A Way to Prosperity: Competitive Analysis

of ICT Industries in Taiwan

Bao-shuh Paul Lin, Roger Cheng, and Kristy H.C.K.Sha*

Over the past several years Taiwan has become a leading player in the global ICT manufacturing arena.
More than two-dozen diverse products have captured a top three position in the respective worldwide markets.
However, the global competition is getting fiercer with slimmer margins and hollowing effect in the
manufacturing sectors; on the other hand, the service industries such as distance learning and healthcare
solutions are expected to flourish. Taiwan has to move towards value-added production, leveraging its superior
ICT industries and reinforcing the value chain integration, to maximize its competitive advantages. Hence, the
government has launched key national programs for infrastructure build-up, content creation and service
deployment to transform Taiwan into a High-tech Service Island. Several other proactive initiatives have also
been taken to move its economy in a new direction and accelerate a transition to the Information Society by
talent cultivation, innovation promotion, and technology commercialization. In this paper we first outline the
international status of Taiwan’s ICT industries. An analysis based on “diamond model” is then carried out and
implementation measures to further enhance Taiwan’s competitiveness are proposed. The final suggestions we
make are 1) Repositioning to be the Global Design and Supply Center for the integrated system, key components,
and digital content; 2) Fostering technology innovation; 3) Leveraging global sources; 4) Strengthening
technology commercialization/ entrepreneurship.

Keywords: Taiwan ICT, High-tech Service Island, R&D Center, talent cultivation, innovation
promotion, technology commercialization

I. INTRODUCTION

Observing the development trends of high-tech industries in many countries, we conclude

that the success of these industries depends strongly on the interworking of both design factors
and chance factors. Those factors that a country can control to develop an industry are called
design factors, whereas chance factors are those uncertainties in the technology market, macro-
economy and micro-economy that have always influenced the directions and speed of industrial
progress and that are beyond the control of a single country. The impact of the latter

*Dr. Bao-Shuh Paul Lin is currently VP & CTO of Communications & Optoelectronics Technologies, Industrial
Technology Research Institute (ITRI), and General Director of Computer & Communications Research Laboratories
(CCL) as well as SoC Technology Center (STC). ITRI, serving as the primary anchor of the government technology
initiatives and policies, has played a vital role in Taiwan’s economic development. CCL, the core member of ITRI, has
significantly helped the growth of 3C industries in Taiwan and continues the thrust into new frontiers. Roger Cheng is
Director of Internet Software Technology Division of CCL/ITRI. Kristy H.C.K.Sha is a Doctoral student of Institute of
Management of Technology, National Chiao Tung University, Taiwan

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aspects can be attributed to inexorable factors. An industry that has available both supply and
demand advantages can always fit into a more competitive position, especially when the country
is ready to invest its resources in an earlier, more rapid and more efficient way. As a result, such
an industry can be expected to maintain its success.
The development of the industrial policy plays a critical role in the political system of a
modern country. It is always an important issue for a country to spur the industrial development
and enhance its competitiveness through the appropriate planning, evaluation and execution of the
industrial policy. Even for the case of a super capitalism country emphasizing the free economics
such as United States, the public resources are also used to supplement the “Market Failure” by
supporting venture capital market, product standardization as well as technology transfer. It is
almost becoming the consensus for most countries that industry structure can be in a more
competitive position if the government is involved with industrial R&D activities.
Taiwan, similar to the Netherlands in Europe, is a small entity with open economy
environment that has high degree of foreign trade dependency. With shortage of natural
resources, Taiwanese have been working hard creating the first wave of “Taiwan First” in 1970s.
However, with the huge global impact from oil crises, Taiwan realized the urgency of directing to
the technology intensive industries from the traditional labor-intensive industries. In the past
decades, the government, research organizations and industries in Taiwan worked well together to
create competitive advantages in ICT industries. Take Industrial Technology Research Institute
(ITRI) as an example. ITRI, a public R&D organization commissioned by the government,
exploits internal (local) and external (global) resources first to construct the technical competence
and disseminate to the industry, which then speed up the product commercialization, and
stimulate the development of new technology-based industries. The success of the collaboration,
not only stabilizes the economic development, but also develops the second wave of many ICT
products ranked as the second wave of “Taiwan First”.
However, with the transformation of the global economy in the twenty-one century, to
incorporate the digital technology with versatile applications becomes the key to business success.
To provide the innovative applications as well as attractive services is now leading the
requirements, especially under the current value of the philosophy emphasizing quality of the life.
This is also the target that knowledge-based economy and information society are aiming at. To
Taiwan, which has been proved excellent in manufacturing capability, it is now the time for a way
forward. After making the top achievements with ICT industries, boosting the design innovation
and service creation will be Taiwan’s new challenges, and the opportunities, too, to stay top in the
world.

II. INDUSTRIAL COMPETITIVENESS THEORIES

Michael Porter introduced in 1990 a competitiveness theory by arguing that national
prosperity is not inherited, but created by choices. Porter’s Diamond Model (Figure 1.) is
concerned with four fundamental determinants: 1) Factors of Production; 2) Demand Conditions;
3) Firm Strategies, Structure, and Rivalries; 4) Related and Supporting Industries. The second set
comprises two additional variables: Chance and Government. The interactions among the factors
can cross-enhance the system, driving the country competitiveness in the speed and the direction
of the industrial development.
Factors of production include human resources, physical resources, knowledge resources,
capital resources, and infrastructure. Demand Factors refer to domestic market and international
market and depend on the size of the demand and potential growth. The success of the firm is

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strongly influenced by its business strategy and corporate structure. Domestic rivalries refer to the
ways in which businesses compete in their domestic market. The strength of the competitors
would initiate the growth of the industrial innovation, and the flow of professionals among the
industries can enhance the technology dissemination. Related industries and supporting system
include the integrated supply chain, the complementary relationships and pull-through effects
among the industries.

Firm Strategies,
Chance Chance
Structure &
Rivalries

Factors of Government Demand

Production Conditions

Related and
Chance Chance
Supporting
Industries

Figure 1: Diamond Model

Modified from M. E. Porter, “The Competitive Advantage of Nations,” N.Y., Free Press, 1990

As to the Chances Factors, the scenarios advancing the industrial development chances
include: the invention and innovation of the basic technology, the discontinuity on the traditional
technology, major changes of global or regional market. War also brings the chances as it breaks
the original market order and creates the new competitive space.
“Government” is an important factor influencing the industrial competitive advantages. The
subsidizing and educational training can improve the innovation capability for a country. The
management on the capital market and the legal system by the government as well as its strong
purchasing power can speed up the development of a new industry. Therefore, government is a
good help to develop the industry; it can also be a hindrance to the industrial development if the
policies are not well planned or executed. One of the roles that the government plays is to create
the “Resource Leverage” for the industry. The “Resource Leverage” employed by the
government helps making Taiwan and Korea the two stars in developing the ICT industries
through bringing in the industrial technologies and industrial clusters. The six principles used as
the criteria by Taiwanese government to select the strategic industries are “Market Potential,
Industrial Linkage, Added Value, Technology Level, Low Pollution Emission and Low Energy
Dependency”, which can also provide the multiplier effects based on the resource leverage.
With the four strategic resources of high quality human resources, solid technology
foundation, knowledge and capital, industrial clusters are also considered as the source of
industrial competitive advantages. Composed of the upper and down stream industries, supporting
business and academia/research institutes, industrial clusters not only minimize the transaction
cost resulting from the information asymmetry, but also accelerate technology innovation and new
business formation during the industrial development process. Via the agglomeration effect,

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industrial clusters can further enhance R&D efficiency, and then the growth of the economics.
As to the other competitive advantages, in the book of “ The Criteria of Market Leadership”,
Treacy & Wiersema has listed the three criteria of leading business, which are product leadership,
operational excellence and customer intimacy. Hope & Hope applied these three models into the
industrial value chain and grouped the value activities into three main functions: innovation,
operations and customer service. Continuing innovation, optimizing operational efficiency and
improving customer service can therefore be the three strategic factors to create the competitive
advantages for the high tech industries.

III. INDUSTRIAL PROGRESS IN TAIWAN

The pattern of economic competition has changed with the times. In the following section we
describe Taiwan’s overall industrial progress based on Porter ‘s stages of national competitive
development before we discuss the specific industrial competitive strategies.
Located at a strategic position in Asia-pacific, Taiwan has a major developmental axis
supported by medium and small entrepreneurs as Taiwanese has strong entrepreneurship in
nature. Very similar to Nordic Finland, as a very small country, Taiwan is becoming a strong
entity that cannot be neglected in the global economics. Finland government has been well
planning her pioneering industries, increasing the R&D investment, developing the interactive
networking among the research institutes, helping the traditional forestry farm business
transforming to the leaders of electronics/communications and biomedical. Below is the chronic
description showing how Taiwan transforms into the ICT industries from traditional business
focus.

3.1 “Factor-Driven” Stage (1950 – 1970)

Between 1953 and 1960, Taiwan focused on developing the industries of consumer products
such as textile, food processing, leather and plastics products to replace the imported products.
Domestic or imported raw materials were used for manufacturing the finished goods to reduce the
imported products. The stage is called Import Substitution Period. From 1961 to 1972, Taiwanese
government realized the policies of providing the investment incentives, creating export industries
and developing the overseas market. It is then called Export Expansion Period. The strong export
demand brought up the production volume resulting in the rapid growth of Taiwanese light
industries, thereafter creating the first wave of “Taiwan First” such as plastics, shoe making,
umbrella, and hat. Based on the data compiled by the Council for Economic Planning and
Development, Executive Yuan (Taiwan Statistical Data Book, 1989;IMF International Financial
Statistics Yearbook, 1989), Taiwan had an average growth rate of 10.2% between 1961-1972.
During the same period of time, average growth rate was 4.6% for the industrialized countries,
5.6% for developing countries. Taiwan therefore was credited as a country of “Economic
Miracle”.
Cheap labor was then the driving force to drive the Taiwan’s economics. With the facts of
lacking the advanced technology, bottleneck to promote the productivity and weak R&D
capability, the country or the industry had very rigid flexibility of the response facing the
challenge when the macroeconomics became unstable. Taiwan realized the urgency of directing
the labor-intensive industries to technology intensive industries during the first energy crisis. The
government funded money to establish the non-profit research organizations such as Industrial
Technology Research Institute (ITRI) in the mid-70s. Very clear target and appropriate flexibility
have been granted to the institutes as the pioneers to upgrade their technology level and uplift the
traditional industry structure. ITRI, playing the role of “Innovation Engine”, successfully made

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up the technology lag through the self-innovation and overseas technology transfer. With the
concerted efforts continuously made by government, industry, academia and research institutes,
Taiwan earned the new wave of “Taiwan First” in semiconductor, optic electronics,
communications and information industries.

3.2. “Investment-Driven” Stage (Late 1970 – Mid 1990) –

During this period, Taiwan not only kept developing overseas market for trading, continuing
the investments in the ten infrastructure construction projects, but also trying to make up the
technology lag with advanced countries by making the new policy with investment incentives.
The foundations of the transportation, communications, financial and legal system were therefore
solidified. The technology efficiency of small and medium size enterprises were also promoted
through the overseas technology import or domestic technology transfer. The government further
established Hsinchu Science Based Industrial Park (Fig. 2) in 1980 to provide a good investment
environment, attract the overseas high-tech professionals, and upgrade Taiwanese industries. A
very famous high tech corridor was later formed, covering Hsinchu Science Park, ITRI and two
very reputed national universities, Tsing Hwa and Chiao Tung universities. The bridging of the
technology and market then brought up the birth of Taiwanese ICT industries. With the successful
experiences from Hsinchu Science Park, the government copied the model in the late 1990 and
has been planning to bring the model island wise, including the north, central and south science
based parks in line with the development of the bases of supporting services. It was expected that
the aggressive planning could place Taiwan onto the list of high-tech advanced countries.

Economic Development Progress in Taiwan

Manufacturing Venture Capital R & D Knowledge Internet Usage
Based WEF/NRI
Economy
Information

GDP Current Economy Challenges e-

Trillion

Infrastructure 5
•Knowledge Based Economy
Society

e -Society
•Slowing Economy Growth
•Changing Industry Structure e-Taiwan Project
e-Government
10
Hsinchu Science-based
Industrial

Industrial Park
Society

Ten Emerging Industry e- e-Industry

Transportation
Export Industrial Park 13
5 Ten Infrastructure
Custom Protection Projects NII Projects
Import Control

1950 1960 1970 1980 1990 1996 2000 2002 2007

Import Substitution Export Expansion /
High-Tech Policy e-Taiwan
Policy Heavy Industrialization Policy

Figure 2: Economic Development Progress in Taiwan

Source: National Information and Communication Infrastructure (NICI), Executive Yuan, April 2003

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3.3.「 Innovation-Driven」 Stage (Mid1990 and after)
Taiwan has been facing the dual pressures internally and externally since mid 1990.
Externally, cheap labor force and low cost land, plus the huge market potential of China caused
the industry hollowing effect in Taiwan because of the outbound movement of manufacture
industries. Internally, the labor quality and the discipline that were emphasized by the traditional
manufacturing industries have been gradually facing the erosion. In order to successfully meet
the fiercer global competition, it is necessary for Taiwan to establish the capabilities of technology
innovation. Taiwan also promotes the e-government and e-commerce to enhance the
administrative and management efficiency, with the vision of developing Taiwan as the Asia-
Pacific business center. The global ranking of Taiwan’s ”e-Government” is shown in Table 1.

Table 1. The Global Ranking of Taiwan’s ”e-Government”

Global Evaluation Agency Countries/date Evaluation Contents

Ranking Evaluated
NO.1 Brown University 198 Service functions and the contents of the
(Sept.2002) website provided by government agencies
NO.2 World Marketing 196 Government Web links, Information Access,
Research Center (Sept.2002) and Online Payment Mechanism
(WMRC)
NO.4 World Economics Forum 82 (Feb.2003) Government Applications in the Network
Readiness
Source: Research, Development and Evaluation Commission, Executive Yuan, Mar. 2003

Innovation is the driving force of the national development and national power can be built
by the “Investment to the Future”. In the “ Challenge 2008” of the Six Years National
Development Program formulated by the government, the four major investments include
“Cultivating Talent”, “R&D and Innovation”, “Global Logistics” and “high-quality Living
Environment”. Through leveraging global R&D resources, Taiwan can be developed as the Asian
base for R&D and innovation. Vigorous measures are adopted to promote Taiwan as the
operations headquarters and R&D centers for both domestic enterprises and multi-national
corporations. Meanwhile, the “Digital Taiwan” program is underway to develop Taiwan into a
high quality information society visioning “The most e-Nation in Asia”. The major five targets
are “Broadband to the Home”, “e-Life”, “e-Commerce”, “e-Government”, and “e-
Transportation”. All these comprehensive programs together with science and technology
development programs such as the “Two Trillion & Twin Star” aim to transform Taiwan into a
“Green Silicon Island” with sustainable development and the promotion of knowledge economy.
Based on the report of “2002-2003 Global Information Technology Report”, Taiwan’s
broadband penetration rate is 9.7%, only second to the 14% of South Korea. The penetration rate
of mobile phone is as high as 111%, ranked as No.1 globally. According to “Global
Competitiveness Report (2002 – 2003)” edited jointly by World Economics Forum and Harvard
University, the top three countries are United States, Finland and Taiwan based on the Growth
Competitiveness Index (GCI). In addition, the 2003 statistics data from US Patent Office
indicated that Taiwan had the US patents granted as No.4 globally, after United States, Japan and
Germany (Table 2). In terms of the density of granted patents, which is the number of patents
granted per million populations, Taiwan can be listed as No.2 globally, second to the United
States. These data have illustrated the strong capability of innovation from Taiwan’s technology
advantages.

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 Table 2 Patents Awarded in the USA

America Japan Germany Taiwan France UK Canada South Singapore China

Korea
1998 85,783 30,490 9,304 3,543 3,823 3,548 3,302 3,052 122 87
2000 100,548 34,563 10,978 5,578 4,392 4,241 4,060 3,699 220 143
2002 93,347 34,954 11,529 6,346 4,289 4,076 3,809 3,755 392 347
Source: US Patent Website, July 2003

IV. COMPETITIVE ANALYSIS ON TAIWAN’S ICT

INDUSTRIES
4.1 Current Status of Taiwanese ICT Industries

The achievements of Taiwanese ICT industries can be attributed to the close collaboration
among the government, industries, academia and research institutes. The highly integrated
industrial chain in the semiconductor and information industries and its efficient peripheral
supporting services provide the accumulated benefits for the development of digital contents and
momentum required for the advanced knowledge-based services. Taiwan had over 25 ICT
products listed as the global top three in year 2002 (Table 3), placing Taiwan in a position of
global high tech nation. The total production value of information industries reached US$87.5
billion in 2002, expecting to approach US$97.6 billion by year 2003. Another word, it accounts
for 30.3% of Taiwanese GNP in year 2002 and it would reach 33% by year 2003, demonstrating
the importance of the ICT industries in Taiwanese economy.
Table 3 Taiwan’s ICT Products Ranked Global Top One (in Units) in 2002
Product Global Market Product Global Market
Share (%) Share (%)
IC Foundry 72.5 ADSL Modem 64.0
IC Packaging 32.0 Cable Modem 53.0
Mask Rom 66.4 Hub 62.0
CD-R Disk 78.4 SOHO Router 83.4
CD-RW Disk 84.9 Notebook PC 36.6
DVD-video 74.0 Motherboard 75.0
DVD-recordable 60.3 PDA 42.0
WLAN 80.0 DSC 39.0
Ethernet Card 66.5 Optical Disk Driver 45
Source: Industrial Economics & Knowledge Center, ITRI, April 2003

4.2 Competitive Analysis on ICT Industry in Taiwan

There were many academic in-depth research reports presenting the related issues about the
industrial development of Taiwan’s ICT industries; the market trends and technology
development have long been monitored or reported regularly. Many science & technology
conferences or meetings organized by the government (e.g. Science & Technology Advisory
Group meeting, Strategic Review Board meeting of the Executive Yuan,) had a continuous

7
discussion on the topic in the past many years and many feasible suggestions were made. Our
research surveyed data and compiled information from the archived reports, analysis, survey and
meeting minutes, making a summarized presentation covering the competitive advantages,
challenges and strategies respectively.

4.2.1. Advantages Created

The following sector describes the competitive advantages of Taiwan’s ICT industries based on
Porter’s Diamond Model.

Table 4. Competitive Advantages on Taiwan’s ICT Industries by Diamond Model

Determinants Competitive Advantages

Factors of Production † High quality technical professionals; Very hard working
entrepreneurs and employees with high adaptability
† Strong manufacturing capabilities in global OEM/ODM market
† Efficient cost control; Strong flexibility to the customer demand.
† Excellent knowledge on management know-how
† Ample foreign reserve as well as the capital supply
† Good national information infrastructure
Demand Conditions † Emerging industries derived from Digital Convergence integrated
with 3C, initiating the technology demand
† Macroeconomics expected to turn around; prospective upward
Asia-pacific market bringing in the demand of IT market as well
as the new mobile phones.
† Ample business opportunities generated from the digitizing and
networking functions of home appliances
† Increasing Chinese market demand is placing a better competitive
position on Taiwan against other countries due to the same culture
and languages
Firm Strategy, † Prompt adaptability to meet customer demands
Structure, and Rivalry † Highly efficient OEM with competitive pricing advantages
† Strong global logistics with efficient supply chain management;
† Good in leveraging overseas resources and relationship capital
† Strong partnership with global giants
Related and Supporting † Excellent Industrial Cluster; incorporated with efficient
Industries supporting industries.
† Technology information dissemination promoted by industrial
R&D alliances providing the information for an accurate
investment decision and reducing the business learning cost
† High network readiness and penetration rate of mobile phone and
broadband access
Chances † Digital and wireless technology bringing the development of
knowledge-based services such as remote home-based healthcare,
low temperature logistics and on-line financing
† Broadband networking enabling digital entertainment and e-
commerce
† Integration of mobile cellular network and WLAN initiating
plenty of business opportunities
† Many emerging IC applications services for mobile enterprises…

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 Government † Taiwanese government lists ICT as the strategic industries
† “ Challenge 2008 National Development Program”,” Digital
Taiwan Project”, targeting at building Taiwan a “ High-Tech
Service Island”, can release many business opportunities
† Strong promotion on digital content industries by the government
and venture capital
† Active stock and venture capital markets reducing the capital cost
† Financial support and tax incentives from government

4.2.2. Challenges Faced

Taiwan has the most famous manufacturing capability, however, there are some bottlenecks
that Taiwan’s ICT industries have to break. The challenges its ICT industries face are as follows:
- The production volume is not proportional to the production value
- Profit margin is low though the production is high. In the example of Wireless LAN, its
shipment volume accounts for 80% of the global production, the production value is only
30% of the global value
- The value of IC design in Taiwan is far behind of that from the multinational enterprises
(MNEs) in the US
- The industry hallowing effect caused by the migration to overseas in the manufacturing
sector, and threats of substitution from Korea.
- International standards and specifications controlled by the MNEs and dominance of
foreign owned intellectual properties (IP)
- Products with highly homogeneous characteristics and less innovativeness resulting in
vicious competition cycles among manufacturers.
- Lack of internationally well-known brand names and marketing visibility
- Insufficient supply of senior professionals for SoC design, system integration and content
creation

4.2.3. Strategies Proposed

Based on the situation assessment, in light of the dynamic environment and the goals set for
our desired future, the primary strategies for Taiwan to take will be leveraging its superior ICT
industries and reinforcing its value chain integration to move towards value-added production
such as SoC design, IP creation, system integration and service creation (Fig. 3). The
implementation measures we propose are as follows:
(1) Re-positioning - Transform the current global high-tech manufacturing center into
† Global Design and Supply Center for the integrated system, key components, and
digital content.
(2) Fostering technology innovation
† Enhance quality and quantity of technology manpower by strengthening training
courses and setting up education programs for emerging technologies
† Set up international recruiting network to attract the international R&D professionals
† Create the life-long learning environment to strengthen overall human resources
† Promote National R&D programs in Telecommunications, System-on-Chip, e-
Learning, Digital Content, nano-technology, and so on

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 † Reinforce the R&D in pioneering technologies (such as nano-electronics, terabyte) and
software as well as applied services.
† Optimize the executive system to assure the quality and effective integration of the
internal resources.
(3) Leveraging global sources
† Promote R&D Centers and Operations Headquarters for MNEs and domestic
enterprises.
† Strengthen international R&D cooperation by setting up international knowledge
network, technology exchange and joint development
† Set up R&D alliances include IP management, information service, advanced
design/testing/verification
† Utilize low-cost manufacturing advantages from the emerging economies such as
China, and develop our own brand names.
† Forming strong partnership and alliance with globally reputed major companies to
advance the technology level, develop the marketing strength and set up the marketing
channels.
(4) Strengthening technology commercialization/entrepreneurship
† Promote technology transfers and technology trading mechanisms such as IP mall
† Strengthen digital right management (DRM), valuation system for intangible assets,
venture capitals and incubation capabilities
† Establish strategic consortia and knowledge-based service industries include IP Mall,
information service, advanced design/testing/verification

New Directions for ICT Industries in Taiwan

• box making -> + IP & SoC design
• system integration & solution provisioning
• service-enabling tech.
• WLAN /cellular integration
High
Add-on SoC Software Services/
Value 3G Chip
B3G
LCD Solutions Contents
Contents
IP ASIC Design
Patents Libraries Applications

3G Smart
Phone STB
IA WLAN NB
Web PAD
PDA
Thin client
OEM/ODM
Design/IP/SoC Manufacture High-Tech Service

Fig. 3 New Direction for ICT Industries in Taiwan

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4.3 Action Plans for Specific ICT Industries

In this part, we describe the key measures formulated for the five main sectors of ICT
industries in Taiwan, namely, semiconductor, optoelectronics, communications, information and
digital content. (Table of Abbreviations is shown in the Attachment for reference.)

4.3.1. Semiconductor Sector

Taiwan’s IC industry takes the global lead in foundry, packaging and Mask ROM. The global
semiconductor market is expected to grow and the Asian region has the highest growth rate.
Taiwan should maintain its capability and quality in high-end process control and service delivery.
Advanced process and SoC design technologies should be further explored and the innovated IP
be developed. Efforts should also be exerted to transform from the “quick-follower” to the
innovator by making Taiwan the High Value-Added SoC Innovation and R&D center.

4.3.2. Optoelectronics Sector

Taiwan’s LCD panel, LED has been ranked as No.2 globally in terms of the production
volume. Large Scale LCD becomes the major high end product line for Digital TV (DTV) as
digital entertainment gains popularity in the world. Yet high gross profit LCD TV has very high
entry barriers in technology, product design and marketing issues. Taiwan has to control the
technologies of new generation (such as Terabyte nano technology, MPEG-4 Codec) and expand
channels for the global market. Efforts should be dedicated to compete for the new specification at
DVD Forum, and dominate the global market of the blue light HD-DVD.

4.3.3. Communications Sector

Taiwan’s communications industry had long-term stable growth with superior performance
on manufacturing the customer premises equipment such as ADSL and Cable Modem. It’s
anticipated that innovative new telecom services and products integrating WLANs and cellular
phone systems will become mainstream. Taiwan should leverage its superior positions in
manufacturing WLAN equipment and mobile phones, address related technologies and systems
including security and billing systems. Innovations in services and field trials involving both
operators and vendors should be encouraged. Actions to promote the vision worldwide and
submit contributions to related standards bodies should also be conducted. Through these
initiatives, Taiwan has the strong potential to emerge from being a follower in the telecom
industry to become a leader capable of shaping future integrated communications landscape.

4.3.4. Information Sector

Taiwan plays a leading role in the global IT hardware market, but the size of global
information software market is far bigger than that of hardware. (E.g. For the year 2002, the ratio
of software to hardware was 13:1) One major share of the information software market is
accounted by IT Services (e.g. More than 87.9% in year 2002), which can be integrated with
computer, communications, consumer entertainment (3C) to take the lead in the next generation
information industries. The market for the intelligent mobile devices and digital/interactive TV
will also have the explosive growth. Therefore, Taiwan should target at the development of TV-
centered home appliances and smart Internet Appliances such as Wireless PDA, E-book, and
smart phones. Taiwan should also extend its capability in IT services and establish a high quality
environment for the knowledge-based services through the execution of the “Challenge 2008”
National Development Program.

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4.3.5. Digital Content Sector
Knowledge-based economy triggers the investment in the distance learning, on-line game
and mobile devices, which have huge potential market. Besides the comprehensive network
environment, Taiwan has a long history of Oriental cultures, mixing with Western cultures, which
can provide rich digital content. Therefore, Taiwan has a better position to enter the Greater China
market by designing high quality digital contents with the special characteristics of Chinese
culture. The approaches Taiwan can take to promote its digital content industry are as follows:
attracting the investment and the international cooperation, recruiting the professionals with multi-
cultures, training the local creativity industry professionals and promoting international marketing
strategies. Reinforcement of intellectual property rights and enhancement of user-friendly
platforms for different users are also highly advised.

5. CONCLUDING REMARKS
Taiwan has taken the global lead in ICT industries with more than two-dozen diverse
products have captured a top three position in the respective worldwide markets. The success of
Taiwan’s ICT industries can be attributed to the efficient interaction and the tight collaboration
among the government, industries, academia and research institutes. A well-linked mechanism for
technology development, knowledge diffusion and product commercialization plays a critical role
in the leverage of internal (local) and external (global) resources and the creation of the
competitive advantages in industrial process. However, as the global competition is getting
fiercer and the margins are becoming slimmer in the manufacturing segment, the future
competitive advantages demand not just low-cost productions, but also low-cost innovations.
High value-added production, global logistics, and innovative R&D are the ways to maintain the
leading edge of Taiwan’s ICT industries. Therefore, the primary strategies for Taiwan will be to
upgrade from a manufacturing-oriented industry towards an innovation-driven society. The action
plans we proposed are 1) Repositioning to be the Global Design and Supply Center for the
integrated system, key components, and digital content; 2) Fostering the technology innovation;
3) Leveraging global sources; 4) Strengthening technology commercialization/ entrepreneurship.

In summary, Taiwan has to leverage its superior ICT industries and reinforce the value chain
integration to move towards value-added production such as SoC design, IP creation, system
integration and service creation. Cost advantages should be maintained while service
differentiation should be emphasized. Innovative R&D incorporated with brand names and
marketing channels can be used to maximize the Taiwan’s competitive advantages. All these
efforts will move Taiwan’s economy in a new direction and pave the way to a long lasting
prosperity.

REFERENCES

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Industry: A Policy Framework,” Sloan Management Review

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Computer and Communications Research Laboratories, Electronics Research and Service
Organization, Opto-Electronics and Systems Laboratories, Industrial Technology Research
Institute, (2003) “Strategic Planning Report of Communications and Opto-electronics
Technology Areas”, Taiwan
Hope J. & Hope T., (1997), ” Competing in the Third Wave: The Ten Key Management Issues of
the Information Age “, Harvard Business School Press
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printing

ATTACHMENT

Table of Abbreviations

Full Name
ADSL Asymmetric Digital Subscriber Loop
ASIC Application Specific Integrated Circuit
B3G Beyond the Third Generation
CD-R Compact Disk - Recordable
CD-RW Compact Disk - ReWritable
DSC Digital Still Camera
DVD Digital Versatile Disk
HD-DVD High Density Digital Versatile Disk
LCD Liquid Crystal Display
LED Light Emission Display
MPEG Moving Picture Experts Group
ODM Original Design Manufacturing
OEM Original Equipment Manufacturing
PDA Personal Digital Assistant
SOHO Small Office, Home Office
STB Set Top Box
WLAN Wireless Local Area Network

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