Green Silicon Island: Return Lustre to Its Halo
China Times editorial (Taipei, Taiwan, ROC)
August 26, 2012
Summary: This newspaper has launched an editorial series entitled, "The Dust-covered Silicon Island." It investigates the diminishing competitiveness of Taiwan's technology industry. Taiwan's high-tech industries are ill. The illness appears serious. The good news is Taiwan's high-tech industries have a solid foundation. It still has assets. It still has advantages in technology and management. It can still make a comeback.
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This newspaper has launched an editorial series entitled, "The Dust-covered Silicon Island." It investigates the diminishing competitiveness of Taiwan's technology industry. Taiwan's high-tech industries are ill. The illness appears serious. The good news is Taiwan's high-tech industries have a solid foundation. It still has assets. It still has advantages in technology and management. It can still make a comeback.
Consider the overall figures. Prior to July, exports from Taiwan declined 5.8%. Taiwan's main export technology products come from the ICT industry, which declined as much as 23.3%. During the same period, exports from neighboring countries remained positive. This was especially true of our competitor South Korea, whose export products largely overlap those from Taiwan. Consider individual industries. These once played an important role in Taiwan's PC industry chain. The DRAM industry was once dominated by South Korea, the U.S., and Japan. It is now dominated exclusively by South Korea. Others have closed their doors. They are receiving government subsidies and bleeding red ink. Their technology lags behind South Korea by more than two generations. Their prospects for survival are slim. In the manufacture of LCD panels, other economies have fallen behind South Korea. They are steadily losing money. Chimei and AU Optronics lost nearly 500 billion dollars during the first half of this year. Their prospects are grim. Other industries, such as the PC, LED, and solar energy industries, all face crises and challenges. Semiconductor are the sole exception, Taiwan's high-tech industries are in trouble. That is no exaggeration.
Leave aside short term factors for the moment, such as the global economic downturn. Manufacturers on Taiwan face three challenges. One. Industry trends have changed dramatically. Manufacturers have not been able to respond in a timely manner. Over the past three decades, high-tech industries on Taiwan have developed within the WINTEL (Microsoft plus Intel) framework. But in 2010, the Apple iPad made its US debut. This shook the industry. The PC industry entered the Post-PC Era. The technology industry on Taiwan depends primarily on PCs. It is at a complete loss what to do. It has plummeted to new lows.
Two. South Korean companies learned a hard lesson over the past decade. Past investments, technological advances, and brand building have finally paid off. They are finally reaping what they sowed. Taiwan meanwhile, has been routed. In fact, it lost to a single company -- South Korea's Samsung. Taiwan's DRAM industry has been trounced. Taiwan's share of the DRAM market is in the single digit range. Samsung alone has nearly half the world market. Taiwan's LCD industry is in crisis. In the high tech, high profits AMOLED industry, Samsung has a 97% market share. In the smart phone industry, Samsung has surpassed Apple in market share. The market share of Taiwan's HTC continues to drop. The latest figures show that even on Taiwan Samsung cell phones outsell HTC.
Three. Others are gaining. Mainland manufacturers are catching up. Their technology still lags behind Taiwan's. But the threat increases by the day. Flat panels from Taiwan account for half of the Mainland market. The Mainland is Taiwan's most important market. But Mainland flat panel manufacturers have begun operation. Taiwan manufacturers will inevitably be subject to heavy pressure. Mainland smartphone manufacturers such as Huawei, ZTE, Coolpad have debuted. HTC and other Taiwan-based companies face increased competition. Never mind the PC industry. Lenovo has already surpassed Taiwan's Acer and Asus.
Can the technology industry be rebooted? The government must dramatically liberalize its rules and regulations. It must reduce its myriad controls. We can cite many examples of crippling government controls. For example, the flat panel industry was subject to undue government restrictions. As a result it lost the lead on the Mainland. Mainland companies were able to rise. Even South Korean companies obtained approval for the construction of two flat panel factories. As a result Taiwan plants found themselves facing greater competitive pressure. Had the government allowed mergers and acquisitions, and granted greater latitude and encouragement, Taiwan's DRAM manufacturers could have merged long ago. Their situation today would be very different.
Research and development on Taiwan require more farsighted planning and more ambitious targets. South Korea's Samsung invested 250 billion NT on R&D in one year alone. Taiwan companies cannot compare. The National Science Council invests no more than 90 billion on R&D per year. Its subsidies are too egalitarian. This all needs to be improved. The government should also provide a variety of business opportunities in medical cloud computing, educational cloud computing, and 4G.
Brand building is not the only way. But as MIT scholar Lester Thurow said when he visited Taiwan several years ago, the key to Taiwan's competitiveness is innovation. There is no other way. Domestic businesses are good at being followers. They are unwilling to make long-term investments. They are unwilling to create their own core technology and core competitiveness. As a result they eventually find themselves in a sea of red ink. Businesses must consider this.
The Green Silicon Island is covered with a layer of dust. Taiwan's high-tech industries have deep roots. Hundreds of thousands of energetic small and medium enterprises have cooperated with medium and large enterprises to establish a competitive supply chain. As long they have a direction, as long as the government and enterprises cooperate, they will once again see the light of day. As National Science Council Chairman Chu Ching-yi said, we may be in the midst of a crisis, but we need not despair. Let the government and business join forces and restore lustre to the Silicon Island halo.