Innovation capability

In order to support leading-edge research and speed up the pace of innovative breakthroughs, Taiwan has established a series of open-type national laboratories. These include the Synchrotron Radiation Research Centre, the Nano Device Laboratory, the Centre for Research on Earthquake Engineering, and the Centre for High-performance Computing, as well as various regional instrument centres. These facilities feature first-rate international standards and are able to support innovative basic research performed by outstanding scientists.

As far as applications research is concerned, ITRI and other public and non-profit research organizations have also established various open-type laboratory facilities over the past few years.

Work in such areas as electronics, information, communications, mechanical engineering, electro-optics, materials science, biotechnology, food technology and measurement technology is taking place at these laboratories, which form a comprehensive industrial technology development support system. As far as private enterprises are concerned, more and more high-tech firms are setting up their own in-house technology development departments. Besides acquiring technology from outside, these firms are investing in R&D and establishing basic R&D facilities. This expansion and improvement of R&D capability will enable the nation to further boost its scientific and technological power.

4.4.1 Changing value competences for Taiwan’s ICT

Table 4.9: IT related products and their changes of specification

Product Specifications (mainstream year)

Monitor CRT: 14” → 15” → 17” (1999)

→ TFT LCD: 15” (2001) → 17” (2004) → 17”/19” (2005) Scanner Handle scanner: B/W, Grey Scale, Colour

Desktop scanner: Colour 300 DPI (1997) → 600DPI(1998) … → 1200DPI (2001) → 1600/3200/4800DPI (2004)

Notebook PC Mono + 486 (1994) → STN + 486 (1995)

→ TFT 13”+ Pentium (1996) → TFT 14”+ Pentium III (2000) → TFT 14”+ Pentium 4 (2001) → TFT 15”+Centrino (2003) → TFT 15”/15.4”+Centrino (2004)

CDROM/DVD CD-ROM: 4X→8X(1996) … →40X (1998) → 48X (1999) →52X (2004) → DVD: 8X (2001) → DVD:16X (2004)

Modem Analog Modem: 28.8K → 33.6K (1996) →56K (1999) → Cable Modem (2000) → ADSL Modem (2001)

DSC Pixels: <1M(1998) → 2M~3M (2001) → 3M~4M (2003) → >4M (2004) Cellular Phone Mobile phone:

→ Mono TN/STN+GSM (2000)

→ Multi-Colour STN LCD+GPRS+PC CAM+MP3 Player (2004)

→ Full-Colour STN/ a-Si/LTPS TFT LCD+UMTS+PC CAM+MP3 Player (2006) Smart phone: mobile phone + personal information management

→ mobile phone + PDA (2000)

→ mobile phone + PDA + multi-media (2002)

→ mobile phone + PDA + multimedia + Internet +…

Source: data collected by authors

Table 4.10: The paths of Global Market Share for Taiwan’s ICT products 1998 LCD Monitor Notebook PC (39.2)

CD ROM (34) Source: Collected by the authors from MIC’s “Information Industries Year Book” 1990-2002, etc.

The introduction and upgrading of these ICT products and technologies mainly depend on the supply from other countries, not from domestic industrialists or research institutions, which shows that the innovative value of the originality of domestic ICT industry is insufficient for the needs of the market. However, domestic industrialists or research institutions can study or improve the

products continuously after standing firm in a field in order to maintain the market position of the follow-up products. This shows that domestic industrialists relatively lean towards continuous innovation of value, meanwhile successively strengthening the efficiency of the production lines.

Because relevant industrialists devote themselves to introducing and studying the new technology and to improving production efficiency; they continuously accumulate the knowledge and capability that form the important organizational competences which Taiwan industrialists have.

4.4.2 Foster capabilities of design

Most of Taiwan’s manufacturers focus on labour in manufacturing. The technological abilities that Taiwan’s manufacturers have been accumulating for a long time have mainly focused on mass production technology and cost control. In addition, in the course of product fabrication, even though some Taiwanese manufacturers of relevant components have not yet innovated successfully, its manufacturers have very strong technological ability in system integration and mechanical design for the integration of software and hardware .

The production of Taiwan’s communication industry equipment is still mainly producing by OEM and ODM at present. In wireless communication networks, most components come from large foreign plants, except that some components (such as WLAN’s MAC and Baseband’s chip) can be designed and produced by Taiwan; however, in the development of the applied software, Taiwan’s ability in applied software design for mobile telecommunications can be regarded as leading the whole world, such as the downloading of tinkle bells, screen savers, electronic dictionaries and integrating mobile phone functions, etc., which have already had global market impact. Therefore, Taiwan’s accumulated technological ability in wireless communication networks has mainly concentrated on system integration, mechanical design, the technology of mass production, cost control, etc..

4.4.2.1 Background of Taiwanese companies improving product design

Since 1998, because personal computers were becoming a standard product, the major IT companies have been turning the competition factor from product differentiation to product price.

For leading or reacting to the trend, major IT companies like Compaq, Dell, IBM and HP started to create new business models such as optimized distribution models, channel assembly and BTO (build-to-order), and combined these models as their global logistics strategy. By applying the new business models, these IT companies’ core activities focused only on some higher value-added activities such as branding, after-sales services and channels, with most manufacturing activities being outsourced. Their major outsourcing partners were Taiwanese companies.

When the major branding buyers tried to compete with each other by cutting prices, the PC market kept growing too. For fulfilling the orders from these branded buyers, Taiwanese IT companies have had to invest more in manufacturing capacities, either in Taiwan or in Mainland China.

However, expanding manufacturing capacities also increases the competition level between Taiwanese IT companies, because of higher costs to leave the market. This means ‘price’ also

became a key strategic variable in the PC outsourcing (manufacturing) market. Looking for ways to reduce cost became Taiwanese IT companies’ common major strategy.

Table 4.11: ‘If awards’ for 2 companies, 2002-06

Source: Data collected by the authors

For avoiding price competition, some major Taiwanese IT companies tried to find ways to differentiate their products. Branding and product design were two major strategies. Representative companies are Acer Peripheral Inc. (which became Benq in 2001) and ASUS. Although the companies’ brand has not become famous in global markets, their performance listed for ‘if awards’

has shown their efforts in product design. As the table tells us, both companies earned many of these awards in 2005 and 2006. When we look more deeply into these two companies, we find that both companies’ leadership came from Acer. This reveals the important place of Acer in the process of Taiwanese economic development.

4.4.2.2 Policies for improving the capability of product design

As for policies, the government first introduced a five-year project for improving capability in industrial design in 1989. Besides improving industrial design capabilities, it also tried to build up an intelligent system for design and educate Taiwanese for caring for industrial design. Next year, another five-year project for encouraging product quality was also launched. Within these two five-year projects, two very important awards were giving to companies, one Symbol of Excellence (SOE) and the other the National Awards of Excellence (NAOE). These two awards began to lead products made in Taiwan to a higher quality image and level. The projects were extended for another two runs of five-year projects. Although the projects were not launched to help the ICT sectors in Taiwan, they have fostered good product design as a starting point for ICT companies.

After the five-year project, an integrated programme for improving product design capability was launched in 2002. The programme was part of “Challenge 2008”, named the “Cultural and Creative Industry Development Plan.” In this programme, the capability of design was not only about product design, but rooted in culture and tried to be extended to other related industries. Therefore, the measures were not limited to fostering manpower but a more knowledge-based approach like a national design centre, creative and cultural parks, protection of IPR and encouraging other creative industries.

There were no product design policies directly related to ICT sectors until 2002, which was the “E”

project in ABCDE programme. In the “E” project, government tried to demonstrate a model of collaborative design manufacturing (CDM) that could help companies attend to objectives like early involvement, design to order and design in (new products). The project’s objective was to improve

Company 2002 2003 2004 2005 2006 Total

Asus Tek Computer Inc. -- 1 1 15 2 19

BenQ 1 6 30 16 53

not the capability of product design, but ICT companies’ product design efficiency.

To sum up, before Taiwanese IT companies gradually found that they have to move from manufacturing to product design, the government has supported other sectors to foster capabilities of product design and tried to spread the importance of quality. However, higher growth of the PC market in the early 1990s made Taiwanese companies focus on manufacturing (OEM). When the IT companies decided to move up into product design, they not only have to look for manpower from other sectors but also have try to combine product design steps into manufacturing processes.

However, the IT industry in Taiwan was so big and its manufacturing processes so complicated that the qualified manpower could not fully support them. Therefore, it took time to catch up. For this, polices did not play much of a role until the government established the importance of creative industries and had to launch an integrated programme. However, the performance of the new integrated programme needs more study before it can be evaluated.

4.4.3 Taiwan’s Competitiveness Performance

Table 4.12a: GCI rankings of the Asian countries, 2004-05

Country GCI Technology Public Institutions

Macroeconomi c Environment 2004 2005 2004 2005 2004 2005 2004 2005

Taiwan 4 5 2 3 27 26 9 17

S. Korea 29 17 9 7 41 42 35 25

Singapore 7 6 11 10 10 4 1 1

China 46 49 62 64 55 56 24 33

India 55 50 63 55 53 52 52 50

Source: WEF (Sep. 2005). Compiled by III-ACI-IDEA-FIND

Table 4.12b: Taiwan’s Growth Competitiveness Rankings, 2004-05

Index Rank Score

2004 2005 2004 2005

GCI 4 5 5.69 5.58

Technology 2 3 6.04 5.85

Innovation 2 3 6.06 6.19

ICT 9 6 6.03 5.51

Public Institutions 27 26 5.56 5.47

Contracts and Law 31 33 4.95 4.88

Corruption 24 24 6.17 6.07

Macroeconomic Environment 9 17 5.11 5.15 Macroeconomic Stability 6 17 5.23 5.15

Government Waste 13 12 4.37 4.53

Country Credit Rating 25 24 5.61 5.76

Source: WEF (Sep. 2005). Compiled by III-ACI-IDEA-FIND