOTES: 1 Thomson Reuters, Top 100 Technology Leaders 2 Ministry of Economic Affairs 3 The Apple Suppliers List 2019 4 Taiwan News, Meet Azizi Tucker, Oct 10, 2017 5 Taiwan MOEA Investment Commission 6 A $600 Billion Bill: Counting the Global Cost of the U.S.-China Trade War, Bloomberg, May 28, 2019 22 | BUSINESS SWEDEN | TAIWAN’S TURNING TIDE 7 Foreign Trade – U.S. Trade with Taiwan and China, Census Bureau, U.S. Department of CommerceTAIWAN’S TURNING TIDE | 23 T +88622757 6573 [email protected] www.business-sweden.com/taiwan Rm. 2406,International Trade Building,333.,Keelung Road, Sec.1,Taipei 11012,Taiwan BUSINESS SWEDEN TAIPEI international companies invest and expand in Sweden. and sales global grow companies Swedish We help

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