1990-1995: Taiwanese manufacturers focus on production activities in the initial stage; and are rarely involved in the activities of marketing and R&D.
1996-2000: With the rising familiarity with the local environment and talent, Taiwanese IT manufacturers begin to realize that if they move partial R&D activities to Mainland China, they can employ local project personnel who have basic science and engineering training with cheap wages, thus reducing manufacturing cost. In the early stage, Taiwan’s IT manufacturers adopted a division of labour mode for high/low product levels between Taiwan and Mainland China, in other words, the activities of R&D design were maintained in Taiwan, and the developing activities of process technology stayed in Mainland China.
2001-2005: In consideration of costs and management, most Taiwanese IT manufacturers choose factory sites as the R&D centre; therefore most IT manufacturers distribute their factories across East and South China, only a few game and software manufacturers choose to set up factories in North China with fragmentary distribution. As the production rates of Taiwan’s IT manufacturers rise substantially in Mainland China, the patterns of division of labour of manufacture shift to the labour-division mode of test- and mass-production after 2000. In a situation where the two sides suppress ‘Three
Direct Links’ across the Taiwan Straits for political reasons, the R&D activities of Taiwanese IT manufacturers in Mainland China shift quickly from the stage of accessing mass production to the stage of product development. In this stage, Taiwanese engineers come and go on both sides of the Strait.
Among the largest-scale 500 foreign-capital enterprises for import and export in Mainland China in 2004, 249 were IT manufacturers, and 70 came from Taiwan; hence the proportion of Taiwan manufacturers was 28%. From the viewpoint of Taiwanese IT manufacturers’ contributions in Mainland China in 2004, the scale of imports and exports reached US$ 112.3 billion: The export value was US$62 billion and import value US$50.3 billion; the total favourable balance was up to US$11.7 billion, which represented 23.3% of the import value. If we compare this with the same sample group of 2002, we find there were 37 manufacturers which were on the list for the first time, and 23 of them were listed first in the group. All the information shows that the production scale of Taiwanese IT manufacturers in Mainland China has a tendency to expand gradually.
At the same time, if we analyse 33 Taiwanese IT manufacturers listed on board in 2002 and 2004, we find that though the import value rose to US$18.9 billion, since the export value was US$30.1 billion, a US$3.89 billion of unfavourable balance (24.6% of the import value) has already shifted to US$7.28 billion of favourable balance (20.9% of the import value), which shows that according to the trend where large MNC plants ask Taiwan IT manufacturers to raise production proportions in Mainland China, the orders for export which originally created foreign exchange for Taiwan have already been quickly transferred to China.
The degree of dependence on Taiwan’s exportation to China had reached 37.23% by 2004, and the trade surplus exceeded $50 billion. The estimated amount of Taiwan’s investment in China is more than US$50 billion, which is more than 40% of Taiwan’s total foreign investments.
While the export dependence of Taiwan on China is getting deeper than before on the one hand, the import dependence of China on Taiwan is decreasing on the other hand (Table 12). For the Taiwanese electronic components industry in particular, the export dependence was 52.8% in 2004, representing a 2.09 point increase over the previous year.
Table 12
Degree of import/export dependence between Taiwan and Mainland China Export dependence of
Taiwan on China
Import dependence of China on Taiwan Degree of import/export
dependence
2003 2004
+/－ 2003 2004
+/－
The Economic System 34.27 37.21 2.94 11.96 11.54 -0.42
Electronic Components 50.67 52.76 2.09 21.48 22.57 1.09
Manufacture 34.47 37.42 2.95 12.63 12.44 -0.19
Electronic Equipment (Radio, TV & Communication)
13.06 13.88 0.82 8.56 7.31 -1.25
Source: Shen (2006/3) The Direction of Taiwan’s Industrial Development under the Changing Global Economy and trade，IDB/MOEA
In 1995, the percentage of production in Taiwan for information hardware manufacturing still remained 75%, the percentage of investment in overseas production in Mainland China was 14%, and in other foreign countries (mainly in Southeast Asia) was 11%. In 2000, the percentage of production in Mainland China reached 31.3% and 19.6% in other foreign countries, and only 49.1%
production was left in Taiwan. The percentage of Taiwan’s information hardware industry production going abroad (especially to Mainland China) increased year by year, and reached 79.5%
in China and 13.7% in other countries by 2005, with only 6.8% remaining in Taiwan (see Figures 4a and 4b).
In 1999, the percentages of “power supply” and “casing” among the products of information hardware produced in Mainland China reached over 60%, “motherboard”, “monitor” and “CD Rom/DVD Rom” were around 35%-45%. It is worth noting that the laptop PCs were mainly produced in Taiwan in 2000 (95.8%), however after that, the production percentage of laptop PCs in Mainland China rose rapidly to reach 94% by 2005. The also happened with other information hardware products. For instance, the percentage of “CD Rom/DVD Rom”, and “Digital Camera”
etc. produced in China was over 90%, and “motherboard” and “LCD monitor” also 80% (see Figures 7.5a and 7.5b). These two figures also show the transformation of information hardware products, with some products that show up in Figure 7.5a for 1996-2000 not appearing again in Figure 7.5b, such as LCD monitors, LCM, and digital cameras, etc.
To sum up, the impact of Mainland China on Taiwan’s ICT sectors can be divided into four stages over the past 10 years: i) before 1997, mainly producing in Taiwan; ii) between 1997-2000, both Taiwan and Mainland China expanding; iii) between 2000-2002, expanding in Mainland China and keeping the same size in Taiwan; iv) after 2002, expanding in Mainland China and decreasing in
Taiwan.
Figure 4a
Overseas production by Taiwan’s Information Hardware manufacturing, 1995-2000
Source: MIC, 2006/3
China China
China China
China China
Taiwan Taiwan
Taiwan Taiwan
Taiwan Taiwan
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1995 1996 1997 1998 1999 2000 year
China Tailand Malaysia Others Taiwan
Figure 4b: Overseas production by Taiwan's Information Hardware manufacturing, 2000-2005
Source: MIC(ICT Country Report)；2006/3
Note：Data are based on the shipment value and exclude the projectors
China
Figure5b: Products produced overseas, 2000-2005
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