TAIPEI


 

 

 

 

QUICK FACTS:

Taiwan's wealthiest people, who built their fortunes on property, plastics and mobile-phone parts, have become richer this year on prospects of more trade with China, the magazine Forbes Asia has said. Tsai Hong-tu, 55, and his family are Taiwan's wealthiest people with a net worth of $8.5 billion US  - 2008 June


 

Taiwan, China to negotiate signing trade pact

Taiwan and China are expected to begin formal talks on signing a wide-ranging trade agreement by next spring or earlier after Beijing publicly sanctioned the negotiations, officials said yesterday.

Liu Teh-hsiun, a vice-chairman of Taiwan's Cabinet-level Mainland Affairs Council, said Beijing's 'positive attitude' could help smooth discussions for the trade pact, which would deepen economic ties between the two countries.

On Sunday, China's Taiwan Affairs Office chief Wang Yi said the two sides could begin talks on the trade pact, known as the Economic Cooperation Framework Agreement, during a new round of bilateral talks later this year.

China is 'willing to take into full consideration Taiwan's reasonable needs', and both sides should carefully assess the possible impact on certain industries to maximise benefits and minimise costs, he told a business conference in the western Chinese city of Chengdu.

A report by Taiwan's Economics Ministry says the island's economic growth rate could eventually increase by 1.6 percentage points under the framework agreement, adding 260,000 jobs in the industrial and service sectors.

A separate report by the Labour Council says in the first year or two, Taiwan could lose 80,000 jobs in labour-intensive sectors such as towels and toys but add 100,000 jobs in chemicals, plastics, textiles and machinery.

Taiwan and China have already started informal talks on the trade pact, and Taiwan wants to sign the agreement next spring. This was the first time a senior Chinese official has proposed a timeframe for it. The two sides split amid civil war in 1949.

Taiwan and China have scheduled their next round of high-level talks in Taichung, Taiwan's third largest city, for the middle or end of December.

The trade agreement would permit the free flow of many goods, services and capital between Taiwan and China. It would allow the island to keep its competitive standing in the region as Beijing is set to allow tariff-free imports from South-east Asian countries as soon as next January.

Taiwan has said the pact will not include agricultural goods and will not allow the import of Chinese labourers.

Since China-friendly Taiwanese President Ma Ying-took took office 17 month ago, the two sides have signed a number of agreements, including financial cooperation and launching direct air and shipping links.

During informal talks on the trade pact, each side has proposed a list of goods to be granted tariff-free status in the initial stage, said Huang Hsien-lin, an official with Taiwan's Economics Ministry.

The framework agreement will proceed gradually and may take 10 years to complete in order to give struggling industries time to adapt, he noted.

'We hope the trade pact will benefit both sides, so we can together gain a greater share of the global market,' the official added. -- 2009 October 27      AP

Taiwan opens door to China investments
Taiwan has opened its doors to investment by mainland Chinese companies in 100 sectors, from retail to restaurants to manufacturing of cars and personal computers, a major step forward for improved ties between the longtime rivals.

Chinese businesses have been lining up to expand in Taiwan since a month ago, when Taipei introduced regulations that will bring the first Chinese investment allowed on the island in 60 years. Taiwan began accepting applications for investment today.

The opening is part of an effort by Taiwanese President Ma Ying-jeou, who took office in May last year promising to look for common ground with China. His government announced the planned investment opening in July.

Chinese investment is still excluded from Taiwan's most economically vital industries, the manufacturing of semiconductors and LCD displays, and those sensitive to national security, such as telecommunications. But the opening trend could help reshape the island's economy and increase integration with the mainland.

The government is also hoping that improved relations with China will attract investors from other nations, who have largely focused on the mainland market.

"We hope the policy would attract Chinese investors and eventually foreign investors," said John Deng, vice-minister of the Ministry of Economic Affairs, at a news conference announcing the opening.

For years, investment across the Taiwan Strait has been one-way. Taiwan estimates the island's companies have poured more than $US77 billion ($95.4bn) into China since the early 1990s, and the real number could be two to three times that amount, including unregistered investments.

But Taiwan has long barred mainland companies from investing on the island, a legacy of the civil war that divided the two sides in 1949, and of fear that China could use its economic heft to dominate Taiwan.

Since President Ma took office, and as Taiwan's export-heavy economy has struggled with the effects of the global recession, Taipei and Beijing have held a series of high-profile meetings to expand economic ties and transportation, including the first regular commercial air traffic and shipping links.

Taiwan seeks to sign a trade agreement with China slashing remaining tariffs and other trade barriers by the end of this year.

The result of these efforts has been a steady stream of tourists and, more recently, the first visits by groups of Chinese executives seeking investment opportunities.

Impediments remain. The first major Chinese investment deal, an April agreement by China’s state-owned wireless carrier, China Mobile, to pay about $US527 million for 12 per cent of Taiwan's Far EasTone Telecommunications, has yet to be approved by Taipei, and is unlikely to pass. Telecom services are conspicuously absent from the sectors now officially open for investment.

For investors in newly opened sectors, the application process could be difficult. The Ministry of Economic Affairs will hold a cross-agency review of applications monthly, and applications might be rejected when advanced technologies are involved.

Many people in Taiwan fear China could use its economic might to influence the island politically. The opposition Democratic Progressive Party said it will to push for a referendum on the trade deal with the mainland. "Taiwan is losing its economic autonomy and is likely to become another Hong Kong," said Chiu Tai-san, a former legislator with the Democratic Progressive Party and previous vice-chairman of the Mainland Affairs Council, which overseas Taiwan's China policy. Hong Kong, a former British colony, reverted to Chinese rule in 1997 and has increasingly found prosperity as a service and logistics center for the Chinese economy.

But foreign businesses - whose investment in Taiwan has been declining in recent years - are welcoming the trend. Normalisation "is upgrading Taiwan's economic strategic position", says Jerry Fong, an official with the European Chamber of Commerce Taipei.

One focal point of Chinese investment has been the Taipei 101 office tower, which, when it opened five years ago, was the world's tallest building. Built to be an icon of Taiwan's progress, the 509m jade-colour tower was largely a white elephant, with almost half of its office space empty. Now representatives from major Chinese companies such as Lenovo, Sinosteel and Tiens Group occupy the high-profile address. The building is now 80 per cent occupied.

Anticipation of more Chinese renters has helped lift average rental rates in the area around Taipei 101 by 5-10 per cent, says King Chiao, president of Hsin-Yuan Business Rehouse, a Taipei office brokerage.

The tower's shopping areas are now busy with shoppers from across mainland China. In the first six months of this year, the number of visitors to Taipei 101's observation deck rose 30 per cent from a year earlier, almost all because of Chinese tourists, says Michael Liu, a spokesman for the building.

Beijing has been eager to use its economic clout to woo the island's population. China claims Taiwan as part of its rightful territory and aims to eventually bring it under Chinese control. Chinese President Hu Jintao has publicly encouraged Chinese enterprises to invest in Taiwan.

Beijing has sent a series of business delegations to the island in the past month, signing deals with a nominal value of $US68bn - although it's unclear how much of that will be realised. Prominent Chinese restaurant chains, including Quanjude and Guobuli, have been gearing up to open Taiwan branches, according to the companies. Mainland restaurant chains have the green light to apply to invest in Taiwan.

Some other changes are under way. The number of Chinese tourists surpassed 300,000 in the first four months of this year, compared to 320,000 for the whole of 2008, According to Taiwan's Tourism Bureau. The influx has been helpful at a time when Taiwan's economy, battered by weak demand for its hi-tech exports, has posted contractions for two consecutive quarters.

The prospect of more Chinese investment and signs of improvement in the global economy have driven Taiwan's benchmark stock index up 40 per cent so far this year. Shares in hotel companies like Formosa International Hotels, a five-star chain, have led the rally.

Economists say that substantial economic benefits might take a while to show, but over the longer term the impact on Taiwan could be significant. “The structure (of) investment spending will change from being highly geared to the volatile export sector to investment in the domestic sector," said Sharmila Whelan, an economist at CLSA Asia-Pacific Markets.  
- 2009 July 1    WALL ST. JOURNAL

Prime office rents in Taipei may dip 5-10% in '09

Prime office rentals in Taiwan's capital Taipei could fall 5-10 per cent this year and the value of real estate across the island will likely shrink further due to a sluggish economy, property services company DTZ said yesterday.

Cloudy outlook: The value of real estate across Taiwan is expected to shrink further due to a sluggish economy

Listed companies that purchased land in Taipei after the third quarter of 2008 could also suffer a loss of about 20 per cent in the value of the real estate after Taiwan adopted new accounting rules on Jan 1.

'Things are looking very cloudy for the real estate sector right now, and the industry will have to decide whether or not they want to push prices down further,' said Billy Yen, general manager of DTZ's Taiwan unit. Office rentals in prime Taipei areas fell 2.26 per cent in the fourth quarter from the previous three months, logging the first decline since late 2004, as the global financial crisis sapped demand for high-end real estate.

An expected increase in the supply of office space and weakened demand could push rents down even further this year, Mr Yen said.

DTZ figures showed that the value of foreign investors' real estate investments fell to NT$19.9 billion (S$889.5 million) last year from NT$44.5 billion in 2007, and the company was 'even more conservative' on the sector's outlook for this year. -   2009 January 7     REUTERS

Taiwan's economy shrank during the third quarter by 1.02% from a year earlier as the global crisis hit the export-dependent economy.

The island, a leading producer of electronics products, has had two months of falling exports, helping send its stock market down 40% over the past six months.

The GDP contraction is the biggest in seven years, and the first since 2003 when the outbreak of the SARS virus battered economies in the region.

[Weakening Outlook charts]

In Taiwan, the government said this week it would give each of Taiwan's 23 million residents a US$120 shopping voucher, as part of an economic-stimulus program that also includes infrastructure spending announced in September. The voucher is intended to make sure consumers spend the money rather than save it.

However, Shu Wang, professor of economics at the National Chengchi University, said the downturn reflects Taiwan's overreliance on exports. "It is almost not possible for the government to rescue it," he said.

Taiwan's government says growth will be 2.12% next year but most bank economists have lowered forecasts to 1% or minus 1%.

Betty Tsai, a human-resource clerk at a security-guard company, says many recent job applicants came from the tourism and technology industries. "About half of the applicants for our company's open positions state that they were either laid off or lost jobs for company closures," she said.

On Tuesday, Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker by revenue and one of Taiwan's bellwether companies, imposed a hiring freeze. More than 7,000 companies and 3,000 factories have closed this year, according to government statistics.

President Ma Ying-jeou took office this year on a platform of improving the economy through better relations with China, including closer trade ties and increased tourism. But only a fraction of the expected 3,000 Chinese tourists a day have arrived since tourism limits were eased in July.

Correction & Amplification

Taiwan's decline in gross domestic product in the most recent quarter was its first such contraction since 2003. Earlier versions of this article incorrectly stated that the latest contraction was the first since 2001. In addition, Taiwan's government has forecast 2.12% economic growth for 2009, not 5% as reported in some editions.   - 2008 November 21   WALL ST JOURNAL

Taiwan removes foreign ownership restrictions
The announcement signals a departure from a decade of closed-door policy. Regulators hope this will attract foreign investments and listings in Taiwan

Taiwan’s Financial Supervisory Commission has removed all restrictions on foreign ownership of Taiwan securities.

The move, which took effect on October 14, is a significant departure from the protectionist policies that have eschewed foreign M&A buyers since the original enactment was brought into force in March 1996.

The FSC says it wants to encourage overseas companies to list in Taiwan, and most importantly, to attract foreign individuals and mainland Chinese to invest in its securities market.

The FSC has yet to clarify how the lifting of ownership restrictions specifically affects funds under the Qualified Domestic Institutional Investor (QDII) programme.

Despite the general difficulty of securing financing this year, there has also been much noted interest among investors who want to tap into Taiwan’s infrastructure renewal story. The administration is expected to follow the UK’s model for private investments. (Editor's note: See the upcoming November issue of AsianInvestor for further analysis.]

The announcement is in line with Taiwan president Ma Ying-jeou’s vision of turning the island’s domestically focused financial sector into a world-class financial services hub on a par with regional competitors, such as Hong Kong and Singapore.

The promise of world-class market infrastructure is intended to divert Taiwanese overseas investments back to the island. In the past, the regulator and the central bank have lamented the fact that the Taiwanese have put too much money outside of their home market. It has often been claimed that these institutions have enacted policies and interfered with the foreign exchange markets to discourage external money flows.

Domestic pension funds, insurers and banking groups have expressed relief in the lifting of the restrictive policies that have been in place for the past decade.

It is interesting to note that the regulator’s reluctance to jump on new financial bandwagons – be it to liberalise markets or sanction innovative financial products – has probably protected Taiwan from some of the external shocks caused by global financial market turmoil. However, the timing of the current deregulation, coming at the height of the current credit crisis, has raised questions among some sections of the Taiwanese public
- 2008 October 15   FINANCE ASIA 

Taipei housing market confidence dips
Rising prices push figure down to lowest in 4 years

Taipei housing market confidence dropped to its lowest in almost four years because of rising prices, a Taiwan government-sponsored survey showed.

The housing confidence index for Taiwan's capital fell to 97.55 in the second quarter, slipping below 100 for the first time since the third quarter of 2003, the Institute for Physical Planning & Information wrote in a report. A score lower than 100 means most respondents view conditions as poor.

Residential property in Taipei cost an average NT$316,000 (S$14,331) per ping in the second quarter, an increase of NT$54,000 per ping from a year earlier, the report said. Each ping equals 3.3 square metres.

People paid an average NT$9 million for a home in Taipei in the second quarter, down from NT$9.3 million a year earlier, according to the report posted on the institute website. The survey polled 1,233 people who had already bought a house, 895 people who were looking to buy, and 744 people looking to rent.

Taiwan's Council for Economic Planning and Development, which sponsored the survey, decided to cancel its press briefing on the release because it indicated a slowdown in the island's property market, the Economic Daily News reported yesterday.

Taiwan's central bank on Sept 20 raised its discount rate on 10-day loans by an eighth of a percentage point to 3.25 per cent, compared with the 4.75 per cent benchmark interest rate in the US.

That resulted in an exodus of money as individuals and companies invest in higher-yielding assets abroad.

Taiwan residents invested a net US$17.2 billion in overseas securities in the second quarter, the biggest quarterly net outflow on record, the island's central bank said in August. --  2007 September 25   Bloomberg


Taiwan property prices rose 11 percent last year amid lower capital gains taxes on land sales and low interest rates, Sinyi Realty, Taiwan's largest realtor, said in a January report.  - INTERNATIONAL HERALD TRIBUNE     29 June 2005

Why Taiwan Matters

Want to find the hidden center of the global economy? Take a drive along Taiwan's Sun Yat-sen Freeway. This stretch of road is how you reach the companies that connect the vast marketplaces and digital powerhouses of the U.S. with the enormous manufacturing centers of China.

The Sun Yat-sen is as bland as any U.S. interstate, but it's the highway of globalization. Though it snakes along the whole west coast of Taiwan, the key 70-km stretch starts in Taipei's booming new Neihu district of high-tech office buildings and ends in Hsinchu, home to two of Taiwan's best universities, its top research center, and a world-renowned science park. Along the way, the Sun Yat-sen leads to some of the most important but anonymous tech outfits in the world: Asustek Computer, whose China factories spit out iPods and Mini Macs for Apple ; and Quanta Computer, the No. 1 global maker of notebook PCs and a key supplier to Dell and Hewlett-Packard. You'll also find Taiwan Semiconductor Manufacturing Co., the biggest chip foundry on the planet, an essential partner to U.S. companies such as Qualcomm and Nvidia. Dozens more companies dot the Neihu-Hsinchu corridor. There's AU Optronics, a big supplier of liquid-crystal display panels, and Hon Hai Precision Industry, which makes everything from PC components to Sony's PlayStation 2, and which is a fast-rising rival to Flextronics International, the world's biggest contract manufacturer. Taken together, the revenues of Taiwan's 25 key tech companies should hit $122 billion this year.

Taiwan's success is also China's. No one knows for sure how much of China's exports in information and communications hardware are made in Taiwanese-owned factories, but the estimates run from 40% to 80%. As many as 1 million Taiwanese live and work on the mainland. "All the manufacturing capacity in China is overlaid with the management and marketing expertise of the Taiwanese, along with all their contacts in the world," observes Russell Craig, of tech consultants Vericors Inc.

CROSS-STRAIT DRAMA 
Impressive stuff. Yet for many people around the world, Taiwan evokes only one thing: the standoff between the People's Republic of China, which considers the thriving democracy as just one of its provinces, and Taiwan President Chen Shui-bian, who has made little secret of his dream of one day declaring Taiwan independent. This cross-strait drama is now in a tense new phase, played out with dramatic effect in recent weeks. First Beijing passed an anti-secession law authorizing an attack on Taiwan in case it moves towards independence. Taiwan responded with a massive anti-Beijing rally. Then came the shocker: The late April visit to the mainland by Lien Chan, Chen's chief political opponent and chairman of Taiwan's Kuomintang (KMT). As millions of Taiwanese and Chinese watched on television, Chinese President Hu Jintao shook hands with the opposition leader at a lavish state reception in Beijing. After Lien returned to Taipei on May 3, Hu's government sweetened its PR offensive with more goodies, including a plan to ease restrictions on Chinese travel to Taiwan, lift tariffs on some Taiwanese agricultural imports -- and send two giant pandas to the Taipei Zoo. To add even more surprise, Taiwanese President Chen, despite some of his supporters' fury at Lien's visit, inserted himself into the dialogue. Chen agreed to send a message to Chinese President Hu through another opposition leader, James Soong of the People First Party, who was scheduled to start a China trip on May 5. Hu seems to be counting on his contacts with the opposition to increase pressure on Chen, forcing him to accept that the island is part of China. But that's a concession Chen's unlikely to make.

Real reconciliation thus seems a long way off. Yet any serious attempt to lower the tension would hold huge promise for the executives who run America's IT industry, which depends on Taiwan for so much of its goods. A shooting war between Taiwan and China would be catastrophic in human terms. And for the Western companies that have built their fortunes around Taiwan, the damage would be a direct hit to the global economy and the Digital Age. "It would be the equivalent of a nuclear bomb going off," says a top executive at a U.S. high-tech giant. Couldn't U.S. industry develop sources of IT supply that don't involve the Taiwanese? "That's like asking, 'What's the second source for Mideast oil?' says this exec. "You might find it, but it's going to cost you." Insiders estimate that it would take a year and a half to even begin to replace the vast web of design shops and mainland factories the Taiwanese have built. "The IT model is not one built on second-sourcing," says Ken Wirt, a top executive for the handheld business of palmOne Inc.

Not that Taiwan and China aren't also extremely pragmatic. Throughout this turbulent spring Taiwan Inc. hasn't missed a step. For instance, Acer Inc., the PC maker, increased sales by 40% in March; its models are among the top five sellers in the world. Dell and Hewlett-Packard will source $10 billion and $21 billion respectively from Taiwan this year, estimates Chicago-based consulting firm THT Research, which tracks contract manufacturing. Apple is boosting its order book from Taiwan companies by 28% from a year ago, to $5 billion. Quanta on Apr. 8 announced a partnership with the Massachusetts Institute of Technology to cooperate on research into the next generation of computing. Despite a cyclical downturn that has hurt profits, TSMC has embarked on a $2.6 billion ramp-up to produce more custom-designed chips than ever. Compared with a more specialized chipmaker such as Intel, "we have maybe 100 times the number of product lines," says TSMC chairman and CEO, Morris Chang. "It takes a very special expertise."

China may threaten Taiwan as No. 1 IT supplier. But for now it's Taiwanese engineers who provide ever-more-ingenious solutions to manufacturing and design conundrums. "In Taiwan, people say the U.S. understanding of outsourcing is backward," says Victor Zue, co-director of the Computer Science & Artificial Intelligence Laboratory at MIT. "It feels more like the Taiwanese are outsourcing marketing and branding to the rest of the world."

The island's high-tech industry has had to improve its skills sharply to get where it is today. Barely a decade ago, Taiwan made components or assembled machines designed elsewhere, and was only a marginal player in more lucrative segments of the electronics industry. Today its companies are increasingly proficient at original design, and dominate manufacturing in key categories. In LCD screens the Taiwanese have passed the Japanese and rival the Koreans. Taiwan is tops in routers, notebook computers, and cable modems. The PC industry "has really consolidated around Taiwan," says John A. Antone, Hong Kong-based head of the Asia Pacific region for Intel Corp., which has 400 engineers at work on the island. "That's just where the best engineering is done."

How does Taiwan do it? Lower pay helps. "You look at the engineering costs in the U.S. and compare them to Taiwan's, and we are talking about one third of the cost," says Kai Hsiao, director of global procurement for greater China at HP. Visit Taiwan-owned factories on the mainland, and you will find that assembly line wages average $120 a month.

But Taiwan's advantage goes way beyond cheap labor. The island combines an entrepreneurial culture with effective government involvement. The Hsinchu-based Industrial Technology Research Institute is a collection of labs that works closely with local companies. It has 4,300 engineers striving to match the best that the West, Japan, and Korea can offer in fields such as microelectronics and optoelectronics. The government-backed Institute has alliances with scientists from MIT, the University of California at Berkeley, and Carnegie Mellon University in the U.S. Companies such as TSMC and cross-town rival United Microelectronics Corp. have their origins in ITRI technology.

The result is one of the deepest reserves of high-tech talent in the world. It starts with figures such as Chang, who was present at the creation of Taiwanese tech. Walk into Fab 12, TSMC's multibillion-dollar facility in Hsinchu, and off to your left you'll see a giant portrait of the chairman sitting, pipe in hand, in an armchair. Surrounding him are scenes from his life -- as a child in Hong Kong, as a student at Harvard, and as TSMC chief at the company's debut on the New York Stock Exchange. But the silver-haired Chang, 73, isn't done yet. He's still working hard to beat rivals UMC in Taiwan and Semiconductor Manufacturing International Corp. (SMIC) in Shanghai. He's also pushing Taiwan's politicians to build up the island's schooling. "I wish we had a world-class university," he says.

Chang and other tech leaders blend Western values -- Chang took liberal-arts classes at Harvard before studying mechanical engineering at MIT -- with Asian culture. One minute Jonney Shih, Asustek's 52-year-old founder, will be discussing Six Sigma best practices and the next minute he'll be evoking the Changshan snake described in Sun Tzu's Art of War. When attacked at one end, the serpent counterattacks with the other. "We need that kind of fast reaction," says Shih.

The quick reflexes of Taiwanese like Shih make all the difference. Unlike Korea, where Samsung Electronics Co. and LG Electronics Inc. dominate, Taiwan is composed of smaller and nimbler outfits. When Taiwanese companies get too large, they tend to spin off businesses and refocus. Hence, in 2001 computer maker Acer Inc. begat consumer electronics company BenQ and LCD panel maker AU Optronics. The Hsinchu-based chip design houses spun off from UMC include MediaTek and Novatek, a designer of chips for LCDs.

Some of Taiwan's most important tech companies have also grown by acquiring technology from elsewhere. Chi Mei Optoelectronics Corp. (CMO) licensed LCD technology from Fujitsu Ltd. and hired top engineers to come up with the rest of the expertise it needed to become a leading LCD producer.

All these businesses excel at serving corporate customers. Eighteen months ago, after Intel had made a big bet on Centrino, the wireless Internet system for notebook PCs, the American company sought out a partner that could quickly get Centrino computers to the market. So Intel teamed up with engineers at Acer. Within three months, says Acer CEO J.T. Wang, they not only came up with a high-end Centrino notebook sold under the Acer brand but also mid-tier and even entry-level PCs using Intel's new technology.

Taiwanese companies will do just about anything to please customers. When Quanta was first working on what promised to be a hot new design for a top client, it had to work in total secrecy. Quanta executives guaranteed the U.S. customer that all work would be done in the middle of the night. They even had the assembly line draped in concealing black. Other Taiwanese companies combine discretion with an ability to handle even the smallest orders. HP's Hsiao says he places orders for as few as 10 PCs of a specialized configuration. The Taiwanese can process and ship such an order in 48 hours. "They can change direction overnight," says Hsiao.

This do-whatever-it-takes ethos has led Taiwan's businesses to move to the mainland at astonishing speed. "In 1999 we had about 300 employees" in China, says Alexander Lee, head of operations for Asustek in Suzhou, China. "Now we have more than 45,000." Issues of loyalty don't enter the equation. Acer CEO Wang recently asked his own Taiwanese suppliers if, as good citizens, they'd keep some production in Taiwan. "Their answer was: 'No way,"' he says.

The Taiwanese also play a vital role for rivals on the mainland. Liu Chuanzhi, chairman of Beijing computer company Lenovo Group Ltd., which just completed its purchase of IBM's PC division, says Lenovo sources components from Taiwanese companies. According to THT Research, Lenovo even buys notebooks from Quanta, Compal, and MiTAC. Liu says that's not the case.

Most important of all, the Taiwanese are the real developers of China's semiconductor industry. Chinese companies such as SMIC depend on squads of Taiwanese executives for knowhow. TSMC is still far ahead but it is starting to focus on China, too. The Taipei government has allowed TSMC to invest $900 million for its own plant in China.

In effect, Taiwan is hoping to control design and innovation while giving over much of its manufacturing to China. When U.S. companies come to Taiwan today, they say, "'This is what we want. Do you have it?"' says Billy Ho, president of MiTAC, which makes smart phones, PDAs, and servers.

Increasingly, the Taiwanese do. Two years ago, MiTAC decided to upgrade the PDAs it sells under its own brand name as well as under several different names in Europe. In discussions with the sales team, Ho recalled how, when he lived near Birmingham, England, he would get baffled by the layout of the city streets. A PDA with GPS, the satellite-controlled global positioning system often found in cars, was the answer. Today, MiTAC is No. 3 globally in PDAs, behind only Dell and HP.

The Taiwanese know they're good at such innovations. But they also know they are being squeezed on price even while they are under relentless pressure to be more creative. "Margins have come screaming out of the PC business because products have become very commoditized," says Michael Marks, CEO of Flextronics Corp. Net margins at Asustek have fallen to 6.4%, from 19% in 2001. The company's 2004 net profit of $484 million was 7% lower than what it was in 2001, although sales nearly tripled in the same period to $8 billion. Both Quanta and Compal have suffered from falling profit margins too, despite fast-rising sales.

Some analysts also wonder how long the Taiwanese will have the edge in chips. "I don't think Taiwan is in the driver's seat anymore," says James C. Mulvenon, co-author of a 2004 Rand Corporation study on Taiwan's and China's chip industries, which concludes that European and Japanese chipmakers will provide China with technology the Taiwanese refuse to share.


One way out is to find new markets. "We have to get into the next wave of products," says Ray Chen, president of Compal. "It can be TVs, cell phones, home digital media centers. We don't know yet." To do that better, Compal plans to double its R&D team. Quanta's beefing up too. In its $20 million partnership with MIT, Quanta is looking at using artificial intelligence to link digital devices that have different operating systems. Quanta boss Barry Lam also identifies autos as a promising area. As control and display systems in cars go digital, the Taiwanese can apply their expertise in making complex components for small spaces.

The other way to stay ahead for Taiwan is to create its own brands and maintain solid margins by delivering better performance and design. A leader in the branding effort is BenQ, which has its own brand of thin-screen TVs and MP3 players. Since its launch in 2001, BenQ has stressed in-house design to make its branded products stand out. Manfred Wang, who runs the BenQ design center, leads a team of 70 designers who have, among other things, come up with a PC monitor whose base can be folded up against it, taking up much less space in shipping. "Our designers are aware of the manufacturing process and that's a big advantage," says Wang, who learned his skills in Germany and once worked at Porsche.

At the heart of Taiwan's effort to reinvent itself is the government research institute, ITRI. It's into everything from new wireless networks to nanotubes that provide backlighting for displays. It's also trying to mix the hard sciences with something softer. Enter Room 131 of Block 53 on the main campus, and you'll find the Creativity Lab. The place looks more like an advertising agency than a high-tech center, with its stuffed animals and a comfy couch for a staff that includes artists, psychologists, and an anthropologist, in addition to engineers. The idea is that getting techies together with liberal arts types will help designers think more broadly, says Wen-Jean Hsueh, a PhD in mechanical engineering from California Institute of Technology who is the lab's head. "We know we have strong manufacturing and engineering," she says. "But we have to look beyond this."

Even this fresh effort has to build on Taiwan's engineering corps, which can't expand enough to meet all of Taiwan's needs. With so many companies expanding research and development, "we have to fight very hard to get experienced guys," says Hsiao-ping Lin, head of Faraday Technology, which specializes in chip design services. He hopes to hire Indian engineers, but adds, "in the long run, we will set up an R&D center in mainland China."

That shift to China is understandably of great concern to Taiwan's political and business leaders. But it may be inevitable. "The market here is so much more important than Taiwan's," says Lawrence Ho, the Taiwan-born owner of online music startup 8LaNetwork Inc., which has its headquarters in Beijing's trendy Jianwai Soho district. Ho also appreciates how hard his mainland employees are willing to work -- as many as 90 hours a week.

Taiwan clearly has lots to worry about, but it's also renowned for its resilience. Intel's John Antone compares Taiwan to long-distance runners who are being challenged but who are still in the lead. "As long as they're committed to run very aggressively," he says, "I don't see anyone catching them." Competitors be warned: Taiwan will do everything it can to stay in the race
. - By Bruce Einhorn, with Matt Kovac in Taipei, Pete Engardio in New York, Dexter Roberts in Beijing, Frederik Balfour in Shanghai, and Cliff Edwards in San Mateo, Calif.    BUSINESS WEEK        16 May 2005

Taiwan's future still in never-never land

The  recent visits by three Taiwan opposition leaders to mainland China illustrates the new policy of President Hu Jintao, which is a marked departure from that of his predecessor, Jiang Zemin.

When Mr Jiang was China's leader, he wanted to set a timetable for Taiwan's unification with the mainland, an idea that raised tension in the Taiwan Strait. However, Mr Hu's policy is not to bring about political unification but merely to frustrate any attempt to bring about a formal declaration of independence by Taiwan, which already enjoys de facto independence.

Professor Xu Shiquan, a leading authority on Taiwan, explained recently in Beijing that the visit by Yok Yu-ming, chairman of Taiwan's New Party, means that all three opposition parties - the Nationalist Party (Kuomintang), the People's First Party and the New Party - who together command a majority in the legislature, have been to Beijing and met with President Hu. In effect, Beijing has forged an alliance with the majority of elected representatives of the Taiwan people.

Mr Hu's policy seems to maintain the status quo for the foreseeable future, something that the United States and many people in Taiwan also favour. This new stance was confirmed in January by State Councillor Tang Jiaxuan, who told a group of American scholars that China was 'patient' where Taiwan was concerned - a new thinking that should be welcomed.

In fact, even the recently passed Anti-Secession Law reflects this stance. Previously, Beijing had talked in terms of passing a Reunification Law. Such a law would imply the necessity to change the status quo to bring about reunification. An Anti-Secession Law, however, implies preserving the status quo through opposition to any move by Taiwan to seek de jure independence.

Just how flexible Beijing has become was reflected by President Hu's willingness to accept a proposal by Lien Chan, Kuomintang party chairman, to set up a common market comprising the mainland and Taiwan, based on the European Union model. Such an idea would previously have been unacceptable to Beijing because EU members are all sovereign states, and Beijing insists that Taiwan is not an independent country. However, Mr Hu was willing to accept the common market idea because Mr Lien had accepted Beijing's 'one China' principle. As long as the one China principle is accepted, it appears, Beijing is willing to discuss almost anything.

China's Anti-Secession Law was widely criticised in the West because it mandates the use of 'non-peaceful means' if Taiwan should move towards independence. However, Prof Xu explained that the law has clarified the situation. Prior to its passage, some people in Taiwan called China a 'paper tiger' and said the mainland would never carry out its threats to use military force regardless of what provocative action Taiwan took. But now, he said, because the law has been enacted, Taiwan knows Beijing will have no choice but to use force if Taiwan were to declare independence.

Mr Xu explained that the Anti-Secession Law enjoyed wide support on the mainland. He pointed out that the law had been passed unanimously by the National People's Congress, something that is extremely rare. He recalled eight members had opposed the vote to appoint President Hu chairman of the Central Military Commission.

Has President Hu found a formula to prevent pro-independence politicians in Taiwan from moving towards independence? One sign may be something that Chen Shui-bian, Taiwan's leader, said recently.

Mr Chen, who will serve as president until 2008, said that he would be unable to bring about Taiwan's formal independence in the next three years. After all, he said, his predecessor Lee Teng-hui was president for 12 years and had failed to achieve Taiwan's independence. But it is likely that he will try, in his remaining years, to strengthen the sense of Taiwan identity. Already, the government is asking schools to teach Chinese history as the history of a foreign country, and Chinese culture as foreign culture.

Unless there are many more exchanges between Taiwan and the mainland, it will be difficult to expect that the island's residents in the future will think of themselves as Chinese rather than as Taiwanese.

This tug of war for the hearts and minds of the people of Taiwan is likely to continue for many years. In the foreseeable future, however, it appears that Taiwan's status will remain in never-never land: Not quite a fully independent country but also very definitely not a part of the People's Republic of China.   - by Frank Ching is a Hong Kong-based writer and commentator   BUSINESS TIMES    20 July 2005

Taipei sets its sights on foreign deals

Taiwan plans to give its banking reform and privatization ambitions a boost this week by selling a story of recovery, modernization and takeover opportunities to foreign investors.

Finance Minister Lin Chuan and a posse of seven top Taiwanese banks will lead a marketing blitz, or roadshow, in New York and London. Potential investors will want more from Lin than the vague commitments made so far to consolidation incentives, but analysts say the timing is good.

``The progress they have had in cleaning up NPLs (non-performing loans) has certainly put the sector on the radar screens of a lot of global investors,'' JPMorgan strategist and head of research Krista Yue said.

Taiwan hopes top foreign banks - institutions it sees as a role model for a modern industry - will buy strategic stakes and sink in expertise, kickstarting a takeover process that could release cost savings and reduce cut-throat competition.

It also wants portfolio investors to beef up demand for the sell-off, maximizing proceeds to help ease a forecast government budget shortfall of NT$277 billion (HK$69.6 billion) this year, Taiwan's sixth straight annual deficit.

State holdings of varying size in six listed banks have a combined market value of around US$7.2 billion (HK$56.2 billion). In all, 12 state-linked banks are sell-off candidates.

The Taiwan delegation along with investment banks JPMorgan Chase and UBS is due in New York today and tomorrow, and then in London on Monday.

Taiwan has so far offered unspecified tax breaks and speedier regulatory approval for new products as an incentive to banks that can achieve a 10 percent market share.

It has also frozen issuance of new bank branch licenses - an attempt to force 48 banks serving a population of 23 million people into consolidation. In South Korea, 19 banks serve a population twice as large as Taiwan's.

The state aims to halve the number of state-controlled banks to six by the end of the year, and investors already smell profits through cost-savings and reduced competition.

Since a 2004-low reached on August5, the financial sub-index has gained about 22.5 percent, outpacing both the main Taiex index's 18.6 percent gain and the 16.2 percent rally on the electronic index over the same period.

Taiwan Cooperative Bank's shares have soared over 60 percent since their debut in November.

Taiwan banks wrote off a record level of bad loans in 2003 and continued write-offs last year to nearly halve their overdue loan ratio to 3.3 percent in the third quarter from 6.1 percent in early 2003. But analysts say investors who may put up US$1 billion or more need more assurances from the government of full commitment to consolidation.

``One of the primary investor concerns is market fragmentation,'' Morgan Stanley Financial Institutions group executive director Willard McLane said.

Yue went further, wanting reassurance the government was ready to deliver promised incentives and to allow politically unpopular job cuts.

``Investors need to hear more,'' she said. ``The government's willingness to sacrifice a bit to get the progress going in terms of price and allowing staff flexibility for acquirers is key.''

Taiwan state banks have been making provisions for privatization for years, but labor unions and opposition parties worried about potential job losses have stalled the plans. While private firms like Chinatrust Financial Holdings, the owner of Taiwan's largest private bank, boast foreign equity ownership of some 50 percent, some 60 percent of the island's banking assets are still controlled by state banks.

Faced with slowing growth elsewhere, lenders such as Citigroup, HSBC Holdings and Standard Chartered Group are increasingly turning to Asia for acquisitions and revenue boosts. China has become the hottest market. HSBC paid US$1.75 billion last year for the mainland's Bank of Communications.

That kind of direct investment has not happened in Taiwan yet, but analysts say its close manufacturing links with the booming mainland economy could help attract overseas lenders.   - Kirby  Chien      REUTERS        3 Mar 2005

World's tallest building juts above Taipei's cloud cover

The Pacific Ocean's 'Ring of Fire' doesn't sound like the best place to put up a skyscraper, and certainly not the world's tallest. In addition to the earthquakes that give this zone its name, Taiwan is visited several times a year by typhoons and winds of 100 mph.

'It's probably the worst situation to build a tall building,' said architect C P Wang. Yet his Taipei 101, a sleek pagoda-shaped high-rise, has surpassed Malaysia's Petronas Towers to become the world's tallest building.

The jade-green building rises in eight slanted sections of eight floors each. Its shape is inspired by bamboo, which connotes sturdiness and vigour in Chinese culture.

Standing at 507.9 metres, with the upper floors often jutting above the cloud cover, it has transformed Taipei's skyline and holds hopes to do the same for Taiwan's economy and identity.

More than one superlative applies to Taipei 101. According to Emporis.com, a comprehensive database on tall buildings, it is the world's only supertall building in a highly active seismic zone. Besides having the tallest structural height in the world, the standard measure used to determine 'world's tallest', it also has the tallest roof and the world's highest occupied floor. (The building with the tallest tip is the CN Tower in Toronto which, with its antenna, stands at 551.7 metres.)

Taipei 101 uses the world's fastest elevators, whisking visitors to the 89th floor observation deck in just 39 seconds. According to Emporis.com, each elevator cost more than US$2 million.

Only two of the building's 63 elevators will offer non-stop service to the top. Yet Taipei 101 will also be one of the few buildings in the world with double-deck elevators.

The US$1.7 billion project broke ground in 1998 and was topped out last October. The five-story shopping mall adjacent to it opened last autumn, but Taipei 101 itself will not be completed until late this year.

Based on the Chinese lucky number eight, the jade-green building rises in eight slanted sections of eight floors each. Its shape is inspired by bamboo, which connotes sturdiness and vigour in Chinese culture.

While the design may be Eastern, it's Western technology that makes Taipei 101 sturdy, strong enough even to withstand a direct hit by a jumbo jet, Mr Wang said.

'After Sept 11, we simulated the situation,' he said. 'We didn't have to change it greatly. We have very big, strong columns. If an airplane runs into it, it'll probably be stopped. Or at least people would have a few more hours to get out.'

Even before the Sept 11, 2001, terrorist attacks, architects had planned two fireproof refuge rooms every eight floors with emergency supplies and communications. The building also exceeds Taiwan's stringent seismic standards by five times to withstand the type of earthquake that comes only once every 2,500 years. But tremblers are not the biggest worry.

'A building of this proportion is more flexible,' said Mr Wang, who was born in Beijing and educated in Taiwan and the United States. 'An earthquake is not the controlling factor. Wind is.'

As in most skyscrapers, a device called a tuned-mass damper - usually a heavy concrete block - is mounted in the building to help stabilise it against winds and quakes. Taipei 101 features the world's largest tuned-mass damper, and in a bold design decision, architects decided to leave it exposed, allowing visitors to view the 730-tonne ball, painted gold. Although it reduces swaying, the top of the building will still swing up to 1.5 m in each direction.

Mr Wang thinks there's nothing stopping someone from building a skyscraper twice as tall as Taipei 101. 'The technology exists,' he said. 'It's the cost.'

Roughly half of Taipei 101's US$1.7 billion price tag went to paying the city government for the land use rights. The developer, the Taipei Financial Center Corp, is a consortium of 14 of Taiwan's leading banks and insurance companies and the Taiwan Stock Exchange.

About 20 per cent of the space has been rented. With 76 floors devoted to office space, Taipei 101 can hold 15,000 office workers. - NEW YORK TIMES 

 


Copyright ©  2009
By opening this page you accept our
Privacy and Terms & Conditions