TALKING POINTS FOR FOREIGN INVESTMENT
–On the OBU (on-board unit) industry
I. Investment Niche in Taiwan
A、 Globally speaking, the OBU industry is a fast-growing industry
The global market value of on-board units was US$ 5.5 billion in 2004. It is estimated that the global market value of on-board services will increase from US$ 2.1 billion in 2004 to US$ 14.4 billion.
B、 Several measures have been implemented by the government of Taiwan to assist the development of the OBU industry
The government of this country has set up “National Development Project for 2008”, which includes “Plan to Enhance the Values of the Industrial Sector”, “Plan to Double the Number of Tourists”, “Digital Taiwan Plan” and “Plan for the Improvement and Construction of the Transport Systems of the ROC”.
C、 With the average annual growth more than 5%
According to the statistics of Strategy Analytics in October of 2005, the average annual growth of automobile electronics from now to 2008 will remain at more than 5%.
D、 A complete OBU supply chain has been established in Taiwan
There is a complete OBU supply chain in this country. The companies in the industry have a close cooperative relationship with oversea companies, and the number of such cooperative cases has been increasing. For oversea companies investing in this country, these oversea companies would have a complementary relationship with their domestic counterparts.
II. Market analysis
A、 Global market: will have an average annual growth of 6.7%
The global market of the OBU industry in 2005 is US$134.125 billion and will increase to US$ 163.456 in 2008. Please see the following table.
Table 1 The global market in terms of various types of OBU
unit: US$ 1 million
B、 Market of this country
a. The on-board navigation market of this county will show an increasing pattern from 2003 to 2008. Please see Fig.1
b The compounded average annual growth for this period will be 14.3%. Most of on-board navigation devices are sold after automobiles are sold. About 17,990 sets of navigation devices will be sold in 2008.
c Yue Loong Motor, Kuozui Motors and China Motor have put automobiles with a navigation system on the domestic market.
Data sources: SRD Japan Inc. and IEK-IT IS Project of the ITRI
Fig.1: The on-board navigation market of this county from 2003 to 2008
C、 Present and future opportunities in the Chinese market
According to the CCID, only 80,000 sets of on-board navigation devices (with the monetary value of RMB 320 million) were sold in China in 2003. The demand for on-board navigation devices will be increased due to the 2008 Olympic Games (to be held in Beijing), 2010 Shanghai World Exposition and the development of on-board communication devices in China. The Beijing City Government plans to require all the taxies in Beijing to be installed with an on-board system with an emergency rescue function. Also, as of now, over 4 million automobiles have been sold per year in the past few years; as income per capita increases in China, more people will drive an automobile for long-distance travel and hence the demand for navigation service and travel information will be greatly increased. Hence, the demand for on-board navigation systems will greatly increase in the next few years. Please see Fig. 2.
Note: The size of each circle represents its sales (in RMB 100 million)
Data sources: CCID and IEK-IT IS Project of the ITRI (Dec. of 2005)
Fig. 2: The growth rates for various on-board devices in China for 2004 and 2005
III. Analysis on competition
A、 The main large corporation in the world
The global telematics systems market comprises three regions – North America, Europe and Asian Pacific region. Of these regions, North America market is the largest; Asian Pacific region has shown the biggest growths; the Europe has the highest degree of product diversification. Table 2 illustrates the cooperative relationship between “tier 1 suppliers” (i.e., the main electronic device suppliers) and the automakers. While TSPs (telematics service providers) acts as a service provider and a bridge between an automaker and its users (please see Table 3).
Table 2 The cooperative relationship between the main electronic device suppliers and the automakers
Main electronic device supplier / Platform/product / Automakers that the supplier has been cooperating withDelphi / ¨ Communiport
¨ Navigation
¨ Radio / Toyota/Lexus
OnStar/GM
Subaru
Matsushita Electric
(Panasonic) / ¨ TCUs
¨ Navigation / Toyota Monet
Helpnet
Denso / ¨ Navigation Systems / Jaguar
Toyota & Lexus
Cadillac
Motorola / ¨ iRadio
¨ MobileGT
¨ Embedded CPU / BMW,M-B
GM,Ford
Nissan,Audi
Visteon / ¨ VoiceTechnology
¨ Infortainment / Ford
Nissan
Lear / ¨ Instrument Panels / Motorola
Ford
Main electronic device supplier / Platform/product / Automakers that the supplier has been cooperating with
Magneti-Marelli / ¨ Navigation systems / Fiat
PSA
Robert Bosch / ¨ Navigation
¨ Telematics / BMW,M-B
Audi & VW
Siemens VDO / ¨ Navigation
¨ TM systems / Mercedes
Porsche
Data source: The symposium on the telematics trade
Table 3 The cooperative relationship between TSPs and the corresponding automakers
TSP / Region or country / Automakers / ExplanationOnStar / North America and Europe / GM / The largest TSP in North America; providing three types/classes of services: (1) Safe & sound (2) Directions & Connections (3) Luxury & Leisure
TEGARON / Europe / Daimler-Chrysler, VW, Audi andRenault / The largest TSP in Europe; its service areas cover Germany, Italy, France and UK.
TeleAid / Germany / Mercedes-Benz / Providing emergency services for all models of Mercedes-Benz in Germany.
VodafonePasso / Germany and UK / BMW and Ford / Providing services of safety, anti-theft, remote automobile diagnoses, dynamic navigation, traffic information and POI
GedasTelematics / Germany / Volkswagen / Providing navigation, traffic information and telecommunication to all models of Volkswagen in the Berlin area
Atos / France / Citroen / Using Clarion AutoPC; as of now, the main TSP that PSA has been cooperating with is Energy。
Egery / Europe / PSA / Founded by PSA Peugeot, Citroen and Vivendi; providing platforms in French, English, Italian and Spanish
Fiat Targa Services / Europe / Fiat / Founded by Fiat
G-Book / Japan / Toyota / Toyota owns 75% of the company; providing the services of navigation, traffic information, daily life related information and the linkage to internet.
TSP / Region or country / Automakers / Explanation
Inter Navi / Japan / Honda / Founded by Honda; providing the services of LBS, traffic information, daily life related information, weather conditions, communications/ telecommunication and navigation.
CompassLink / Japan / Nissan / Jointly founded by Nissan, Hitachi and NTT
ATXTechnology / The US / Ford/Linclon
Mercedes
Benz
Infinity
Jaguar
BMW / The largest independently operated TSP in the US
Data source: IT IS Project of the ITRI (Dec. of 2004)
B、 Extrapolated predictions on the sales of OB systems
As of now, the US, Europe and Japan are the three biggest markets of the OBUs in the world. The compounded annual growth of the US OBU market will be 26% of the world from now till 2010 because the large automakers in the US have put in a lot of effort in the promotional campaigns. In 2003, the monetary value of the global telematics market was US$ 6.2 billion, the sale of OB systems comprised 75% of it. The percentage will drop to 60% in 2010 due to the dropping of the prices of OB systems. Please see Fig. 3 and 4.
Data sources: Telematics Research Group and IT IS Project of the ITRI (Dec. of 2004)
Fig. 3 Extrapolated prediction on the sales of OB systems in the US, Europe and Japan from 2006 to 2010
Data sources: Telematics Research Group and IT IS Project of the ITRI (Dec. of 2004)
Fig. 4 Extrapolated prediction on the global OBU market from 2006 to 2010
C、 The reasons for oversea companies to invest in the OBU industry of Taiwan
a. The companies in the OBU trade of this country are relatively weak in the areas such as navigation, software and communication networks; while some of large oversea companies have acquired mature technologies in these areas. In addition, the companies in the OBU trade of this country have acquired the technologies used for the fabrication of OBUs so that they are able to cooperate with the oversea software and service providers.
b. For the time being, most people in China would not spend extra money to purchase a whole set of OBU or service due to its lower income per capita; we suggest oversea companies establish a factory in Taiwan so as to use Taiwan as a springboard to the Chinese market and other countries in the world.
IV. Production Cost
A、 Land rent Cost
a. Rents at the Hsinchu Science-based Industrial Park
Table 4 Land rent at the Hsinchu Science-based Industrial Park
Unit: NT$
Category / Area (m2) / Rent (per month)Land / Over 2,000 / NT$ 49/ m2
Standard plant / First floor / 531.3~1280.4 / NT$ 122/ m2
Second floor / 531.3~1227.6 / NT$ 115/ m2
Third floor / 662.97~1346.4 / NT$ 106/ m2
Fourth floor / 662.97~798.6 / NT$ 99/ m2
Deluxe plant / 1485 / NT$ 204~325/ m2
Incubation center / 80
160
240 / NT$ 184/ m2
Dormitories / Single room / 15~18 / NT$2,250~2,950/unit
Double room / 15~21 / NT$1,850~3,300/unit
Family home / 100~290 / NT$10,550~33,300/unit
Note: The above rents are adjusted on the basis of announced rents for the current year.
b. Rents in the Tainan Science-based Industrial Park
Land and plant buildings within the Tainan Science-based Industrial Park are leased, and will not be sold. The government will set and adjust rents on the basis of amortized cost at the time of development and subsequent yearly changes in real estate and land value taxes. Rents within the Tainan Science-based Industrial Park will consequently be lower than those outside the park. Land shall be leased for periods of 20 years, and plants leased for periods of one year. The following rents are currently charged:
Units: NT$
Land / 20 years / 12.9
Plants / 1 year / 103~120
Note: Land rents will be adjusted on the basis of announced land prices, public facility development costs, and laws and regulations.
B、 Labor Cost
Table 5 Average monthly wages for workers in different industries in Taiwan
Unit: NT$
Year / Ave. 2001 / Ave. 2002 / Ave. 2003Mining and quarrying / 44,264 / 45,006 / 47,263
Manufacturing / 38,586 / 38,565 / 39,583
Electricity, gas & water / 93,091 / 89,591 / 91,034
Construction / 37,746 / 36,848 / 37,219
Trade / 39,760 / 39,202 / 39,799
Accommodation & eating-drinking places / 25,991 / 25,828 / 25,181
Transportation, storage & communication / 53,350 / 51,564 / 51,396
Finance & insurance / 62,625 / 65,767 / 64,693
Real estate& rental & leasing / 42,604 / 40,714 / 39,872
Professional, scientific & technical services / 53,191 / 49,587 / 50,990
Health care services / 54,701 / 54,115 / 55,999
Cultural,, sporting & recreational services / 41,242 / 39,489 / 40,861
Other servies / 31,157 / 30,525 / 30,057
Source: Monthly Bulletin of Earnings and Productivity Statistics and Annual Report of Earnings and Productivity Statistics published by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, Jan. 2004
V. Taxation
Table 6 Individual Consolidated Income Tax Rates
Units: NT$
Net consolidated income / Tax rate / Progressivedifferential / Tax payable
0—370,000 / x / 6﹪ / – / 0 / =
370,001—990,000 / x / 13﹪ / – / 25,900 / =
990,001—1,980,000 / x / 21﹪ / – / 105,100 / =
1,980,001—3,720,000 / x / 30﹪ / – / 283,300 / =
3,270,001–– / x / 40﹪ / – / 655,300 / =
Table 7 Profit–Seeking Enterprise Income Tax Rates
Taxable income (P) bracket / Tax rate / Progressive differential / Quick formulaLess than NT$50,000 / 0 / –
Less than NT$100,000 / 15% / None / 1. When P is less than NT$71,428: T= (P–50,000x1/2
2. When P is greater than NT$71,428: T=Px0.15
Over NT$100,000 / 25% / 10,000 / T=Px0.25–NT$10,000
Note: T is the amount of tax.
VI. Investment Incentives
A、 Preferential Taxes
The ROC Government enacted the Statute for Upgrading Industries in 1991 to develop a favorable environment for foreign and overseas Chinese investors in Taiwan and to encourage investment by foreign companies for the purpose of upgrading the ROC’s industrial base. On January 1, 2000, the statute was amended to extend preferential tax measures for another 10 years until December 31, 2009. These measures are detailed in the chart below:
Incentive Measure / Nature of Incentive /Accelerated depreciation of equipment and facilities / Equipment and facilities used exclusively for R&D, experimentation, and quality control purposes, and equipment, machinery, and facilities that are utilized for energy conservation or that use new and clean energy, are eligible for an accelerated depreciation period of two years. If there is any residual post-depreciation service life remaining following the accelerated depreciation period, depreciation may be continued for one or several years within the service life of the assets as specified in the Income Tax Law until the assets are fully depreciated.
Investment in automation equipment or technology / Companies may deduct 5% to 20% of the amount of investment in these areas from their profit-seeking-enterprise income tax over a five-year period beginning with the year in which the investment is incurred.