Developing High-Tech Industry through Establishing ICT Cluster

ICT Seminar in Tokyo —1—

Developing High-Tech Industry through Establishing ICT Cluster

Kung Wang PhD.Prof., National Central University

Advisor, Industrial Technology Research Institute

Taiwan, R.O.C

Sep. 1, 2004


Transition of Taiwan’s Economy and Industrial StructureA

s p

erce

nta

ge

of

GD

P (

%)

1951 1964 1971 1981 1991 2002

Agriculture Manufacturing Service

Labor-Intensive industry

Technology-Intensive Industry

Knowledge-Intensive Industry

Capital-Intensive Industry

GDP(USM$) 1,614(1952) 48,600(1982) 290,540(1999) 281,508(2002)GDP/Capita(US$) 196(1952) 2,819(1982) 13,114(1999) 12,572(2002)

Manufacturing-Led Investment-Led Innovation-Led

67%

26%

2%

46%

15%

32%

Source : Directorate-General of Budget, Accounting and Statistics, R.O.C., Monthly Bulletin of Earning and Productivity Statistics, Taiwan


Production Value(US$M) Industry

1999 2000 2001 2002 2003 CAGR(%)

World Position (2001)

Information (Hardware) 21,023 23,081 20,124 17,443 11,864 -13.3% 4

Communications 3,645 4,322 5,076 5,230 6,240 14.3% 19

Opto-Electronics 8,328 14,000 13,104 18,026 17,449 20.3% 3

IC 13,234 22,434 15,054 18,864 23,551 15.5% 4

World Position of Taiwan’s IT Industry

Exchange rate for 2003： US$1.00 = NT$35.00. Figures do not include overseas output (e.g. China)

Source：MIC,IEK (2004/02)


35.3%

72%

34%35.5%

26.8%23.6%

19.4%

66%

36.4%

9.7%

0

10

20

30

40

50

60

70

80

Mic

roco

mpute

r

Color C

RT

Mai

nboard

Switch P

ower S

upply

Term

inal

Mono C

RT

Keyboar

d

Graphic

Car

d

Mouse

Scanner

441

10,500

5,90010,370

3,1291,394

8,499

4,530

5,105

2,295

Data Source： IEK, ITRI (2001/10)

Taiwan Electronic Products Worldwide Market Share in 1990 Unit： thousand unitsmarket Share (%)

http://store.yahoo.com/cgi-bin/clink?jpcl+shopping:dmks/___y__+09018y14400.html

http://store.yahoo.com/cgi-bin/clink?wasong+shopping:dmks/____+0106020401002.html

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http://store.yahoo.com/cgi-bin/clink?wasong+shopping:dmks/______+0108010803006.html

http://store.yahoo.com/cgi-bin/clink?jpcl+shopping:dmks/crt+40013x6g1000.html


market Share (%)Unit： thousand unitsTaiwan Electronic Products

Worldwide Market Share in 2002

Data Source： IEK, ITRI (2003/08)

39463

18,380

58732

84675

2880

1348210450

57742774 1996 2764

98008%23%57%

64%80%

7%

38%

23%

30%

67%

51%39%

0

20000

40000

60000

80000

100000

0%

20%

40%

60%

80%

100%


1997 1998 1999 2000 2001 2002 COUNTRY

patent rank patent rank patent rank patent rank patent rank patent rank

U.S. TOTALS

61,707 1 80,291 1 83,905 1 85,072 1 87,610 1 86,977 1

Japan 23,179 2 30,840 2 31,104 2 31,296 2 33,224 2 34,859 2

GERMANY 7,008 3 9,095 3 9,337 3 10,234 3 11,261 3 11,277 3

TAIWAN 2,057 7 3,100 7 3,693 5 4,667 4 5,371 4 5,431 4

FRANCE 2,958 4 3,674 4 3,820 4 3,819 5 4,041 5 4,035 5

UNITED KINGDOM

2,678 5 3,464 5 3,572 6 3,667 6 3,965 6 3,838 6

SOUTH KOREA

1,891 8 3,259 6 3,562 7 3,314 8 3,538 8 3,766 7

China 81 25 160 22 155 22 179 23 237 22 289 21

Source:Indicators of science and technology Republic of China,NSC

Remarks: Patents per capita, Taiwan ranks no.2 in 2001

U.S. Patents Granted


Human Resource Development• Provide on-the-job training • Promote cooperative work/ study education exchange programs• Recruit overseas talent

Human Resource Development• Provide on-the-job training • Promote cooperative work/ study education exchange programs• Recruit overseas talent

Infrastructure

• Develop industrial parks• Found incubation centers • Establish NII (National information Infrastructure)

•Support market and Technology forecast study

Infrastructure

• Develop industrial parks• Found incubation centers • Establish NII (National information Infrastructure)

•Support market and Technology forecast study

Financial Means•Tax incentives• Encourage venture capital investment• Invest government funds• Provide low-interest loans

Financial Means•Tax incentives• Encourage venture capital investment• Invest government funds• Provide low-interest loans

Technology Support

• Strengthen R&D systems• Subsidize R&D,SBIR• Promote international cooperation and strategic alliances

Technology Support

• Strengthen R&D systems• Subsidize R&D,SBIR• Promote international cooperation and strategic alliances

Industry

Government Development Strategies for the Hi-Tech Industry


Providing the Infrastructure

Establish Science-based Industrial Parks• Provide the infrastructure for the development of hi-technology industries

Establish Science-based Industrial Parks• Provide the infrastructure for the development of hi-technology industries

Establish Processing Zones• Attract Foreign direct investments • Develop external trade.• Introduce state-of-art technology and increase employment opportunities

Establish Processing Zones• Attract Foreign direct investments • Develop external trade.• Introduce state-of-art technology and increase employment opportunities

Create Incubator Centers• Offer assistance to technology-oriented entrepreneurs

and business Start-ups

Create Incubator Centers• Offer assistance to technology-oriented entrepreneurs

and business Start-ups

Develop Software Parks• develop the niche products for the world market

Develop Software Parks• develop the niche products for the world market

Promote Research Parks • Provide innovative mechanisms through cooperation

between R&D centers, universities and industries

Promote Research Parks • Provide innovative mechanisms through cooperation

between R&D centers, universities and industries

Initiating Industrial Cluster

Enhancing Technology Innovation Capacity


3C Gorwth in Taiwan

Sources:STIC(2003), this study.

Output Valuein 1991

(NT$ thousand)

Averageemployees

in 1991

OutputValue in

2001(NT$ thousand)

Averageemployees

in 2001

AverageAnnualRates of

Increase inOutput

AverageAnnualRates of

Increase inEmpolyees

TaipeiCounty

198,178,959 35.62 763,554,018 41.55 28.53 1.66

Taoyuan 163,020,240 67.70 416,864,910 59.09 15.57 -1.27TaipeiCity 89,796,271 38.27 410,168,778 74.82 35.68 9.55

HsinchuCity

50,721,250 37.46 310,107,786 154.26 51.14 31.18

HsinchuCounty

54,093,673 61.71 289,682,046 156.14 43.55 15.30

Kaohsiung

76,498,711 146.41 190,711,551 140.63 14.93 -0.39

Taichung 35,289,951 35.04 54,309,389 31.02 5.39 -1.15


100238 4501737

24433406

6706

11565

13664

29,804

25,244

0

5,000

10,000

15,000

20,000

25,000

30,000

'83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

GROWTH OF SALES in HSIPGROWTH OF SALES in HSIPUS$ Million

Taiwan’s “Silicon Valley” organized and administered by NSC Taiwanese home-grown firms


Sales by Industry in Hsinchu Science Park

Computers &Peripherals

72%

IC14%

PrecisionMachinery &

Materials1%

Biotechnology1%

Optoelectronics3%

Telecom9% Computers &

Peripherals42.0%

IC43.3%


Materials1.3%

Biotechnology0.2%Optoelectronics

2.8%

Telecom10.4% Computers &

Peripherals15.7%

IC65.8%


Materials0.7% Biotechnology

0.2%Optoelectronics11.0%

Telecom6.6%

1988:$1.74 Billion

1993:$4.84 Billion

2003:$25.2 Billion

Source: Science Park Administration(Feb,2004)


3C Output Value in Taiwan (1991)

Sources:STIC(2003)

ICT Seminar in Tokyo —13— Sources:STIC(2003)

3C Output Value in Taiwan (2001)


Development of HSIP1974 2003

Deliberation Establishment Burgeoning

1980 1995

•Established ITRI in 1973•ITRI established the EIRC• Transfered technology from Texas Instruments, Philips, RCA, IMR,…etc..•Established the HSIP in 1980

•The spin-off enterprises of ITRI got into HSIP•The capital was guided to high-tech industries by policies•Recruited the high-tech talents by policy•The IT industries raise the finance through the stock market•Venture capital was getting more important since 1990

•Government stimulate high- tech industries by offering various concessions•The area of SIP expanded to Chunan, Tungluo and Tainan•The firms was stimulated to do independent R&D by a reward system


Current Status of HSIP

Industry Enterprises Employees Capital(Billion NT dollars)IC 136 60,459 695.6

PC and peripheral 50 12,813 106.6Communication 60 6,869 34.2Optoelectronics 56 16,939 116.8

Precision machinery 15 893 4.2Biotechnology 18 712 3.3

Total 355 98,685 960.7

Industry Distribution in HSIP (by December 2002)

4% 7%

89%

Privatesectors

Government

Overseasinvestments

Fund sources of park enterprises (by July 2003)

25%

28%22%

18%

1% 6% College

Senior HighSchoolBachelor

Master

PhD

Other

Human resource distribution in HSIP(by July 2003)

Features of HSIP•Vertical disintergration in IC industry•SME dominant•Highly centralized information electronics industry


The Network---Talent and Technology Network

HSIP

ResearchInstitutes

Technology Transfer

Spin-off

Strategy Alliances

Open Lab/Incubators

IndustrialAssociations

TSIA

TEEMA

AAISIP

TheReturnees


Infrastructure1980 Established the Park Administration2001 Rules of Application for Admission to Science-based Industrial Park for Service Industry

Capital1978 The tax of stock exchanged was cut to half1980 The liberalization of interest rates1983 The liberalization of capital market and full deregulation of control over foreign exchange1983 Venture Capital Management Rules1983 Investment Encouragement Statues1985 The government appropriated a seed fund amounted to NT$800mn1984 The liberalization of finance1989 The tax of stock income was released1991 The government appropriated a seed fund amounted to NT$1600mn

Policy on HSIP

Talent and Technology1950 Rules for Career Counseling for Returnees1955 Returnees Career Program1955 Rules for Job Application and Assignment for Returnees1969 Rules for Career Counseling for Returnees1971 Rules for Recruiting Oversea Talents 1973 Established ITRI1980 Established HSIP1983 Advanced Level Technical Talents Cultivation and Recruitment Reinforcement Program1985 Rules for Encouragement and Guidance of Science and Industrial R&D Talent Cultivation and Internship in HSIP2000 Rules for Tax Deduction with Investments in R&D and Personnel Cultivation


ITRI-Innovation Engine


ITRI: Key Factors in its Relationship to Taiwan’s High-Technology Development

Major Government research funding An intensively interactive partner to local industry A mechanism for disseminating technology and

information to industries, and speed up commercialization of technology

The role of researchers and managers technology leaders / industrial leaders resource of talented people

Encouraging entrepreneurship


ITRI played a significant role to upgrade Taiwan as a powerful player

• establish the foundations of Taiwan’s semiconductor industry– spin off the United Microelectronics Corporation (UMC) in 1979– spin off the Taiwan Semiconductor Manufacturing Company (TSMC) in

1987

• make breakthroughs in Flat-panel Display technologies– 7 local TFT LCD makers and 4 color film makers were established– with investment of some US$ 3 billion– has reached the world-class level

• support the Information Industry– started development of a basic input-output system (BIOS) for IBM

compatible PCs– powers Taiwan to become the world’s fourth largest producer of

information industry products in 2001– with a total output value of US$ 359.73 billion


Tech. Development stages of IC Industry in Taiwan

4 key milestones

UMC→first IC firm established

TSMC→foundry

Vanguard→own-brand DRAM

SoC Alliance→innovation oriented

UMC 80→ ERSO(5-3.5um), RCA

TSMC 87→ ERSO (1.5-1um)TI-Acer 87→ TI, IBMWinbond 87→ Toshiba Mosel 87→ SiemensMXIC 89→ MatsushitaVanguard 94→ ERSO (0.35um), EtronPowerchip 94→ MitsubishiNan Ya 95→ Oki, IBMProMos 96→ SiemensWSMC 98→ Winbond, ToshibaWinbond 02→ Infineon(0.11um)Powerchip 03→ Elpida (0.1um)

main tech source ERSO/ITRI

ERSO/ITRI IC

FoundryIDM

DRAM

SoC Design Center

Importing → Own tech R&D→ International alliance


K.S.F. for Taiwan IC industry

• Government policy– R&D: ITRI– HSIP

• Continuous investment in capital spending and R&D– Long-term and reliable capital sources

• Skilled human resource• Innovative Business model


Challenge-industry transformation

• Mainland China becomes Manufacturing Center• Over 60% IT Production in China is contributed by Taiwan companies

Taiwan($17.4B)

36%

47%

Others 17%

Mainland China

2002($48.3B)

Worldwide Distribution of Manufacturing of Taiwan IT Industry-B

y Revenue

Source： ITRI (2003/10)

2003($57.1B)

Worldwide Distribution of Manufacturing of Taiwan IT Industry-B

y RevenueOthers($9.1B)

16%

MainlandChina($36

B)63%

Taiwan($12B)21%


Hsinchu ChallengeFacing the transformation to China, instead of maintaining

our manufacturing advantage, it is needed for Taiwan to

keep upgrading itself and transform into a design and R&D

center, to maintain design and technology R&D with high

added value.

To cultivate of high-tech talents and to create a good

environment for investment, to attract high-tech talents

return Taiwan are urgent tasks.

Documents

Developing High-Tech Industry through Establishing ICT Cluster