TALKING POINTS FOR FOREIGN INVESTMENT -FILM TEXTILE INDUTRY
I. Investment Niche
A、Taiwan textile productivity dominates the top position in the world with technical supremacy.
Taiwan has always been the PVC production kingdom, reputed for its first position in the fiber glass production world widely for the lower cost and technical superiority. There leaves much room for production of fine fiber glass while combining with. The development effort rendered by the upstream and downstream, it is able to develop the PVC/fiber glass film fabric with high performance and low cost, the key point for the foreign investment in Taiwan.
B、The film textile promises a new application market.
Among the textile product, the film textile appears to have a variety of brand new application, in recent year; it is used as the building material, becoming “the sixth building material” besides stone, brick, concrete and steel rebar and promising a huge potential market pends for exploration.
C、Taiwan is the nearest gateway to China giant market.
As a whole, Taiwan owns an integrated upstream, midstream and downstream in the film textile industry and its manpower and technology are good enough to produce high value production, plus it closes to the china mainland, the utilization of low cost labor in china will result certainly the low cost merchandise. When the technical breakthrough achieves in the film textile, there is sure a golden opportunity to success.
Fig. 1 The industrial structure of film textile used as building material
II. Market Analysis
A、Analysis of Market status and Scale
a. Global market scale
The annual consumption of building film fabric in Taiwan amounts to 25,000 square meters and the annual global consumption, 500,000 square meters as shown in fig. 2 below. The total installation cost is about NT$15,000/per square. For Taiwan alone, the market demand totals NT$3.75 million and the global market, NT$7.5 billion.
Fig. 2 Taiwan global market share in film fabric
Source: Textile Institute, ITIS, 2005.11
b.The major film fabrics used as the building material are PTFE and PVC in which the base fabrics are fiber glass and polymer. The former presents better strength and weather resistance, but higher production cost. The latter is weaker in strength and weather resistance, but lower production cost, however receives broader application.
Table 1 Installation cost for film fabric
Unit installation cost/1000㎡ including material, engineering, adjustment and installationMaterial / Film fabric/Euro / Film +Steel/Euro
PVC-coated PET / 80 – 100 / 200 – 900
PTFE – coated fiber glass / 200 – 700 / 300 – 1200
Source: www.skyspan.co; Textile Institute, IT IS 2005.11
Table 2 Comparison of physical composition of film fabric
Polymeric fabric / Fiber glass fabricBase layer / PVC / PVC / PVC / None / None
Surface coating / Acrylic / PVF laminate / PVC-coating / PYFE / Silicone
Service span (yr) / 8 – 10 / 12 – 15 / 12 – 15 / >30 / >30
Aging proofing / General / Good / Good / Very good / Very good
Self-cleaning / General / Good / Good / Very good / Very good
Permeable to light / Good / Good / Good / Good / Very good
Fire Proofing / Good / Good / Good / Very good / Very good
Bend ability / Very good / General / Good / Bad / General
Source: Textile Institute, IT IS 2005,11.
B、Present and Future Marketable Opportunity
a.Technical bottleneck for film fabric
The coating and laminating of PVC are a matured technology for Taiwan manufacturers, but it is very hard for PYFE. PTFE has high performance in moist resistance, water proofing and high air permeability. PTFE is UV resistant, hard in reprocessing. It is a new challenge to the film fabric industry.
b.The size of Taiwan is small and the local demand is limited. When Taiwan manufacturers plan to develop a new product, in most cases, they are looking forward to the overseas market in which China mainland is the great market they desire. For 2008 Olympic Games, they have built two huge gyms decorated with film fabric; the next potential will be the gym in every university. For short term, the gym is an imminent demand and for long term, the film fabric will enter the house, used in landscaping. Taiwanese firms have close knowledge of China market, accessible at any time.
c.Timing for Taiwanese Firms to Enter the Market
The starting point for Taiwanese firm to enter this market shall begin with precision product in good quality and low cost. Taking PVC as an example, Taiwan has been a PVC kingdom with low cost in material and high technology in processing. For this reason, Taiwanese firms have a strong willingness to develop the PVC film fabrics. The base fabric to be selected will be the fiber glass because Taiwan is number one country in the fiber glass production and the associated downstream firms have a matured technology. To meet the high quality and product variance, fiber glass shall be the best choice for new development. However, Taiwan is still short of technology to produce the fine filament of fiber glass. The trial production of film fabric will start with the course denial fiber glass, later on, the upstream and down stream shall concentrate the efforts to develop the high performance and low cost PVC/fiber glass film fabric.
III. Competition Analysis
A、Major Competitors
At present time, almost about 1/3 of building film fabric consumed in China is imported from Ferrari, France; whose main product is PVC, a small portion (PTFE) is supplied by Chukoh Chemical. So Ferrari and Chukoh are our major rivals in China.
Table 3 List of building film fabric manufacturers
Upstream / Fiber glass filament / PFG Fiber Glass, Taiwan Glass, Fulltech, Fu Long, A Johnson Composites IncFiber glass fabric / Formosa, Taiwan Glass, Taiwan Wire and Cable
Polymeric filament
Polymeric fabric / Hoyu
Midstream / PVC coating/laminating / Muster Virtue Plastic, Telling Fine, Formosa, FRG Formosan Rubber Group,
PTFE coating/laminating / Taiwan Du Pont, Yeu Ming Tai
Silicon coating/laminating / 祥宇
Downstream / Cutting/patterning / Taiwan Taiyakogyo, Tiger Taiwan
Exhibition / BIGDOMECORPORATION
Film fabric plant / 1. Ferrari, France
2. Mehler, Germany
3. Sioen, Belgium
4. Supertex, Korea
5. Chemfab, USA
6. Duraskin Germany
7. Chukoh chemical, Japan
8. Taiyo Membrane Corporation
9. Birdair, USA
10. Shanghai C+M germany
11. Shyspan, Europe
12. Naizil, Canada
13. Seaman, USA
14. Fiberplon, Germany
15. Fastilo, Germany
16. Geiger, USA
17. Buro Happold, UK
18. Landrell, UK
b. Advantage of Foreign Investment in Taiwan
(a) For the fabric alone, Taiwan has the number one periodicity in fiber glass, high technical standard in process in the down stream. Nothing to say the top technical quality in PVC reprocessing.
(b) Taiwan cherishes sufficiency in fiber production, n¥matured technology and workmanship in coating and laminating in which Formosa is one of the greatest five PVC manufacturers of the world.
(c) Now china is the world manufacturing center with rapid economic growth. If setting manufacturing plants on Taiwan, the skilled engineers and high productive technique will result high value product while the lost cost labor, it warrants the outcomes of high quality and low priced products.
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$10,550~33,300/unit
Note: The above rents are adjusted on the basis of announced rents for the current year.
b. Rents in the Tainan Science-based Industrial Park:
Land and plant buildings within the Tainan Science-based Industrial Park are leased, and will not be sold. The government will set and adjust rents on the basis of amortized cost at the time of development and subsequent yearly changes in real estate and land value taxes. Rents within the Tainan Science-based Industrial Park will consequently be lower than those outside the park. Land shall be leased for periods of 20 years, and plants leased for periods of one year. The following rents are currently charged:
Units: NT$
Category / Term / Rent (m2/month)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 / Progressive differential / Tax payable0—370,000 / × / 6% / – / 0 / =
370,001—990,000 / × / 13% / – / 25,900 / =
990,001—1,980,000 / × / 21% / – / 105,100 / =
1,980,001—3,720,000 / × / 30% / – / 283,300 / =
3,270,001–– / × / 40% / – / 655,300 / =
Table 7 Profit–Seeking Enterprise Income Tax Rates
Taxable income(P) bracket / Tax rate / Progressive differential / Quick formula
Less 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.
Investment in recycling and pollution control equipment or technology
Investment in equipment or technology for the use of new and clean energy, energy conservation, and industrial wastewater recycling
Investment in equipment or technology for reducing greenhouse gas emissions and enhancing energy efficiency
Investment in the hardware, software and/or technology that can promote an enterprise’s digital information efficiency, such as the Internet and television functions, enterprise resource planning, communication and telecommunication products, electronics and/or audio visual equipment, and digital content production
Research and development / l Companies may deduct 35% of the amount of their investment in R&D or personnel training from their profit-seeking-enterprise income tax over a five-year period beginning with the year in which the investment is incurred.
l Companies may deduct 50% of the amount of their investment in R&D or personnel training that exceeds the average annual amount of their investment in R&D or personnel training for the previous two years from their profit-seeking-enterprise income tax.
l The total amount deducted from tax due per year under the previous two items may not exceed 50% of the company's profit-seeking-enterprise income tax due for that year. The amount deducted during the final year, however, is not subject to this limitation.