Brief Introduction of Investments Between Taiwan and U.S

Brief introduction of Investments between Taiwan and U.S.

According to statistics compiled by the Investment Commission, Ministry of Economic Affairs, In 2011 U.S. foreign direct investment (FDI) in Taiwan amounted to $690 million, an increase of 118.7% from 2010, and accumulated U.S. investment in Taiwan up to the end of June 2012 amounted to 4,880 cases with a total value of approximately US$22.61 billion. This makes the U.S. the largest source of FDI in Taiwan. Most U.S. direct investment in Taiwan has gone into wholesale and retail trade; finance and insurance; professional, scientific and technical services; electrical equipment manufacturing; and electronic parts and components manufacturing.

The U.S. has also been the biggest recipient of outward Taiwanese investments. In 2011, Taiwanese companies direct investment (FDI) in the U.S. by Taiwanese firms was $738 million, an increase of 14.89% from 2010, and accumulated investment in U.S. by Taiwanese companies up to the end of June 2012 amounted to 5,125 cases with a total value of approximately US$13.08 billion, ranking Taiwan second among the source of FDI in the U.S. Most Taiwan direct investment in the U.S. has gone into electronic parts and components manufacturing, ICT, computers, electronic and optical products manufacturing, wholesale and retail trade, and medical goods manufacturing.

U.S. Companies in Taiwan

Taiwan’s unique investment climate is defined by its high-quality human resources, strong government incentives, a sophisticated infrastructure, unparalleled expertise in high technology, sound legal framework, and protection of intellectual property rights. The Economic Cooperation Framework Agreement (ECFA) which entered into force in September 2010, together with its four follow-up agreements, further enhances Taiwan’s competitiveness in the Chinese market and establishes Taiwan as a strategic springboard for its trading partners. In June 2010, Taiwan passed the Industrial Innovation Act, which lowered its corporate income tax from 25% to 17%, among the lowest in the region. The Government has enacted special tax and non-tax incentives to promote investment in innovative industries such as cloud computing, intelligent vehicles, and green architecture, as well as in infrastructure projects, free trade zones, and science parks. These factors make Taiwan a highly attractive investment market, especially for U.S. companies.

With the aim of establishing Taiwan as a global center for industrial innovation and R&D, the Ministry of Economic Affairs (MOEA) initiated the Multinational Innovative R&D Centers in Taiwan Program to encourage multinationals to set up their regional R&D centers in Taiwan. The ultimate goal of the program is to create a positive and complementary effect for local industries while establishing synergies between local and multinational companies. The new technology management systems introduced under this program are expected to boot Taiwan’s industrial technology will be promoted to a higher plane. Since its initiation in 2002, the program has received a highly positive response; it has been widely reported in the media, and leading multinationals such as HP, Dell, IBM, Intel, Corning, DuPont, and Microsoft have established R&D centers in Taiwan. In the future, The MOEA will continue to provide foreign corporations with information related to investment and business environment in Taiwan, and to assist them in solving problems encountered in the process of investment and operation.

Taiwan’s high-tech and IT sectors effectively integrate the R&D operations and supply chains that stretch from Silicon Valley through the Hsinchu Science Park, and now into Mainland China. Taiwan has become a global supply base for high-tech products, with the highest density of industrial clusters in the world. Furthermore, Taiwan’s unique culture, economy and geographical location make it well suited to serve as a springboard for U.S. expansion in the Asia-Pacific region. With an extensive network of investment and business ties in Southeast Asia and China, Taiwanese companies play a vital role in the global supply chain.

Examples of major U.S. investments in Taiwan

Microsoft

Setting up a Research and Development Center in Taiwan: A New Trend for Big International Corporations

The world-class software company is opening a multi-function research and technology center in Taiwan with hope that by this local direct investment the new products and new technologies may use Taiwan’s rapid mass production sector, and as a result, the products will become available in the market in the shortest time possible.

As technology evolves with each passing day, such as radio frequency identification (RFID), portable multimedia player (PMP), and global positioning system (GPS) all become the life-related hot technology. On how to bring technology into life, a research and development center plays quite an important role. Therefore many big corporations have recently come to Taiwan and set up technology-related research centers, and especially among them Microsoft.

Rapid Volume Manufacturing and Market-Available

In the recent years, Microsoft has established R&D units and technology centers with various functions in Taiwan, including the Microsoft Technology Center, RFID Excellence Center and a Windows Media Engineering Center. With the local direct investment, Microsoft expects that the new products and technologies may use Taiwan’s high volume manufacturing sector to reach the goal of coming to the market in the shortest time possible.

For example, the first of its kind in South Asia, the Microsoft Technology Center (MTC) in Taiwan, presumably at a cost of NT$ 5.5 hundred million, is designed as mainly a developing center for software industry at the early stage, yet it will work toward the integration of software and hardware. This center will apply Taiwan hardware companies’ strong research and development capability, in coordination with Microsoft project management, so as to fast produce the terminal products of newest technology and shorten the research and development process of marketable products. Microsoft Taiwan says that the annual full-time personnel may reach 140 persons, and within three years the center is expected to assist Taiwan’s 70 software companies to develop 100 software solutions and cultivate 2800 software talents. As a result, it will hopefully create 4 billion NT dollars product value for Taiwan software industry.

Given that multi-media application is on the right path for digital home, Microsoft invests NT$ 107 million in Taiwan to set up the world’s first Windows Media Engineering Center (WMEC). With this center, Microsoft intends to apply the next-generation multi-media technology, Windows Media Video (WMV), so as to launch products of various kinds through technology development and field tests.

The Key: Quick Reaction of the Upstream and Downstream

In the process of developing products with new technology, many areas may have their own evolving process under the geographical differences. Such as US, Europe and Japan, these countries highly regard new technology development. Once technology is fully developed and a new product launched, it often happens that the product is completed before planned-time; however, the market likely fails to fully appreciate it. Sometimes it may occur that the technology is successfully developed, yet its early-stage product is evaluated as a failure.

In Taiwan, the mass production of new-tech products is easily accomplished because the production chain of Taiwan’s electronic industries is quite complete. From the upstream chip-manufacturing plants, such as TSMC and UMC, to the midstream chips assembly plants, and to the OEM responsible for manufacturing actual products, the complete range covers the whole process of new product launching. There is no need to be away from Taiwan to get the product tested and manufactured. Since the process is short-termed, it is certain that there won’t be any delay caused by transportation or other factors.

Customers Willing to Try New Technology

With a new product being out on the market, how to learn about customers’ response within the shortest time becomes a major task for manufacturers. Especially when the manufacturer intends to launch a widely applied product, a must-job is to conduct the planned product tests and efficiently decrease the potential problems which may happen after mass production. With a strong consuming capability and hunger for new stuff, especially for electronic products, Taiwan consumers are viewed as ideal targets for market tests. Using the customer response in Taiwan, those manufactures who want to go for other regional markets may try to facilitate product modification and efficiently promote their products to other markets.

According to the local GPS researchers on consumer electronics, if a product gains its reputation in Taiwan market, it is likely to sell well in other markets. Taiwan consumers are fairly keen on testing. From a user interface to a cross-comparison among similar products, many consumers like to conduct tests on their own and then announce their review or test results in some forums or blogs. From the user responses, the researchers can find key problems which require improvement, and find out user habits so as that the new product is well positioned and of less application errors.

New Technology Easily Tested in Taiwan

While developing new technology, manufacturers are concerned about volume production, and moreover about the environment available for field test. Taking Worldwide Interoperability for Microwave Access (WiMAX) as an example, it has currently become the hot wireless communication technology and a key research point for the manufacturers of communication, network, mobile phones and laptops. WiMAX is most powerful in establishing long-distance wireless connection at the lowest cost.

As for the development of anther hot technology, RFID, Taiwan won’t be absent either. The members of the center do not only include the non-governmental units, such as EPCglobal Taiwan, Cheng Loong Corp., and the Electronics Testing Center, Taiwan, participate in this center, but also the Industrial Technology Research Institute (ITRI), and the behind the scene support comes from the Department of Industrial Technology and the Department of Commerce, MOEA. Thus it is clear that the government is positive in supporting the development of the leading technology.

Those international giant corporations that set up research centers in Taiwan are relatively rewarded with certain local advantages. After all, in this age of ten times fast, new technology must be developed, and the importance of launching new products in time can never be ignored.

Corning

The World's No.1 LCD Glass Substrate Supplier

Corning was founded in 1851. Headquartered in New York, USA, it has 22,000 employees in some 70 operating locations all over the world. It is also a major shareholder in 50 joint ventures in 16 countries, and ranks among the Fortune 500 companies. Under the Corning banner there are 7 major business divisions: optical fiber, optical cable, optoelectronics, frequency control devices, environmental protection technology, biotechnology, and display technology.

In 1880 Corning provided the Edison Electric Company with the glass material for the first light bulb. In the 1950's, glass porcelain composite technology was developed, finding widespread application in the making of kitchenware, and CorningWare became a household name. In the 1970's Corning made the world's first optical fiber. In 1998, Corning sold off its kitchenware division and focused on transforming itself into a high-tech company making such products as optical communication equipment and glass substrate. As the demand for LCD display technology has increased, the share of Corning's operating revenue provided by its display division has risen. Corning Display Technologies Company has a global market share of over 50% and makes the AM-LCD glass substrate used in the production of TFT-LCDs (Thin Film Transistor-Liquid Crystal Displays).

In PC related industries Taiwan is simply a powerhouse. Believing in the growth potential of the island's TFT-LCD industry, Corning intends to root itself firmly in Taiwan and become a well-entrenched local supplier of glass substrate.

Expanding Investment in Taiwan

In 1971, Corning invested in a joint venture to form Pacific Glass, making picture tubes for television sets. In the 30 years since then, Corning has participated continuously in Taiwan's economic development. By bringing optical glass billet technology to Taiwan in the early years, it helped Taiwan become the world's leading center for the OEM production of spectacles and related products. In recent years, Corning has undertaken extensive purchasing in Taiwan, and has provided Taiwan with applied material technologies in the areas of optics, special semiconductors and optical communications. In 1999, Corning built a factory in the Tainan Science Based Industrial Park, which is the first factory for the production of substrate materials used in the manufacturing of TFT-LCD. Today, Corning is a leader in many fields in Taiwan, including optical communications, exhaust gas control, and LCD display units.

Taiwan and Corning -- a Mutually Beneficial Win-Win Relationship

As the overall market demand for Corning's glass substrate continues to increase, the company's display business unit reached a historical high in terms of production and delivery volumes in 2002. Located in the Tainan Science-based Industrial Park is the first integrated glass substrate manufacturing plant in Taiwan. In addition, Corning built up the glass smelting facilities lately and the global production capacity for Corning will increase threefold accordingly.

With southern Taiwan having become an important center for the development of the optical industry, Corning reinforces his position as a leading supplier of glass substrate in the Asia Pacific region, the establishment of production facilities in Taiwan will also facilitate the integration of up-, mid-, and down-stream suppliers in Taiwan's TFT-LCD industry, and help raise the technology level of the island's optical industry. It is hard to imagine a better way to create a win-win situation for Taiwan and Corning.

Taiwan -- A Powerhouse in the Display Industry

Taiwan has become one of the world's most important production bases for flat panel display units, and attracts investment from key component vendors all over the world. As related industries cluster together in response to the formation of science parks and industrial districts, up- and down-stream suppliers will gradually become closely integrated, thereby helping to reduce production costs. Yet there is still plenty of room for further growth.

Concerted Efforts towards the Industry

The display industry is one of the key industries targeted in the Republic of China's Two Trillion, Twin Stars Plan. By combining Taiwan's existing information and telecommunication technologies with the advantages possessed by the island's markets and industries, it will be possible to achieve ongoing development of the market for flat panel display units. To meet growing demand, Taiwan has started training programs to build expertise and develop new, forward-looking technologies in this field. The island is also forming strategic alliances with other technologically advanced countries to raise the level of R&D expertise, and to cooperate in the joint development of the next generation of display technologies and equipment. Taiwan welcomes your participation in the development of the display industry, which offers such enormous potential.