Chapter 13. Taiwan Technology Parks and NGOs

Taiwan is a great example of a region dedicated to the enhancement of the quality of life for its citizens through participation in the Innovation Economy. It is a very strong high-tech market. While it lacks land and natural resources, it more than makes up for these inhibiting factors with some terrific strengths in its societal culture: hard work, propensity to save, entrepreneurial orientation, and the capacity to engage in risk-taking activities.

Taiwan attracts great venture capital streams to its industries, so there is plenty of ready capital for both infrastructure investment and business development. It has a highly educated population and an international perspective, which makes it easy for foreigners to work and establish business relationships. It has a great supply of high-tech management professionals who have many years of experience in manufacturing.

There is close collaboration between high-tech companies and universities. Universities integrate their curriculum into the high-tech industry through the relationship of the schools with high-tech parks. Most educated Taiwanese are well-versed in English and they use English-version textbooks in colleges and universities. The science-based knowledge and education system is a good fit with technology and problem-solving innovation.

Taiwan has a strong work ethic and its highly skilled, quality-driven work force is a major competitive advantage. This region has focused step-by-step to develop a high-tech industry as a national priority. The tax and incentive system from the government is highly favorable for the kind of capital investment, profit, and legal regulations necessary to enable high tech to thrive. The Taiwan government supports but does not try to directly control investment decisions in the high-tech economy as Singapore and mainland China do.

Taiwan has very close interaction with Silicon Valley and is a good example of a completing region. It has not tried to replicate Silicon Valley, but rather link into it with a great deal of joint research and development, business creation, and manufacturing activity.

Taiwan has transformed itself from a low-cost manufacturing hub to a high value-added manufacturing center for the worldwide Innovation Economy. It is the preeminent region of the world for integrated chip (IC) manufacturing. The Taiwan foundries are manufacturing specialists who are subcontracted by the major semiconductor companies. These foundries, such as $5 billion Taiwan Semiconductor Manufacturing Company (TSMC), focus purely on manufacturing, slashing costs through economy of scale. Through aggressive investment, research and development, and the advantage of the experience curve in manufacturing, Taiwan has developed chip-making technologies on par with Japan, and at a lower cost. So, many firms worldwide design and sell chips without having to build factories because they outsource the manufacturing to Taiwan.

Table 13-1. Facts at a Glance ” Taiwan

Population	22,369,000
Gross national savings rate in 1999	20%
GNP growth rate in 1999	5%
Government funding of all R&D investment in 1999	38%
Increase in per capita GNP from 1993 ($10,954) to 2000 ($14,188)	30%
Unemployment rate in 2000	3%
Post high school education institutions in 2000	150 with 1.1 million students
Percent of GNP by sector in 2000	Manufacturing 26%, and service 65%
Number of companies operating in Hsinchu Park in 2000	287
Percent of sales by integrated circuits in tech park in 2000	61%
Number of employees in Hsinchu Park	102,000
Average age of employees in Hsinchu Park in 2000	31 with 16% having post-bachelors degrees
Sources: Government of Taiwan Council for Economic Planning and Development; Hsinchu Science-based Industrial Park administration.

When the information technology markets in the U.S. and Europe have a downturn, Taiwan is especially hard hit. Taiwan also faces a special challenge in its relationship with mainland China. There is an emerging partnership between the two adversaries in the mutual development of manufacturing capabilities. Much of the lower-end manufacturing that depends on cheap wages and lower working conditions have moved from Taiwan to China. Taiwan is now faced with similar problems as Ireland in that the cheap labor, land, and differential tax advantages are largely gone. So now the Taiwanese have to be very aggressive in maintaining their advantage as a magnet for investment and manufacturing.

By upgrading Taiwan's technology and investment and making its industry distinct from mainland China, the Taiwan government hopes to avoid the trap of de-industrialization. So, they would like to position Taiwan as a global center for high value-added manufacturing.

The Economic Development Advisory Council (a government industry partnership) ^[1] has identified six areas of support systems to achieve this objective:

• Creative research and development

• Cargo storage and transshipment centers

• Venture capital investment mechanisms

• Supply-chain management networks

• High-tech industry capital accumulation systems

• Value-added financial service systems

One of the jewels in the crown of Taiwan's success is the Hsinchu Science-based Industrial Park (HSIP), which is a great example of public/private and university partnership making wealth for the region. Since it opened in 1980, the Taiwan government has invested almost $800 million in the Park's infrastructure and administration. HSIP is a great example of a home-grown park with international linkages for companies in the Park as well as international companies into Taiwan.