Digitalisation Taiwan: Trapped between low cost and high tech

Author / Editor: Frank Jablonski / Frank Jablonski

In economically tough times of pricing pressure and competition, companies and associations in Taiwan are responding with investment in quality and digitalisation. In this phase, the voters are putting a spanner into the works with a political change of course.

Machine builders from Taiwan are networked via their association Tami and the foreign trade organisation Taitra and present at trade fairs.
Machine builders from Taiwan are networked via their association Tami and the foreign trade organisation Taitra and present at trade fairs.
(Photo: Jablonski)

Taiwan is becoming feminine. And according to the barometer of public opinion, as expressed by a taxi driver during the journey from airport to the inner city of Taipei, that is good too: “A woman as president? It’s good, it’s good!”, sounded enthusiastic from the driver’s seat. Taiwan had voted the previous day and elevated Tsai Ing-Wen of the large opposition party to the presidential chair with more than 58 % of votes – which shall be occupied by a woman for the first time in history.

The historic election took place at the time of economic stagnation and increasing frustration during many elections over the overdue economic success. The formerly ruling Kuomintang had viewed its economic (and also political) salvation in a growing number of trade agreements with Mainland China.

But, the promises do not seem to be fulfilled to any extent, neither in case of the growth rates nor simple voting populace. Many citizens furthermore perceived the simultaneous approach of conservative previous government to China as too close. Yet others see the latest election result anxiously and fear an increase in tensions.

Anxiety in Taiwan due to tensions with People's Republic of China

A brief view in the history shall help in understanding these anxieties better: Taiwan considers PR China as a rebellious province, whereas Republic of China views the Island of Taiwan, which is its official name, as a sovereign state. The Island of Taiwan, which was a Japanese colony for a long time, did not belong to the territory of Republic of China till 1945 and served as a retreat area for the authorities of Republic of China at the times of famous leader Chiang Kai-shek. While Taiwan is under its own rule until now, Beijing is striving for an association.

In the days after election, a lot has been speculated about the future interaction of both in Taiwanese Media. However, there are indications that the political status quo shall be maintained even under the new government. The economic relationships and advantages of team work on both sides are too close.

Estimates assume the investment sums of Taiwanese companies in China to be way over 100 billion dollars and conversely the mainland Chinese shall buy billions of computers, electronics, bicycles and machines. With China, the Taiwanese machine builders have their most important market directly at their doorstep.

Despite the absence of possible tensions with China, the economy on the small island is currently not doing well. As C. C. Wang, President of Taiwan Association of Machinery Industry (Tami), explains, on one hand it depends on the changing market requirements and on the other on the external conditions such as the unfavourable rate of exchange to Yen for Taiwan.

Chipping accounts for the greatest share in foreign trade of machines of Taiwan

Though the industry of the island continued to develop at the border of two climate zones in the past 60 years, nevertheless the nearness to Mainland continued to be more of a problem in the past years. Example – machine tools: Taiwan sells machines worth almost 4 billion dollars in a year.

Numbers of the finance ministry for 2014 show that, with over 3 billion dollar, chipping machines account for the greatest share. Press equipment worth about 638 million dollars were sold and machine tool components for about 1.3 billion dollars as well as rolling machines with an export value of 812 million dollars were sold.

The USA, Turkey, Thailand and Germany come directly after China. These are then followed by Netherlands, Russia, Indonesia, Malaysia and India. According to the analysts, the greatest growth was recorded in Netherlands and Turkey.

Wayne Hsueh, Director in Victor Taichung Machinery and responsible for a part of the sales team worldwide, confirms: “The business with the Turks is going great. Here we encounter people who negotiate predictably and reasonably and wish to invest in our technology.”

Nevertheless, the absolute value of trade with Turkey accounting for a share of 5.6 % is relatively still low; however, it is 4.5 % with Thailand, which is a much more easily accessible region. In this series, you can also read, with what measures various Taiwanese companies are changing the tack.

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The MM series shines a light in March on Taiwan as a machine tool producer, high-tech site and prolonged workbench.