Strategic Thinking for Taiwan’s Next Generation Industry Development

T.C TuGeneral Director

Industrial Economics & Knowledge Center, ITRI

August 3, 2006

Background

Bottlenecks encountered in Taiwan’s industrial developmentBottlenecks encountered in Taiwan’s industrial development

Discord persists among the business community,Discord persists among the business community,

government, academics and research institutes in regard togovernment, academics and research institutes in regard to

directions and strategiesdirections and strategies

Take advices from the industrial think tanksTake advices from the industrial think tanks

Ten-year visions decide today’s strategiesTen-year visions decide today’s strategies

8-28-2

8-3

Idea and Consensus of A Balanced Economy

Social Justice

Economic Growth

Weak StrongStrongLow

High

2015

Sustainable Environment

Weak

Q1: Do we want an equilateral rectangle or optimum asymmetry?

Q2: Sustainable environment Quality life?

Q1: Do we want an equilateral rectangle or optimum asymmetry?

Q2: Sustainable environment Quality life?

8-4

What could we possibly be?

Innovator ofInnovator of Soft EconomySoft Economy

Innovator ofInnovator of Soft EconomySoft Economy

Value Initiator and CValue Initiator and Championhampion

Value Initiator and CValue Initiator and Championhampion

Pioneer of Pioneer of New Lift StyleNew Lift Style

Pioneer of Pioneer of New Lift StyleNew Lift Style

Hub of Hub of International International

NetworkNetwork

Hub of Hub of International International

NetworkNetwork

8-5

Ideal Positions for Today vs. 2015: International Value Chain

0

50

100

A3 A2 A1 0 B1 B2 B3

今日台灣明日台灣

0

10

20

30

40

50

60

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Moving Toward Global Moving Toward Global resource integrationresource integration

Respondents to Positioning Displacement

Taiwan Today

Taiwan 2015

(A). Development key technologies vs (B). Integrating global resources(A). Development key technologies vs (B). Integrating global resources

(A). Developing key technologies vs (B). integrating global resources

(A). Developing key technologies vs (B). integrating global resources

8-6

Ideal Positioning for Today vs. 2015: Industry Driver

0

50

100

150

A3 A2 A1 0 B1 B2 B3

今日台灣明日台灣

0

10

20

30

40

50

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Moving toward Soft Moving toward Soft EconomyEconomy

Respondents to Positioning Displacement

Taiwan Today

Taiwan 2015

(A). Knowledgeable services vs (B). Physical product Manufacturing

(A). Knowledgeable services vs (B). Physical product Manufacturing

(A). Knowledgeable services vs (B). Physical product Manufacturing(A). Knowledgeable services vs (B). Physical product Manufacturing

8-7

Ideal Positioning for Today vs. 2015: Innovation Trigger

020406080

100120140160

A3 A2 A1 0 B1 B2 B3

今日台灣

明日台灣

0

20

40

60

80

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Moving toward GlobalMoving toward Global

Market InitiationMarket Initiation

(A). Initiated by global market vs (B). Triggered by domestic Demand(A). Initiated by global market vs (B). Triggered by domestic Demand

Today’s Taiwan

Tomorrow’s Taiwan

Respondents to Positioning Displacement

Taiwan Today

Taiwan 2015

(A). Initiated by global market vs (B). Triggered by domestic Demand

(A). Initiated by global market vs (B). Triggered by domestic Demand

8-8

Prerequisites to realize vision

1. Moderate cross-Strait relationship2. Real-time responsive policy3. Technology R&D talents4. People with commanding foreign languages

and with international perspective5. Good ICT infrastructure

Characteristics required by future Industries

1. Improved international competitiveness2. High value-added3. Developing unique technology4. Helping improving living qualify 5. Escalating a nation’s development and status in i

ts region

Source:

IEK survey result of Taiwan’s top 500 MFG firms, top 500 service firms and 500 social opinion leaders, in July 2006. Respondent rate was about 23%.

Source:

IEK survey result of Taiwan’s top 500 MFG firms, top 500 service firms and 500 social opinion leaders, in July 2006. Respondent rate was about 23%.

8-9

Aspect 5Increasing

Taiwan businesses’

overseas investment and their links to

domestic industries

Aspect 5Increasing

Taiwan businesses’

overseas investment and their links to

domestic industries

Aspect 8Consolidating

nation’s innovation

system

Aspect 8Consolidating

nation’s innovation

system

Aspect 4Developing applications

enriched with local

ingredients

Aspect 4Developing applications

enriched with local

ingredients

Aspect 3Developing

strategies for regional

repositioning

Aspect 3Developing

strategies for regional

repositioning

Aspect 2Restructuring

Industrial value chain

Aspect 2Restructuring

Industrial value chain

Aspect 1Optimizing and

balancing industry’s portfolio

Aspect 1Optimizing and

balancing industry’s portfolio

Aspect 6Instituting

mechanisms for

establishing high-quality

industries and for

competing for resources

Aspect 6Instituting

mechanisms for

establishing high-quality

industries and for

competing for resources

Aspect 7Developing and utilizing high

quality manpower

Aspect 7Developing and utilizing high

quality manpower

Industry RestructuringIndustry Restructuring

Market expansion Market expansion and creationand creation

Fundamental Fundamental elements elements

enhancementenhancement

Eight Strategic Aspects for Taiwan’s Industrial Development Over The Next Ten Years

8-10

Constructing Clusters of Next Generation Industry from a Technological Integration Perspective

Smart Materials

InformationTechnology

GeneticManipulation

Process

Functions

Organism

Conception

Nano-technology

Material applications

Artificial Intelligent

System

Biomedical materials

Sources: RAND, Taiwan 2015 Industrial Development and Technology Integration ProjectSources: RAND, Taiwan 2015 Industrial Development and Technology Integration Project

Biomimetics

Biomechatronics

Integrated Microsystems

Body

8-11

Constructing Clusters of Next Generation Industry from a Perspective of Resource Effectiveness

Renewing products and business conceptsModern process and productiontechnologies in business applications

Environment and energySustainable and eco-efficient solutions

Health and well-beingHuman approach, quality andproductivity in health care

ServicesQuality and productivityNew service businesses

Security and safetySecurity at work and in systemsInformation security

Work and leisureProductive, creative and motivatingEnjoyment and experiences in leisure

Renewing products and business conceptsModern process and productiontechnologies in business applications

Environment and energySustainable and eco-efficient solutions

Health and well-beingHuman approach, quality andproductivity in health care

ServicesQuality and productivityNew service businesses

Security and safetySecurity at work and in systemsInformation security

Work and leisureProductive, creative and motivatingEnjoyment and experiences in leisure

ICTMobility 、 Broadband communications 、 Software-intensive products and systems 、 Knowledge and content management 、 Test environments for new services & applications...

BiotechnologySystems biologyBioprocess technologyCombining biosciences with ICT

NanotechnologyInnovative nano-structured materialsNew structures for nano-electronicsNano-sensors and actuators

Materials technologyInterdependencies betweenproperties, structures and productionSurface phenomenaMaterials design

ICTMobility 、 Broadband communications 、 Software-intensive products and systems 、 Knowledge and content management 、 Test environments for new services & applications...

BiotechnologySystems biologyBioprocess technologyCombining biosciences with ICT

NanotechnologyInnovative nano-structured materialsNew structures for nano-electronicsNano-sensors and actuators

Materials technologyInterdependencies betweenproperties, structures and productionSurface phenomenaMaterials design

Application

Focus

Technology

Focus

Business Competence

& Development

8-12

Analysis and Implication of Balancing Portfolio of Industrial Technology

Dangerous area

Sideline or hedge

InsignificanceNiche market for private enterprise

Gold MineSprinting opportunity for private enterprise

PitfallResource reallocation

TreasuryFocus of governmental resources

Importance

Important(++)

Unimportant(-)

RiskRisk

Low (++) High (-)

8-13

Reviewing Opportunities for Development of Technology Industry with Globalization Thinking

Given quick circulation of technology information and most production factors, global key technology industries such as information, semi-conductor, automobile and bio-technology ones are making vertical collaboration and horizontal integration according to their value chains. No single country may resist this trend.

Given quick circulation of technology information and most production factors, global key technology industries such as information, semi-conductor, automobile and bio-technology ones are making vertical collaboration and horizontal integration according to their value chains. No single country may resist this trend.

In response to threats from newly developing countries with advantages of low-cost production, Taiwanese businesses best strategy is to go localization, control resources, and block potential competitors from leveraging international resources. This strategy is best evidenced by Taiwanese laptop PC manufacturers in China who have stopped China from establishing the industry of its own.

In response to threats from newly developing countries with advantages of low-cost production, Taiwanese businesses best strategy is to go localization, control resources, and block potential competitors from leveraging international resources. This strategy is best evidenced by Taiwanese laptop PC manufacturers in China who have stopped China from establishing the industry of its own.

Taking advantages of global resources and international markets, the Netherlands has been envied to have world-class conglomerates like Shell, Philips, ING and Unilever, to name a few

Taking advantages of global resources and international markets, the Netherlands has been envied to have world-class conglomerates like Shell, Philips, ING and Unilever, to name a few

8-14

Selecting Strategic Sectors for Selecting Strategic Sectors for Next Generation Technology IndustryNext Generation Technology Industry

The technology industry has over the past five years witnessed great change in its structure. Such changes bring both challenges and opportunities:

Profit margins minimized in manufacturing, as shown in laptop PC and motherboard manufacturers. Disruptive technologies, such as bio-technology and wireless communications, are creating new opportunities. Knowledge-enabled service, such as the application of RFID on logistics industry, is emerging. The emergence of innovative business models driven by intellectual capital has made intellectual resource planning even more important.

The technology industry has over the past five years witnessed great change in its structure. Such changes bring both challenges and opportunities:

Profit margins minimized in manufacturing, as shown in laptop PC and motherboard manufacturers. Disruptive technologies, such as bio-technology and wireless communications, are creating new opportunities. Knowledge-enabled service, such as the application of RFID on logistics industry, is emerging. The emergence of innovative business models driven by intellectual capital has made intellectual resource planning even more important.

Semiconductor and panel display industries have become the cornerstone of Taiwan’s industry. As entry barrier for international competition is getting higher, production equipment and materials will become the key to continuous development.

Semiconductor and panel display industries have become the cornerstone of Taiwan’s industry. As entry barrier for international competition is getting higher, production equipment and materials will become the key to continuous development.

The timing for development and economic spillover effects of alternative energy such as photovoltaics, and basic integrated applications such as robots, may be more important than those of biotechnology and digital contents.

The timing for development and economic spillover effects of alternative energy such as photovoltaics, and basic integrated applications such as robots, may be more important than those of biotechnology and digital contents.

8-15

Service and Manufacturing Industries As Twin EnginesService and Manufacturing Industries As Twin Engines

With infusion of ICT and biosensor technologies, the medical equipment industry can further develop home and mobile healthcare products. This will not only improve domestic healthcare quality but also lower waste of resources in national health insurance system. Furthermore, it will help ICT industry to move toward higher value-added.

With infusion of ICT and biosensor technologies, the medical equipment industry can further develop home and mobile healthcare products. This will not only improve domestic healthcare quality but also lower waste of resources in national health insurance system. Furthermore, it will help ICT industry to move toward higher value-added.

Integrated communication service and application, such as digital home technology, will serve Taiwan to benefit from designing, manufacturing and high value services, ideal for the development of a quality-pursuing society.

Integrated communication service and application, such as digital home technology, will serve Taiwan to benefit from designing, manufacturing and high value services, ideal for the development of a quality-pursuing society.

Over the past four decades, Taiwan has been unrivalled in low cost and flexible manufacturing. If Taiwan is able to further develop professional services for supply chain such as turnkey planning, warehousing and logistics service, automatic production design and so on, it should enjoy both better self sufficiency and promising profits.

Over the past four decades, Taiwan has been unrivalled in low cost and flexible manufacturing. If Taiwan is able to further develop professional services for supply chain such as turnkey planning, warehousing and logistics service, automatic production design and so on, it should enjoy both better self sufficiency and promising profits.

Developed countries, without exception, place emphasis on tourism industry. In addition to creativity in marketing and service, how to utilize technology to add value has become a key successful factor nowadays. Integration of tourism and traffic system with technology industrial resources is crucial to future development.

Developed countries, without exception, place emphasis on tourism industry. In addition to creativity in marketing and service, how to utilize technology to add value has become a key successful factor nowadays. Integration of tourism and traffic system with technology industrial resources is crucial to future development.

8-16

Developing Taiwan as an InnoIslandDeveloping Taiwan as an InnoIsland

Innovation and creativity are the root of technology and industry development. Government policy should be brought to strengthen technology industry’s basic development, which may start from education and technology development reforms.

Innovation and creativity are the root of technology and industry development. Government policy should be brought to strengthen technology industry’s basic development, which may start from education and technology development reforms.

By pronouncing to the world its determination to stress innovation and creativity, Taiwan should be able to draw attention from world class enterprises and research institutes, thus fostering international cooperation to counter-balance the threat brought forth by Korea giant enterprises and China’s cheap labors.

By pronouncing to the world its determination to stress innovation and creativity, Taiwan should be able to draw attention from world class enterprises and research institutes, thus fostering international cooperation to counter-balance the threat brought forth by Korea giant enterprises and China’s cheap labors.

Taiwan can cooperate with international institutions to design a commonly recognized indicator, for example, the National Index for Innovation And Creativity, and Taiwan should aim to score the highest in Asia Pacific region in 2016.

Taiwan can cooperate with international institutions to design a commonly recognized indicator, for example, the National Index for Innovation And Creativity, and Taiwan should aim to score the highest in Asia Pacific region in 2016.

Encouraging independent thinking and creating heterogeneous exchange environment are indeed the soil for innovation and creativity. Government agencies and R&D institutes should set performance index, using it as a tool to enhance multi-domain integration, and increase investment on relevant resources for exploratory researches and studies.

Encouraging independent thinking and creating heterogeneous exchange environment are indeed the soil for innovation and creativity. Government agencies and R&D institutes should set performance index, using it as a tool to enhance multi-domain integration, and increase investment on relevant resources for exploratory researches and studies.