BOSTON - Mainland Chinese factories can generally mass-produce computer hardware cheaper than Taiwan, so the Taipei government wants to change the field of competition. A government delegation from Taiwan wrapped up two weeks of pitching to U.S. investors in small conferences around the country on Monday, praising the merits of a developed infrastructure and business-friendly environment, looking for foreign investment.
Taiwan remains the third-largest producer of information technology products in the world, according to the delegation, and an indispensably huge supplier of semiconductors to the world market. The country is the number one producer of notebook PCs, recordable compact discs, modems, network hubs, and LAN cards. Taiwanese companies sold US$22.4 billion worth of microchips last year.
Other Asian countries have aggressively courted manufacturing business, and can offer labor with cheaper wages and lower environmental standards for industry. The writing is on the wall for Taiwan, and the Taiwanese know it.
"The margin on manufacturing alone is too low to survive," said Liu Ying-Huei, a deputy director in Taiwan's Office of Information Industry Development. "I don't think Taiwan can compete with mainland China in original equipment manufacture."
Taiwan no longer wants to promote itself as a place to make cheap chips. Instead, it positions itself as a country with experience making chips, industrial space ready to go, peak business taxes of 25 percent, universities dedicated to producing IT workers, and a government crafted to be a service to industry.
With the mass production of PCs moving to areas with lower manufacturing costs, Taiwan wants to focus on areas where it can add special value, like using its technological base to design and produce integrated system-on-a-chip semiconductors, or network multimedia products and information appliances localized for China.
Taiwan also hopes to develop its biotech industry, outside its traditional base of IT hardware expertise. Taiwan's officials believe diagnostic devices and aquaculture could grow to be a big business for them, and are in the process of setting up regulatory policy to that effect. The government has set aside $5 billion in its budget to develop biotechnology.
Liu traveled with a dozen or so government officials on the Ministry of Economic Affairs high-tech mission to the U.S., shopping Taiwan around in Los Angeles, New York, Boston and San Francisco. The investment seminars permitted one-on-one talks with investors. The object was less to strike deals immediately than to begin to shift perceptions.
The Taiwanese delegation argued that the costs of developing and retaining talent, of building facilities from scratch, and of uncertain power and telecommunication infrastructure outweigh the potential cost savings of setting up fabrication plants in less-developed nations. Taiwan's proximity to China and Japan allow it to service those markets without suffering their drawbacks -- China's high cost of infrastructure development or Japan's high cost of production.
Economic incentives arise for investing in areas Taiwan considers strategic technology, like wireless systems, biotechnology and Internet products. Tax credits of 5 percent to 20 percent accrue for buying manufacturing machinery. Training, research and development draw a tax credit of up to 25 percent.
