Hi-Tech Edge

Economic News

22 Jul 2010
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Taiwan ranks sixth in the world in terms of the competitiveness of its information technology (IT) industry, according to a white paper issued this month. "The means to compete: Benchmarking IT industry competitiveness" awarded Taiwan a score of 65.8 in its index of 64 countries. The US ranked first with 77.4. The index gauged the IT industry environment by taking into consideration the quality of the IT and communications infrastructure, the supply of local talent, the research and development (R&D) environment and legal regime, as well as the overall business environment.

The paper argues that the relevance of IT to an economy lies in the fact that "in countries where software, hardware or IT services are generated in abundance, the contribution to gross domestic product is upwards of 5%". It adds that in many countries, the IT sector has also been a major source of labour productivity growth.

Taiwan scored particularly high in the research and development environment, securing third place globally. The paper, published by the Economist Intelligence Unit, notes that "East Asian economies are prolific generators of patents and noteworthy for high levels of private-sector investment in R&D, which is integral to product and service innovation in the IT sector. Strong university-industry ties in research, along with a culture of risk-taking, are also important elements of a supportive innovation environment for IT". According to the research, Taiwan has made great strides by actively investing in higher education in IT fields.

In this year's BusinessWeek magazine's annual selection of the Top 100 IT companies, Taiwan took the accolade of Asian nations with the highest number of entries (14), followed by Japan with eight. BusinessWeek selected the 100 companies taking into account sales and growth, return on capital, shareholder returns and net profit. Growth and profitability were given more weight than sales volume.

Hon Hai Precision Industry counts Apple, Nokia and Sony among its clients. Last year, it reported profits that surged 45% year-on-year and which totaled $1.84bn. In addition, it jumped 52 places in this year's Fortune Global 500 to take 154th place.

Taiwan has nurtured its IT industry over several decades to emerge as a world-class player in a range of high-tech fields, most notably those of personal computers and semiconductors. Like many other successful Taiwanese companies in the high-tech domain, Hon Hai Precision Industry falls into the ODM (original design manufacturer) category, meaning it outsources manufacturing for other companies. Major global names such as Hewlett Packard (HP) and Dell outsource large shares of their production to ODMs.

Research company iSuppli predicted that by 2010, outsourced PC notebook production would represent 92.5% (130.8m units) of the total global market. In 2005 it represented 82.6% of notebook production, or 51.2m units, and five ODMs - Quanta, Compal, Wistron, Asustek and Inventec - accounted for 67.9% of total shipments. All five companies are Taiwanese.

Quanta Computer is the world's largest producer of notebook computers and a key supplier to Dell and HP. At the end of last year, Ray Chen, general manager of Compal, announced the company's aim to topple Quanta from top position. He said Compal shipped 14. 6m notebook PCs in 2006, up 48.98% from the previous year and that the shipment volume goal for 2007 was set at 20m units.

Market Intelligence Center (MIC), an ICT industry research institute based in Taipei, forecast that total Taiwanese notebook PC shipment volume will grow more than 40% year-on-year to around 19.6m units in the second quarter of 2007.

Taiwan Semiconductor Manufacturing Co., the world's largest chip foundry and supplier to US companies such as Qualcomm and Nvidia, is another major Taiwanese player worldwide. Semiconductors are an essential component of electrical devices that include computers, mobile phones and mp3 players. Taiwan holds a number of advantages as a production base for semiconductors, with a highly educated workforce, a solid back-end support base and infrastructure, as well as a strong enterprising spirit, said Brian Shieh, the president of Powerchip Semiconductor Corp, speaking at Taiwan&China Semiconductor Outlook 2007 earlier this year. Shieh said that over the next five years Powerchip Semiconductor Corp and Elpida of Japan would build four factories in Taiwan to produce 12-inch wafers (the current industry standard for chip manufacturing). The cooperative project is anticipated to drive continued growth of the semiconductor industry, he said.

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