Asia Times: Mainland threatens Taiwan's high-tech industry


	August 16, 2001	atimes.com

China

Mainland threatens Taiwan's high-tech industry

TAIPEI - Some 50 percent of Taiwan's high-tech businesses believe that mainland China will become Taiwan's leading competitor due to an exodus by the local information industry, according to the results of a recent poll. At the same time, nearly 90 percent of Taiwan's high-tech firms are worried that Taiwan-based foreign companies will move their production lines out of Taiwan in the coming three years.

The survey by Business Weekly of companies whose business revenues exceeded NT$500 million (US$14 million) in 2000 shows that 70 percent praised the government's role in the development of Taiwan's information industry over the past 20 years, but only 8.9 percent think Taiwan's economy will remain "in good shape" in the coming three years, lagging 43.6 percent who said it will be "regular" and 47.5 percent that are "pessimistic" about the issue.

Of those who hold a "pessimistic view" of Taiwan's economy, 35 percent attributed "political woes" to the deteriorating economy, while 14 percent and 11 percent blamed "industry exodus" and "government policies", respectively, for the situation. Some 50.2 percent said that those local computer firms that have set up plants in mainland China will pose the largest threat to those maintaining their operations at home in the coming three years. A dwindling economy, Taiwan's falling status as a manufacturing center, and a talent exodus, also troubles them.

As to the question of the future of Taiwan's computer industry, around 30 percent of the personal computer-related businesses surveyed said that it is "extremely good" or "good", 48.7 percent said that it will be "business as usual" and 20 percent were "extremely pessimistic" or "pessimistic" about the issue.

Taiwan's IT market declines ...
The production value of Taiwan's information technology (IT) industry amounted to $17.125 billion for the first half of this year, down 13 percent from that of the same period the previous year, according to a report by Market Intelligence Center (MIC) of the Institute for Information Industry.

The center has revised downward its forecast for the Taiwan IT industry's production value for 2001 for the third time since early this year. The MIC report forecast that Taiwan's IT industry will show negative growth in its production value for this year, with output estimated to reach only $37.714 billion, down 19.79 percent from that of last year.

The international market for IT hardware products has been sluggish due to the global economic slowdown and the high levels of inventory. Sales of notebooks, CDT monitors, motherboards, desktop computers, DVD players and scanners have declined considerably over the past several months, and only liquid crystal display (LCD) monitors and digital cameras have demonstrated a growth in sales, according to the MIC report.

A breakdown of the report's figures shows that in the first half of this year, the notebook sector registered a 4 percent decline in sales volume and a 16.9 percent decline in value, the monitor sector showed a 12.7 percent decline in production volume and a 19.7 percent drop in value, while the desktop sector registered a 9.5 percent decline in production volume and a 14.1 percent drop in value.

The report also said that the market for notebooks is expected to gradually recover in the second half of this year. However, the profit margin of Taiwan's OEM notebook factories may shrink further if and when international firms apply price cuts to grab more market share.

... as China's strengthens
The output of the IT industry is expected to make up more than 7 percent of the gross domestic product (GDP) in China in the next five years, according to a government forecast. The State Development Planning Commission (SDPC) said that China will expand the size of its information and telecommunication network to become the largest in the world by 2005.

According to the special plan for upgrading the economy and social life with information technology, the country will have more than 70 million computers in 2005. The plan predicts that 40 percent of Chinese households will have telephones, and more than 95 percent of them will have access to TV and radio in five years.

The plan said that the Chinese government will attach top priority to the development of the economy and society through application of information technology. In the next five years, the output of IT service industries will grow by more than 30 percent annually. In the same time, the number of Internet users will increase to more than 8 percent of the population.

According to the plan, the output of information product manufacturing will make up 3 percent of the GDP in 2005. The exports of information products are expected to grow at an annual rate of 15 percent in the next five years, occupying a larger share of the international market.

Meanwhile, application of information technology in the fields of education, public health, social security and public service will help enhance the quality of the Chinese people. As average Chinese families are expected to spend a larger part of their income on information consumption, the penetration of information technology into all aspects of people's life is to bring about 20 million new job opportunities in the next five years, the plan said.

Move on or move out
A local official has warned that Taiwan industries should seek profound transformation or be caught up soon by their mainland Chinese competitors. Industrial Development Bureau (IDB) director-general Shih Yen-shiang said that Taiwan businesses must shift to high value-added manufacturing and focus on research and development, design, marketing and creating own-brand names.

He predicted that local industries will be outperformed by their mainland Chinese counterparts within five years should they fail to do so. According to the IDB head, Taiwan industries are facing a historic challenge in that they must ride out the painful transformation period in order to survive at a time when globalization is sweeping the world and the mainland is quickly emerging as a strong rival. He pointed out that those businesses that fail to achieve this objective will be eventually phased out, no matter whether they choose to relocate to mainland China or maintain their operations in Taiwan.

(Asia Times Online/Asia Pulse)

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