Business information
Electronic components Taiwan is the world leader in semiconductor foundries, packaging and testing of integrated circuits, and production of blank optical disks and MROMs (mask read-only memory). It is second in the world (after the US) in integrated circuit design, and one of the most important producers of several other electronic components. By specialising in very long runs of relatively standardised components, Taiwanese manufacturers benefit from economies of scale and have managed to press down unit costs to levels often far below those of their competitors, thereby gaining a competitive advantage. Another strength of the Taiwanese electronics industry is its precision and reliability: rejects make up a very small proportion of each production run. 2012 2013 2014 (f) 2015 (f) Volume growth, electronic components +5.4 % 3.9% 0.5% +2.1 % Electronic components as share of GDP 7.6 % 7.2 % 7.0 % 7.0 % To maintain competitiveness, Taiwanese electronics firms often rely on imports of leadingedge components which are then assembled with locally made components to make interim or final products, often for consumer product applications. This trend will drive demand for more advanced technologies from the EU and other parts of the world. Taiwanese firms will continue to expand and upgrade existing processing technologies and facilities, not least to meet growing demand from makers of mobile devices. Taiwanese companies increasingly shift their production to higher value-added components found in smartphones and other advanced electronic products. This leads to increased demand for imports of cutting-edge components from other countries. The consumer electronics market in Taiwan is large and growing, as many consumers are eager to acquire the latest products. The electronics components industry is set to benefit as it mainly feeds into consumer electronics applications. The market is saturated and dominated by US, South Korean and Japanese firms. 1
Telecommunication equipment The focus of the Taiwanese industry is on network flow management, deploying virtual and heterogeneous networks, and integrated services. Smartphones, broadband and wireless chips are driving developments. Mobile operators, fixed networks and broadcasters are upgrading their infrastructure and networks to stay competitive. 2012 2013 2014 (f) 2015 (f) Volume growth, telecom equipment 12.7% +7.1 % 0.7% +2.0 % Telecom equipment as share of GDP 1.7 % 1.7 % 1.7 % 1.7 % Taiwan produces around 20 % of the equipment it needs and relies on imports for the rest (predominantly from China). Most of its production is destined for export markets (Japan, South Korea, China, USA, EU). Taiwan s ambitious Development of Digital Convergence Program is running until 2015 and aims to secure a comprehensive broadband network with speeds up to 100 Mbs to promote convergence of telecom services, acceleration of new digital video TV services, and communication and dissemination of upgrades. Once completed, the network will require the latest equipment and services. Last year saw the start of preparations for 5G and there are plans to build a 5G lab network so that 5G services can be commercialised in 2018-2025. Strong political control and influence over telecoms and broadcasting. Risk that take-up of planned services will be lower than expected. 2
Energy Taiwan has few natural resources and imports more than 99 % of the gas, oil, coal and nuclear fuel needed to meet the demands of industry and households. Traditional energy sources such as coal (36 %), LNG (26 %) and nuclear power (16 %) still dominate the energy supply. The policy is to maintain a well-mixed portfolio of energy sources to balance costs, energy sufficiency and environmental protection. In photovoltaics, considerable public and private investments have been made with the goal to make Taiwan the third-largest producer of solar cells by 2015. 2012 2013 2014 (f) 2015 (f) Volume growth, energy equipment +0.4 % +4.2 % +0.8 % +2.0 % Energy equipment as share of GDP 1.0 % 1.0 % 1.0 % 1.0 % There are currently three nuclear power stations in Taiwan. Work on a fourth station has been suspended pending a review of the future energy strategy of Taiwan. As long as the traditional energy sources continue to dominate the energy mix, equipment and technologies will be needed in areas such as reduced-sulphur coal energy; clean coal technologies (such as integrated gasification combined cycles); CO 2 sequestration and other emission control technologies; smart meters; smart grid technology and equipment. The strong wish to move away from gas, oil and coal as the dominant energy sources towards greener, smarter and more sustainable energy solutions means that new technologies and equipment will need to be acquired, in many cases from abroad. The government and energy producers have in the past been open to foreign investment and exporters, as long as they avoid relying on single investors, manufacturers or nations. Strong political control over the energy sector. Vested interests by companies from countries such as Australia, Indonesia and South Africa not to change the current energy mix too quickly. 3
Fish and seafood Taiwan is a big exporter and importer of fish and seafood products, which play an important role in the Taiwanese diet (the average consumer is estimated to eat 35 kg of such products each year). 2012 2013 2014 (f) 2015 (f) Volume growth, fish and seafood +5.5 % +1.2 % +2.8 % +4.0 % Fish and seafood as share of GDP 0.7 % 0.7 % 0.7 % 0.7 % In recent years, the health benefits of fish and seafood products have received more attention in Taiwan and nowadays consumers base their purchasing decisions based on health considerations as well as other factors. Imported fish and seafood products occupy a unique and growing segment of the Taiwanese market. With increasing disposable incomes and new dietary trends, the market share of imported products is expected to rise. Consumers are sophisticated and discerning, with a traditional preference for fresh fish and seafood. They are prepared to pay more for quality products, occasionally even for frozen products if the quality is high enough. Exporters such as China, Japan, Vietnam and Chile provide most of Taiwan s imports of fish and seafood products, enjoying a competitive advantage by virtue of their proximity and being able to sell fresher products. China s position is especially strong. In 2012, shipments of crustaceans and molluscs from a number of exporting countries were inspected and rejected due to high heavy metal content. The lasting effect of the rejection was to create consumer aversion to imported seafood in general, and imported crustaceans and molluscs in particular. 4
Services For more than 30 years, services have expanded faster than manufacturing and now contribute around 70 % of Taiwan s GDP, whereas manufacturing contributes around 25 %. The most important service sectors are retail and wholesale trade, real estate and public administration. In its Blueprint for Services Sector Development the government targeted 15 industries (retail, hospitality and catering, logistics, consulting, IT services, design, advertising, conference and exhibition, digital content, wireless broadband, healthcare, intelligent automation, cloud computing, e-commerce, energy services) as priority industries and drivers of future economic growth. From 2012 to 2020, the target compound growth rate for the services sector is 5.1 %. 2012 2013 2014 Volume growth, services +1.8 % +1.9 % +1.7 % Services as share of GDP 68 % 69 % 66 % Retail and wholesale trade: share of GDP 17.3 % 17.4 % 17.0 % Real estate: share of GDP 8.8 % 8.8 % 8.5 % Public admin and defence: share of GDP 7.6 % 7.3 % 7.0 % Financial services, insurance: share of GDP 6.6 % 6.6 % 6.8 % Education: share of GDP 4.9 % 4.7 % 4.5 % The rapid expansion of the services sector is expected to continue. Many of the industries targeted in the Blueprint for Services Sector Development are industries where EU companies are highly competitive. The services sector suffers from a lack of competitiveness. China and the US have a dominant position among foreign providers of services. The risk of IPR violations threaten reputation and market shares. 5
Technical services In 2011, the government announced its strategy to transform Taiwan s economy into a service-oriented manufacturing industry, an internationalised and high-tech services industry, as well as a specialty-oriented traditional industry. A case in point is the technical services industry, including service providers in the fields of R&D, design, engineering, information, and consulting. Industrial development in Taiwan has underpinned the expansion of the technical services industry. E-commerce One of the target industries listed in the government s Blueprint for Services Sector Development is e-commerce, where the Taiwanese market is growing rapidly: from USD 25bn in 2013 to an estimated USD 29bn in 2014 and a predicted turnover in excess of USD 35bn this year. People aged 20 to 39 are the main customers and mobility is a growing trend increasing use of mobile devices rather than PCs for making purchases has helped expand e-commerce turnover and shifted the peak periods so that purchases are increasingly made while commuting or before bedtime. One of the major B2C and C2C players on the Taiwanese e-commerce market is Alibaba through it shopping websites Taobao Marketplace and Tianmao, as well as its payment infrastructure AliPay. It is estimated that most merchandise sold in Taiwanese night markets and night shops is in fact sourced from Taobao, causing a major problem not only for Taiwanese providers of goods and services but also for the tax authorities. A year ago Alibaba announced its intention to launch an e-commerce association in Taiwan to help local small and medium-sized enterprises break into the global market, but in March this year Taiwan s Investment Commission ordered Alibaba to pay a fine of USD 3800 and leave the Taiwanese market within six months for allegedly violating rules concerning Chinese ownership. Computer services The authorities have identified cloud and mobile computing as the most promising sectors in Taiwan s computer services industries, as also reflected in the Blueprint for Services Sector Development. By 2012, the authorities had invested USD 237 million in ten different clouds covering police, food, health, environmental data, agriculture, transportation, graphic data, disaster rescue, education and culture. In computer services and software, Taiwan relies heavily on imports of integrated solutions and high-performance products. Foreign providers are increasingly teaming up with local IT service providers to get closer to the market and facilitate customisation. Local and foreign suppliers are actively encouraged to take part in the Cloud Open Lab platform for testing 6
and modifying their cloud applications. The platform is supported by domestic as well as foreign hardware, software providers, mobile carriers and data centre providers. Taiwan is short of Big Data analytical skills to combine and commercialise cloud computing, Big Data, analytics, media convergence and the Internet of Things. Environmental protection One of the ten clouds in the previous section concerns environmental data and is related to the government s prioritisation of environmental protection. Specific measures include the promotion of carbon emission reduction and saving energy; promotion of industry environmental information being disclosed; facilitating resource recycling; promotion of clean production and improved safe and healthy manufacturing technologies. More stringent standards for wastewater and polluting air emissions were introduced in 2011, forcing all manufacturing plants to invest in the necessary equipment to comply with the new standards. Ten new measures came into effect in January 2015, notably regarding wastewater systems at industrial parks and CO 2 emission control standards for small passenger cars. Taiwan maintains two negative lists, on certain import goods and on FDI into Taiwan. In both cases environmental concerns are among the small number of reasons for inclusion on the negative list. 7