Launching affiliated venture companies

The Industry Technology Research Institute has since 2000 accepted Ministry of Economic Affairs grants to conduct bio chipset research projects, which as of early 2003 has had an accumulated scope to encompass the biotech and electronic information domains of 70 patent listings in 35 categories. The Industry Technology Research Institute has allocated some of its patent listings and personnel to form the first bio chipset affiliated venture company – Hua-Lian Biotech Company, in January 2003.²⁷⁶

As of 2003, the Industry Technology Development Institute has culminated a total of 31 more representative affiliated venture companies. And as per assessment ²⁷⁷by Zhu, Bo-Yong on the performance of five of the public-listed and OCT-listed companies revealed,²⁷⁸ “forevery dollarthatITRI invests, there is five dollars of industry net profit, or $1.41 after-tax profit, and to include the manpower diffusion yield, every dollar that ITRI infuses, there is $10.77 of net business gain, or $2.01 of post-tax netprofit”. Which furtherindicates,“As technical know-how commands a dynamic external gain, what the government has subsidized industry R&D expenditure and infused the R&D and innovation yield to themarketplace,offersatangibleyield ofexcelling theproducer’s competitiveness. And as can be extrapolated form this chapter that the

government’ssubsidiesto ITRI’stechnology projectshaveexcelled enormous socialyield”.

Among a total of 31 affiliated venture companies, 13 of which have been launched in accordancewith the“Industry Technology Research Institute’s affiliated venturecompany launching measure”. Asstipulated underArticle3

276 “Hua-Lian Biotech, a tech project spawned company, is poised to reshape the future of biotech engineering –TSMC, the Technology Pioneer, Vol.98, Feb. 2003, http://www.st-pioneer.org.tw.

277 B.Y. Zhu,“The Evaluation Modeland Validation oftheYield oftheIndustry Research Research Institute”,excerpted in theIndustry Technology vs.ITRI–Visible Brainpower, Ed. 1,2003,p.257.

278 The study subjects that the postgraduate school chooses are publicly-listed firms including United Tech Electronics (founded in 1980), Taiwan Semiconductor Manufacturing Corporation (1987), Taiwan OptoElectronics (1988), Alliance Automation (1989), and OCT-listed firms in Taiwan Advance (1994).

of the measure, an affiliated venture company may be launched at the following opportune timings, where,

1. A technology that is regarded to offer dynamic market potential, and its implementation requires substantial investment and of high risk that is beyond the means of any individual local producer alone can sustain.

2. A technology that is regarded to be highly time sensitive, yet its commercialization is poised to spawn relevant new domestic industries.

3. A technology’sproductswould play akey rolein thelocalindustries,and that local producers are unable to satisfy the demand of the product’s volume and quality by the downstream industry.

4. The institute’sresearch work isundergoing policy change,such asstrategic withdrawn and the like.

Any other major factor that has been approved by the executive committee.

In other words, the main purpose of the affiliated venture company lies in executing commercialization of pilot research findings that local producers are unable to complete for the lack of capital, technology or know-how, in an attempt to bring new technology to the marketplace, instill a new industry, or improve an existing

industry’sproduction quality and volume (as per the preceding par 1 to 3). In addition, the affiliated venture companies are also helpful in steering the research institutes into different research fields (as per the preceding par 4).

To achieve these functions, the Industry Technology Research Institute often transfers a comprehensive protection technology along with key personnel. In production technology transfer, since the rudimental technology administration law stipulates that research findings may only be placed with research outfits, as a result, the ITRI needs to take to a more flexible means departing from the past implementation means of chopping up a technical transfer and sell off by parts, but rather a patent portfolio that strings a number of vital and compensatory patent listings in a collective authorization that would poise to strength its cross-border negotiation power with patent seeking producers. ²⁷⁹ In return, the

279 “HwaLien Biotech,a tech projectspawned company,ispoised to reshapethe future ofbiotech engineering –TSMC, the Technology Pioneer, Vol.98, Feb. 2003, http://www.st-pioneer.org.tw.

ITRI would secure return through royalties or shareholdings for a technical transfer (Article5 oftheIndustry Technology Research Institute’saffiliated venture company launching measure ). The criteria of computation rests on referring to the market value of a technology, scope of legal restrictions, and negotiation with the funding party (Article 6 of the Industry Technology Research Institute’saffiliated venturecompany launching measure). In addition, to encourage the employees to transfer to the affiliated venture firm along with a project, the transfer would be regarded as a retrenchment (Article 10 oftheIndustry Technology Research Institute’saffiliated venturecompany launching measure ), ²⁸⁰and permit them to invest in the affiliated venture company (par4,Article4 oftheIndustry Technology Research Institute’s affiliated venture company launching measure ).

Asstipulated underArticle4 oftheIndustry Technology Research Institute’s affiliated venture company launching measure ,, capital solicitation sought by an affiliated venture company deriving through public offering. If insufficient, it may be revamped to private offering. But the investments by a given

manufacturer can not exceed 35% of the total capitalization of an affiliated venture company. Employees of ITRI and its affiliated venture firm can invest indirectly through ITRI’saffiliated venturefirm. According to astudy conducted by Liu Rui-hua, though state-owned shares remain at a significant proportion in practical implementation, yet taken into account the market factor, no intervention has been made to thefirm’smanagement,butrathera

consensual respect for independent professional management.²⁸¹

An affiliated venturecompany thattakesoveraresearch project’stechnology and the research team, coupled with the infusion of external capital, is able to attain the objective of commercializing the technology in a relative short time.

280 The Industry Technology Research Institute’spersonnelturnoverrateoverthemostrecentdecade was approximately 10% to 20%. As of 2002, turnovers totaled 15,877 individuals, with over 75%

joining industry. Studies have recognized ITRI’s contribution in human resource cultivation and manpower distribution. Refer to wrong footnote, no bookmark has been made yet., p.255.

281 R.H.Liu,The Contribution oftheIndustry Technology Research Instituteto Taiwan’sindustries”, excerpted from Industry Technology & ITRI –Visible Brainpower, 2003, Ed. 1, p.220.

In the case of the foresaid Hua Lian Biotech, in roughly a year and under the leadership of the previous project investigator Qiu, Chuang Fan as general manager, the firm has seen its employees growing from 9 to around 40, with R&D personnel accounting for more than 60%. The technical equipment had evolved from laboratory experiments to now user-ready servo and technology.

And the firm is anticipated to become the third largest firm worldwide to command high-end genetic chipset capability this year (2004) with an annual output exceeding 100,000 chipsets, excelling Taiwan to trail behind the U.S. as a country capability of mass producing high-end genetic chipsets.

The usage of high-end chipsets, as estimated by 2008, would evolve form the present rudimental research application to expand into disease specific screening, and eventually reaching for the objective of integrated screening. Once the chipsets are ready to replace routine screening, the global mass production

orderswould poiseto grow in leapsand bounds. Forthis,HuaLian’schoosing its inception for entering the market, as buoyed by the probability of

successfully developing a singular or integrated screening chipset to grow alongside the producers, would not only help to form an industry standard in an intangible manner, but can best help the firm to seize future mass production trend to attain the strategic objectives ²⁸²of fulfilling the MOEA-subsidized genetic chipset plan and instilling Taiwan with a genetic chipset industry.