Obstructing AUO Advance on Mainland Merely Helps South Korea
China Times editorial (Taipei, Taiwan, ROC)
December 15, 2010
The Chen regime ruled for eight years, Despite rampant corruption, the DPP undoubtedly intensified "nativist" sentiment on Taiwan. This exaggerated concern for nativist identity, has led to an exaggerated Sinophobia. Politically hostility is already a problem. This hostility has naturally carried over to the realm of economics. The Chen regime's policy could be euphemistically described as "jie ji yong ren," or "be patient, avoid haste." Less euphemistically, it was a Closed Door Policy that tried to isolate Taiwan from the Mainland. Under this kind of atmosphere, the Chen regime boycotted all manner of Mainland talent, including Mainland students. It imposed all manner of restrictions on Mainland investments on Taiwan. It also prevented Taiwan-based businesses from building plants on the Mainland.
Ma Ying-jeou has promoted ECFA since taking office. Relations with the other side are generally positive. But even he has failed to ameliorate the hostility in cross-Strait economic relations. Actual trade has not been liberalized as much as anticipated. Many officials in the Ministry of Economic Affairs fail to view cross-Strait economic and trade interactions in a rational light. Flat panel maker AUO hopes to invest in plants on the Mainland. Review of its request in the Ministry of Economic Affairs has dragged on for over a year, This represents the continuation of such an atmosphere.
If one truly wishes to ascertain whether AUO as a company ought to build plants on the Mainland, one must begin by examining the flat panel industry. Flat panels are categorized according to size, into large, medium and small panels. Large panels include large rear projection advertising billboards. Medium panels include televisions and computer monitors. Small panels include cell phones or automobile control panels. Among these three categories, demand for large panels is global in nature, but volume is limited. Medium and small panels meanwhile, are used in TVs or mobile phones. Most factories are in Taiwan and South Korea. Therefore the struggle over panels between AUO and Samsung also involves the mobile phone and TV manufacturing industries. When the ruling administration reviews AUO's request to build plants on the Mainland, it must understand the panel makers' relationship to other industries, upstream and downstream.
Consider technology industries related to the panel industry. The major players are South Korea, Japan, and Taiwan. As far as intellectual property is concerned, Japan still has a number of advantages. South Korea's Samsung however, has been gaining ground. Regarding upstream and downstream integration in home appliances, Japan's SONY and SHARP have integrated their upstream and downstream production lines. South Korea's Samsung has also integrated its internal operations. In recent years, it has left the Japanese gasping for air. Taiwan's AU Optronics and Chi Mei are major panel makers. But in home appliances their vertical integration clearly pales before South Korea.
When Beijing first encouraged Taiwan's home appliance makers to sell their products on the Mainland, Taiwan's home appliance manufacturers and panel makers received many orders. One reason of course was that Beijing was making concessions for Taiwan's sake. But another reason was strategic considerations regarding vertical integration and competition. If Mainland home appliance makers purchased Samsung panels, future home appliances would have been one half Samsung in origin. Having home electrical appliances either one half Samsung in origin or 100% manufactured by Samsung in its own factories, posed an awkward coopetition problem. In view of this, Beijing wanted to concentrate on manufacturing panels. It had no intention of total integration with AUO. First, it reduced some of its concerns over competition. Secondly, it evaded the nasty clutches of Samsung's panels. Thirdly, it ate into Samsung's strength in home appliances. Based on such considerations, Beijing welcomed AUO with open arms. It looked forward to cooperation with Taiwan. Presented with this great opportunity, what did the Ministry of Economic Affairs do? It procrastinated for a full year. It then compounded its mistake by invoking the stupid curse of "比台灣本地少一世代." Its behavior was stupid beyond belief.
Viewed objectively, the Ma Ying-jeou administration loosened restrictions on cross-Strait economic transactions only superficially. It failed to eliminate remnants of the DPP regime. It continued perceiving the Mainland as implacably hostile. Many industries are engaged in industrial competition. Taiwan's enemy is not necessarily the Mainland. It could be Japan. It could be Uncle Sam. It could be Europe. Most likely however, it is South Korea. The Ministry of Economic Affairs appears confused about this. Under the influence of populist demagoguery, it persists in pointing the finger at Beijing. It invokes the principle of "低一世代" and forces AUO to disarm. These officials are in effect acting as agents of South Korea's Samsung. Their mission is apparently to undermine rather than support Taiwan's industries. Koreans watch as the ROC Ministry of Economic Affairs erects endless barriers to AUO's effort to build plants on the Mainland. They must be feeling a glee beyond description. They must be wondering how Taiwan's officials could be so stupid. Who can blame Guo Tai-ming for chewing them out?
Flat Panels are not wafers. They are not manufactured in accordance to customer specifications. Their manufacture is purely a matter of cost and efficiency. The Ma administration is apparently impotent in the face of the Ministry of Economic Affairs. It had better clear its head. It had better stop fooling around. Cross-Strait liberalization is a foregone conclusion. The Ma administration must not do things halfway. As it waffles endlessly, neither fighting nor surrendering, neither making peace nor going its own way, it teeters on the brink of lost opportunity. Taiwan's industries have been thrashed by Samsung. If Taiwan's officials still refuse to sober up, what more can we do but lay down our pens and sigh?