2010Vol.40No.9 by AmCham Taipei

THE AMERIC AN CHAMBER OF COMMERCE IN TAIPEI

Industry Focus A Report on the Retail Sector

September 2010

Vo l u m e 4 0 N u m b e r 9

w w w. a m c h a m . c o m . t w

The Future for Flat Panel Displays

TAIWAN BUSINESS TOPICS

前瞻TFT LCD產業

September 2010 • VOLUME 40 NUMBER 9 中華郵政北台字第號執照登記為雜誌交寄 5000 9_2010_Cover.indd 1

NT$150 COVER SPONSOR

2010/9/27 4:21:42 PM

ADVERTORIAL

Above: Executives representing 27 multinationals sign letters of intent to invest in Taiwan to the tune of US$3.2 billion. Left: Minister of Economic Affairs Shih Yen-shiang says that a partial free trade pact signed with the mainland in June, known as the Economic Cooperation Framework Agreement or ECFA, is a historic milestone and it will help transform Taiwan into a springboard for foreign companies wanting to do business in China and the world.

he success of the 2010 Taiwan Business Alliance Conference showed how Taiwan is becoming one of the newest leading global destinations for foreign investment -- and how quickly it is shedding the image it had around five years ago as one of Asia’s economic pariahs. A total of 27 multinational companies signed letters of intent at the conference on September 21 indicating they wanted to invest a whopping over US$3.2 billion in Taiwan. The majority of them were American, European and Japanese companies. They included world leaders, such as information and communications technology (ICT) giant Hewlett-Packard, which alone pledged US$ 114 million to expand operations in Taiwan by upgrading its Taiwan-based regional research and development center into a global one. Conference attendees were given the opportunity to look at Taiwan in a new light – as a global center for innovation, as an Asian-Pacific business hub and as destination for multinationals to set up their global headquarters. This was because many regulatory barriers impeding trade and other economic ties between Taiwan and the mainland’s vast markets will soon be removed after the signing of a historical partial free trade pact between Taipei and Beijing in June known as the Economic Cooperation Framework Agreement or ECFA. With the signing of the ECFA, foreign companies can now tap into the strengths of local Taiwanese companies, including their Mandarin language skills and cultural knowhow in navigating China’s markets and government, to work together with them to explore business opportunities in the mainland. “Taiwanese businessmen have gained a far better understanding of the China market than their competitors worldwide,” said Minister of Economic Affairs Shih Yen-shiang in opening remarks. “The ECFA will enable Taiwanese companies to … serve

as a bridge between multinational companies and the Greater China and Asia-Pacific regions,” he said. “We can expect such a breakthrough to transform Taiwan into a springboard for companies aiming at the global market, offering business opportunities that will eventually lead to expansion in the Greater China region and beyond,” The conference, one of Taiwan’s main events for attracting foreign investment, was attended by 600 representatives from more than 500 companies, including 150 multinationals, surpassing expectations from Taiwanese government officials. The proposed investment of over US$3.2 billion will generate 12,900 new jobs, Ministry of Economic Affairs (MOEA) officials said, with the majority of them at 5,260 generated by the eight American companies involved. Taiwan’s Optoelectronics industry attracted the most investment, followed by Cloud Computing and Taiwanese Green Energy industries. Besides Hewlett-Packard, other prominent companies that made investment commitments included America’s Qualcomm Incorporated, Corning Display Technologies Taiwan and Applied Materials Inc.; Japan’s camera maker Canon Inc, as well as Japanese Nippon Electric Glass Taiwan Co. Ltd., and Asahi Glass Co; and England’s pharmaceutical company GlaxoSmithKline and its Standard Chartered Bank (Taiwan) Limited. Shih also pointed out that Taiwan in August reached a consensus with Singapore to start talks this year on pursuing a free trade deal, indicating, he said, that the ramifications of the ECFA go beyond China and are also positively changing Taiwan’s relationships with other countries and its overall global standing. Before the ECFA was signed, Beijing would use its diplomatic clout to block such FTA-style agreements.

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CONTENTS

NEWS AND VIEWS

6 Editorial

11 Issues

Whittling Down the Prohibited List SEpTEmbEr 2010

VOlum E 40, NumbEr 9

九十九年九月號

Publisher

Andrea Wu

Thwarting Cigarette Smuggling; Revisions Adopted to Labor Law Draft

再議中國商品禁止進口清單

7 Taiwan briefs By Jane Rickards

發行人

阻絕走私菸品；勞基法修正案的調整

吳王小珍

Editor-in-Chief

總編輯

Don Shapiro Art Director/

COVEr SECTION

沙蕩美術主任 /

Production Coordinator

Katia Chen Staff Writer

Jane Rickards

(Samsung and LG) followed by two Taiwanese makers (AUO and CMI). The Koreans have the advantage of branding and greater technological innovation, while Taiwan excels at cost control and flexibility – and has the inside track in the rapidly growing Chinese market. The Taiwan producers have developed close ties with flatpanel TV makers in China, and the recent ECFA accord and plans for investments across the Strait should further strengthen their foothold on the mainland.

後製統籌

陳國梅採訪編輯

李可珍

Manager, Publications Sales & Marketing 廣告行銷經理

Irene Tsao

曹玉佳

Translation

Zep Hu

翻譯

胡立宗

American Chamber of Commerce in Taipei 129 MinSheng East Road, Section 3, 7F, Suite 706, Taipei 10596, Taiwan P.O. Box 17-277, Taipei, 10419 Taiwan Tel: 2718-8226 Fax: 2718-8182 e-mail: amcham@amcham.com.tw website: http://www.amcham.com.tw 名稱：台北市美國商會工商雜誌發行所：台北市美國商會臺北市10596民生東路三段129號七樓706室電話：2718-8226 傳真：2718-8182 TOPICS is a publication of the American Chamber of Commerce in Taipei, ROC. Contents are independent of and do not necessarily reflect the views of the Officers, Board of Governors, Supervisors or members. © Copyright 2010 by the American Chamber of Commerce in Taipei, ROC. All rights reserved. Permission to reprint original material must be requested in writing from AmCham. Production done in-house,

By Jane Rickards 撰文／李可珍

17 The Future for Flat panel Displays

21 A Few Distractions 26 3D TV – the Next big Fad?

前瞻TFT-LCD產業 The worldwide flat-panel market is dominated by two Korean companies

This and other new flat-panel television innovations are on the horizon.

Printing by Farn Mei Printing Co., Ltd. 登記字號：台誌第一零九六九號印刷所：帆美印刷股份有限公司經銷商：台灣英文雜誌社台北市105敦化北路222巷19之1號1樓發行日期：中華民國九十九年九月中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Alan Eusden Vice Chairmen/ William E. Bryson / George Chao Treasurer: Carl Wegner Secretary/ Stephen Y. Tan 2009-2010 Governors: William E. Bryson, George Chao, Cindy Shueh Lin, Neal Stovicek, Gordon Stewart, Carl Wegner, Alexander Duncan. 2010-2011 Governors: Alan Eusden, Revital Golan, Douglas R. Klein, David Pacey, Wei-Li Shao, Stephen Y. Tan, Lee Wood. 2010 Supervisors: Steven Lee, Dana McCarty, Charles H. McElroy, Bill Wiseman, Derek Yung. COMMITTEES: Agro-Chemical/ Mong Yang Tan; Asset Management/ Christine Jih, Derek Yung; Banking/ Carl Chien; Capital Markets/ William Bryson, Jane Hwang, Jimin Kao; Chemical Manufacturers/ Art Yen; CSR/ Lume Liao, Fupei Wang; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Stephen Tan; Human Resources/ Richard Lin, Seraphim Mar; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Mark OÆDell, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Jeffrey Harris, Douglas Weinstein; Manufacturing/ George Chao, Albert Li; Marketing & Distribution/ Christopher Fay, Wei Hsiang, Gordon Stewart; Medical Devices/ Daniel Yu; Pharmaceutical/ David Lin, Jaime Robledo Cadavid, Wei-Li Shao; Real Estate/ Peter Crowhurst, Kristy Hwang; Retail/ Angela Chang, Prudence Jang, Douglas Klein; Sustainable Development/ Eng Leong Goh, Kenny Jeng; Tax/ May Lee, Cheli Liaw, Josephine Peng; Technology/ Revital Golan, R.C. Liang, Jeanne Wang, Deborah Yen; Telecommunications & Media/ Ben Way, June Su, Jason Wang; Transportation/ Gary Wu; Travel & Tourism/ Pauline Leung, David Pacey.

lAW

28 learning to Value patent Quality

Patents should be regarded as valuable corporate assets. Given appropriate attention and resources, they can be a source of revenue, not only a defense mechanism. By Andy Chu

TAIWAN buSINESS

31 In Agriculture, the Goal is “HighValue”

The selection as an “emerging industry” is based on focusing on particular products where Taiwan can compete on quality rather than price. By Michael Schulman and Don Shapiro

COVER PHOTO : COURTESY OF ITRI

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s ep tembe r 2010 • Volume 40 n umbe r 9

COVEr SpONSOr

balancing Supply and Demand A report on the Educational Sector INDUSTRY F CUS By Mark Y. Lock

Evolving with Consumer Demand A report on the retail Sector 36 Supermarkets Expand rapidly on lowprice Initiatives Several companies have been opening smaller-sized stores to serve individual neighborhoods. By Philip Liu

38 The Taiwanese love Direct Selling In what is already a major market, some companies are expanding by adding various forms of “physical presence.” By Kathleen Carroll

41 uni-president has a Hit with Foreign retail brands Localization helps Starbucks, Mister Donut, and others assure a strong foundation in the Taiwan market. By Philip Liu

44 Exporters Who Have Turned to the Home market Greater affluence and consumer sophistication in Taiwan have attracted some companies who were once focused only on overseas markets. By Kathleen Carroll

AmCHAm EVENT

49 59TH Anniversary party

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E d i t o r i a l 再議中國商品禁止進口清單

台

北市美國商會過去幾年的《台灣白皮書》不斷呼籲政府，檢討現行的中國商品進口管制措施–禁止輸入

的中國產製商品約有兩千項，其中包括約八百項的工業產品。台灣限制中國商品進口，固然有維持國家安全與保障國內產業的考量，但對同為世界貿易組織（WTO）會員的中國進行大規模商品管制，誠屬舉世罕見。名義上，廠商雖可向經濟部國貿局申請，取消特定產品的進口禁令，但申請與審查過程既繁雜又費時，Costco與IKEA等跨國廠商不免抱怨連連。同時，由於國內業者的反對，政府開放的腳步更形遲緩–就算反對意見未經縝密研究，也難以舉證對國內產業的明顯威脅，但政府往往傾向採信。然而，國貿局最近一次檢討禁止進口清單時，卻罕見地一次開放17項產品，包括商會零售委員會過去四年在白皮書中不斷呼籲開放的四個品項–其他瓷製品、其他陶製品、其他玻璃花瓶以及其他玻璃器。國內業者雖然仍持反對立場，但似乎已經不再像過去，對政府決策具有決定性影響力。兩岸談判與實施《經濟合作架構協議（ECFA）》顯然已經改變政府思維，讓國貿局願意以更理性的態度處理中國產品進口問題。國貿局的態度雖然轉變，但商會仍必須強調，所屬零售委員會高度關注的15類中國商品，仍然無法進口台灣–包括某些巧克力、糖果、洋芋片、蕃茄醬、酒類、外科用膠帶與粘敷料、玻璃鏡、玻璃杯、寢具、寵物食品，以及多種成衣。商會無法逐一申明各別產品開放進口的正、負影響。但就整體而言，商會企盼審查過程更為透明與客觀。意即，如果國內廠商反對特定產品，政府必須要求業者確切舉證，且在公告准否開放時，必須明確指出證據效力。商會希望陶瓷及玻璃製品的開放成為良好先例。未來，如果國內業者無法明確舉證，政府也能比照此例，漸次開放其他中國產製商品進口。

Whittling DoWn the ProhibiteD list

s attentive readers of AmCham’s annual Taiwan White Paper are aware, one of the more irksome issues covered in the document in recent years has been Taiwan’s continuing ban on the importation of some 2,000 products made in China, including about 800 industrial items. The rationale for the ban – a highly irregular step for one member of the World Trade Organization to take against another member – is supposed to be either a threat to national security (which is rarely a relevant factor) or potential serious damage to the domestic economy. The Bureau of Foreign Trade (BOFT) has been tasked with regularly reviewing petitions to have categories removed from the list, but the process has generally been frustratingly difficult and slow for wouldbe importers, which include multinational investors such as Costco and IKEA. A major obstacle has been the government’s tendency to accede to any objections raised by local trade associations, even when those appeals for protection are not supported by any thorough research data verifying the potential risk to domestic manufacturers. In the most recent review round, however, the BOFT announced that 17 items, the largest batch ever, would be released from the prohibited list. Included were four categories – consisting of articles of porcelain or china, other ceramic articles, glass vases, and other glassware – that have been requested for the past four years in the AmCham Retail Committee’s White Paper report. Although the trade association had continued to protest, this time it did not appear to have the veto power that seemed evident in the past. Very likely the recent signing and start of implementation of the cross-Strait Economic Cooperation Framework Agreement (ECFA), for which the BOFT was the lead negotiator, has produced a more favorable environment for considering the liberalization of imports from China. While commending the Bureau for adopting a more reasonable decision-making process this time, AmCham would still like to remind the government that 15 other customs classifications of particular concern to Retail Committee members remain barred from entry if manufactured in China. The products affected include a wide range of items – from certain chocolates and confections to potato chips, ketchup, Chinese liquor, surgical tape and adhesive dressings, glass mirrors, drinking glasses, bed linen, pet food, and various types of apparel. AmCham is in no position to argue the merits of opening the market in each individual case. Instead, we would emphasize that the review process should be imbued with the principles of transparency and objectivity. If local manufacturers regard China-made imports as a severe potential threat to their business, the government should require them to back up that claim with the submission of concrete data – and the eventual government ruling should include a statement as to whether that evidence was deemed convincing. The Chamber hopes that the decision regarding the porcelain, ceramic, and glass products will serve as a precedent, and that – if strong supporting evidence from the local industrial sector proves to be lacking – additional categories will be opened up for import in the next rounds of review.

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BY Ja n e R i cka R d s

MACROECONOMICS

UP BY LEAPS AND BOUNDS Taiwan’s economy, for the moment at least, is improving vigorously, due to the strong performance of the island’s exports. The government in late August upped its GDP growth forecast for this year from 6.14% to 8.24%, saying the trade sector had put in a “splendid” performance. Real exports of goods and services advanced by 34.27% in the second quarter, said the Directorate General of Budget, Accounting and Statistics (DGBAS), while the domestic sector grew 9.24%. Overall GDP growth came to 12.53% for the second quarter, similar to the 13.71% of the first quarter. Meanwhile, Global Insights predicted in August that Taiwan’s GDP this year will grow by 6.6% and Citigroup put the figure at 8.7 %. Exports continued to boom throughout August, amid solid demand for flat panels, handsets, and other electronic items. According to Ministry of Finance statistics, exports at US$24.05 billion were up 26.6% over August of last year, while imports at US$21.79 billion were up 28%, with a favorable trade balance standing at US$2.26 billion. The

FORGING CULTURAL CONNECTIONS — During his unofficial visit, China’s Minister of Culture, Cai Wu (left), was invited to sample some Taiwanese delicacies by Taiwan’s National Museum of History Director Chang Yui-tan. photo : cna

biggest destination for the exports was China (including Hong Kong), accounting for 40.7%, while the United States was second with 12.2%. Exports to the United States increased by a whopping 51.2% from the same month last year. Export orders – which came to US$33.8 billion for July, an 18.23% rise from a year ago – were also strong. And the industrial production index hit a record high of 128.62 in July. It was up by 20.70% from a year earlier, fueled mainly by rising orders for semiconductors, flat panels, and consumer electronics. But in a sign that the government is expecting a slowdown, as fears of double-dip recession loom in the United States, the DGBAS said that “in the

second half of 2010, the propelling strength of the external sector will …be modest.” Economists also caution that the economic recovery has spurred housing prices, raising fears of a property bubble. The recent economic success has put upward pressure on the Taiwan dollar, with dealers saying the Central Bank intervened several times throughout July and August to cap the dollar’s gains, Bloomberg reported. Interest rate increases are also considered more likely, following a hike in June of 0.125 percentage points, the first upward adjustment since 2008. Consumer prices are expected to be stable this year, the DGBAS says, with a rise of just 1.23%. Meanwhile, the govern-

ment released figures revealing a widening gap between the rich and the poor. DGBAS figures showed that the average disposable income of Taiwan’s top 20% incomeearning households was 6.34 times that of the bottom 20% in 2009, the largest differential since 2001, triggering a public outcry. If social welfare subsidies and tax benefits are excluded, said the Taipei Times , the figure would be even higher at 8.22. Hopes for alleviating this state of affairs rest largely on prospects for improved employment conditions, but the most recent jobless figures were mixed. The unemployment rate rose marginally by 0.04 percentage points

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in July to 5.20 percent, the DGBAS said, but seasonally adjusted, it dropped by 0.03 percentage points to 5.17%. CROSS-STRAIT

PRC CABINET MINISTER IN VISIT TO TAIWAN In yet another sign of warmer relations between Taipei and Beijing since the election of President Ma Ying-jeou in 2008, the first minister in China's State Council to visit Taiwan since 1998 arrived in early September to attend a cross-Strait cultural forum. At the conference, Culture Minister Cai Wu urged the two sides to sign a crossStrait cultural exchange agreement, amid reports that Beijing is pushing for political talks following the historic signing of the trade accord known as the Economic Cooperation Framework Agreement

(ECFA) in June 29. In response, Cai’s Taiwan counterpart, Council of Cultural Affairs Chairman Emile Sheng, pointedly said Taiwan's cultural identity is in part a product of its freedom and democracy. The Mainland Affairs Council also dismissed the need for a cultural agreement, citing the already flourishing cross-Strait environment for artists and other cultural workers. To avoid the connotation of an official visit, Cai came in his capacity as honorary head of the China Friendship Association of Cultural Circles, one of the forum’s organizers. DOMESTIC

BIRTHRATE DECLINE WORSE THAN THOUGHT Taiwan is expected to reach zero population growth in 2022, four

Economic indicators Unit: US$ Billion Current Account Balance (2010 QI) Foreign Trade Balance (Jan.-Aug.) New Export Orders (August) New Export Orders (Jan.-August) Foreign Exchange Reserves (end August)

10.56 16.5 33.83 227.91 372.06

Year Earlier 9.92 19.7 28.61 168.58 325.42

Unemployment (August) Overnight Interest Rate (August 31) Economic Growth Rate (2010 QII)P Change in Industrial Output y-on-y (July)p Change in Industrial Output y-on-y (Jan.-July) Change in Consumer Price Index y-on-y (August) Change in Consumer Price Index y-on-y (Jan.-Aug.)p

5.20% 0.21% 12.53% 20.70% 34.22% -0.46% -0.72%

6.07% 2.15% -6.85% -7.18% -21.93% -0.82% 0.62%

note:

p: preliminary

S oURceS: Moea, DGBaS, cBc, BoFt

ONE YEAR AFTER — Minister Paelabang Danapan of the Cabinet’s Council of Indigenous Peoples (left) discusses postTyphoon Morakot reconstruction with one of the officials responsible for the program. photo : cna

years earlier than previously estimated two years ago, according to a draft report on population trends released by the Council for Economic Planning and Development (CEPD) in mid-August. This year the birth rate is expected to decline to a record low of 0.94 babies per woman over a lifetime of childbearing. The draft report said Taiwan's population will peak in 2022 at 23.4 million, then start falling from the following year. The CEPD and some international studies say that last year, at 1.03 babies per woman over a lifetime, Taiwan’s birth rate was already the lowest in the world. The drop to 0.94 is partially due to 2010 being a Tiger year, an inauspicious period for births. This issue and the related prospect of a

rapidly aging society are expected to have severe consequences for the island’s labor supply and economy. So far the government has done relatively little in response, although it recently awarded a prize of NT$1 million to a Taichung woman for creating a slogan to encourage couples to have more children. It has also promoted some other family-friendly measures such as kindergarten subsidies for low-income families.

ABORIGINES PROTEST ONE YEAR AFTER MORAKOT Several memorial services held around the island commemorated the first anniversary of the deadliest typhoon in Taiwan’s history, Typhoon Morakot, which struck on August 8 last year, killing around 700 people – includ-

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ing some 400 buried alive in a landslide in the Kaohsiung County village of Siaolin. The anniversary was marked by demonstrations by Taiwan’s indigenous peoples, who staged a march a few days earlier outside the Presidential Office, along with an overnight sit-in, to protest the government’s policies regarding reconstruction and relocation. Indigenous typhoon victims have complained that the government has forced them to move from their homes in the mountains, where they have lived for generations, without any respect for their cultural traditions, as these areas are categorized as “high risk” zones – and moved them to newly-built villages without offering them secure land rights for the new housing. They have also complained that the design of the new housing does not respect their cultural traditions and that assistance to the victims has been too slow, leaving many homeless. Of the estimated 19,000 people who lost their homes or live in the worst-affected areas, around 72.5% are indigenous people. I N T E R N AT I O N A L

SINGAPORE AND TAIPEI START TRADE TALKS In an indication that

President Ma’s strategies for spurring Taiwan’s integration into the global economy are working, Singapore and Taipei in early August announced the start of trade negotiations. Ma had consistently responded to opposition criticism of ECFA by arguing that signing the trade pact with China would end Beijing’s blockage of Taiwan’s concluding free trade agreements with other countries. FTAs with Singapore and others would help prevent Taiwan from becoming economically isolated within the region. But the opposition Democratic Progressive Party (DPP) had consistently expressed doubt that Beijing would ease its diplomatic pressure on the island, but rather use ECFA to lock Taiwan’s economy into its own in order to spur unification. Beijing did not denounce the move by Singapore and Taiwan to enter into a trade agreement. The Taiwan Affairs Office of China’s State Council merely said that Beijing believes “Singapore will continue to apply a One China policy and, based on that, handle economic and trade relations with Taiwan in an appropriate manner.” Taiwan is hoping that an agreement with Singapore may lead to its eventual entry into the 11-nation

taiwan stock ExchangE indEx & valuE

THE BLUE LINE SHOWS CHANGES IN TURNOVER AND THE SHADED AREA CHANGES IN THE TAIEX INDEX.

8250

160

8000

150

7750

140

7500

130

7250

120

7000

110

6750

100

6500

6250

6000

August chaRt SoURce: t wSe

Unit: ntD Billion

trade bloc of the Association of South East Asian Nations plus China. During the rule of DPP President Chen Shui-bian and the early days of the Ma administration, Taipei repeatedly tried to engage Singapore in talks toward a free trade pact, but these attempts either got nixed by Beijing or met with Singaporean refusal on the grounds that cross-Strait relations needed to improve first. BUSINESS

TAIWAN REGULATORS BLOCK NAN SHAN SALE The Financial Supervisory Commission in late August said it would not approve a proposed sale of AIG’s Taiwan life insurance unit, Nan Shan Life, to a Hong Kong-based consortium for US$2.15 billion, following months of uncer-

tainty. The decision was a major setback for the U.S. insurer, which had hoped to use the funds from the sale to help repay loans from the U.S. government received as part of the bailout during the 2008 financial crisis. As of press time, it was not immediately clear how AIG planned to respond. The Hong Kong-based consortium, which consists of China Strategic Holdings and Primus Financial Holdings, initially struck a deal with the ailing American insurer last October to acquire Nan Shan. But the Taiwanese authorities repeatedly requested additional information from the consortium on its financial adequacy and the source of the funds to be used in acquiring Nan Shan. The regulators were concerned that the consortium was

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STOCK EXCHANGE GETS FIRST MAINLAND LISTING Yangzijiang Shipbuilding Holdings Ltd. in early September became the first China-owned company to list in Taiwan, paving the way for more Chinese companies to trade their shares on the island’s exchange. The Taiwan bourse has for the past two years aggressively courted foreign listings, but so far has attracted mainly Taiwanese-invested companies operating overseas, such as Hong Konglisted food companies Want Want and Ting Yi, as well as computer casing manufacturer Ju Teng. Although attracting Yang Zijiang, China’s fourth-largest shipbuilder, was considered a 10

taiwan's JanuarY-august tradE FigurEs (YEar on YEar comParison)

2009

2009 Imports

11.8 13.6

2009

2010 Exports

ships can be established.” In order to protect exports, Taiwan’s interventionist Central Bank has recently been struggling to mitigate the effects of short-term capital inflows and currency speculation buoying up the New Taiwan dollar. But Chen Miao, chief macroeconomic forecaster at the Taiwan Institute of Economic Research, said a currency coordination mechanism was unlikely to be economically feasible. In the European Union, Chen said, the economies of the participating European countries were at more similar stages of development than those of Asian countries – but even then it took many years and much political will before they were able to coordinate their exchange rates

16.7 18.6

Europe

16.2 20.2

U.S.

2010

163.4 179.9

2010

105.1 124.7

11.9 18.2

2009

TOTAL

18.6 27.2

11.8

34.1

21.6 9.1

2010

10.77 14.9

Central Bank Governor Perng Fai-nan in late August called for Asian countries to set up a formal exchange rate coordination mechanism. In an article in The Banker , Perng said that such a mechanism could help avoid the economic instability caused by sudden inflows of foreign capital, which can create asset price bubbles and stifle export competitiveness. While pointing out that capital mobility has brought benefits for many countries, he said it has also been closely linked to financial crises. “Regional exchange-rate stability is conducive to promoting economic and financial stability. When exchange rates are stable, lower transaction costs and reduced uncertainty will boost growth in intra-regional trade and investment,” Perng wrote. “Asian countries should set up a formal regional exchange-rate coordination mechanism through which stable currency relation-

ASEAN

23.7

2009

CENTRAL BANKER CALLS FOR COORDINATED RATES

Japan

76.26

HK/China

50.4

major development, it may still be difficult for the Taiwan exchange to attract a large number of foreign listings, given stiff regional competition among stock exchanges, the Financial Times reported.

backed by mainland money, which is still not allowed in Taiwan’s insurance sector, and that some of the principals had political connections with Beijing. When the FSC cited the official reasons for the rejection, however, it said the consortium had failed to demonstrate that it has sufficient commitment to the long-term operation of Nan Shan or that it has the financial resources to meet any future needs for increased capital injections. Nan Shan is the country’s third largest life insurer and has 4 million policy holders.

2010

2009

2010

Unit: US$BN Source: BOFT

and ultimately use one currency, the Euro. Countries in Asia are “much more diverse” than those of the EU, with some having post-industrial economies and some still primarily based on agriculture, Chen said. “The disparity between the ‘haves’ and the ‘have nots’ is too large a divide to cross,” he added. Additionally, Perng’s suggestion could run up against political obstacles, other analysts said. China is unlikely to tolerate currency coordination unless it is on its own terms, while its neighbors – Taiwan included – are wary of becoming dominated by China’s economic sway. Beijing has made clear its desire to eventually turn the renminbi into a new international reserve currency.

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Issue s

Thwarting Cigarette Smuggling Illicit “cheap whites” are flooding the market, depriving both legitimate manufacturers and government tax coffers of revenue.

he smuggling into Taiwan of cheap, little-known brands of cigarettes has become so rampant recently that it emerged as an AmCham lobbying issue in this year’s Taiwan White Paper. To deal with the smuggling problem, some lawmakers have proposed amending the Tobacco and Alcohol Administration Act to require tobacco industry to implement a “unified security and anti-counterfeiting mechanism.” Such a system would involve the introduction of a stamp tax system, with a certification of authenticity applied to individual packaging and perhaps to pallets, cases, and cartons as well. Currently, the Legislative Yuan’s finance committee has reportedly completed reviews of the amendments, and the issue has been submitted for inter-party negotiations, so far without any clear conclusions. The tobacco industry hopes that the lawmakers will come to realize that the proposed mechanism would be of little use given how smuggling techniques have changed over the years. Smuggling no longer primarily involves bulk shipments of counterfeit goods, but rather small quantities of declared lawful imports used to conceal larger volumes of illicit “cheap whites” – obscure brands that can sell on the market for as little as NT$30 a pack. Thus, instead of trying to pass off poor-quality cigarettes as a well-known brand and illegally profiting from another company’s brand value, smugglers are now seeking to make their money by avoidance of duties and taxes on the undeclared cigarettes – causing a large revenue loss for the government. Arguing against the need for a new certification system, legitimate importers and manufacturers of tobacco products note that they have already adopted their own anti-counterfeiting identification features. In addition, a certification stamp would be easy to forge, if the experience of other countries is anything to go by, says Lauren Chen, secretary general of the Tobacco Institute of the Republic of China. It would also give smugglers a new smokescreen to operate behind, while increasing the cost and time of administrative procedures for both industry players and the government. The result would therefore be to penalize tobacco companies wishing to operate in Taiwan legitimately, while still not effectively catching smugglers. “The guys following the rules will just get more delays,” says Jeffrey Harris, managing director for Orient Commercial Enquiries, an anti-counterfeiting investigations firm. Compounding the complexity of the issue, the government does not favor the imposition of a unified security and anti-coun-

阻絕走私菸品台灣市場充斥「低價白牌菸」，傷害合法廠商權益，也影響政府稅收。

走

私進口台灣的廉價、來路不明菸品實在太過猖獗，台北市美國商會不得不在今年的《台灣白皮書》中呼籲政府重視。鑑於非法菸品（俗稱白牌菸）氾濫，部分立法委員提案修正《菸酒管理法》，強制業者遵守安全防偽辨識憑證制度，不僅菸盒外包裝，甚至整批、整箱、整盒都需印上完稅憑證。立法院財政委員會雖已經完成初審，但因爭議仍大，修正案需經朝野協商達成共識。菸品業者希望立委體察現實，畢竟走私方式已經出現很大改變，使憑證制度的功效有限。走私已經不再限於整批闖關，還包括以少量合法菸品掩護大量非法走私等方式，這類白牌菸每包市價約只有新台幣30元。因此，走私型態已不僅限以劣值產品冒充知名菸品、以賺取其中差價，更試圖規避關稅與健康捐等政府的重要稅收來源。合法菸品進口與製造商反對憑證制度的主因在於，各家廠商都已建立獨立的防偽辨識系統。此外，中華民國菸業協會秘書長陳鳳英指出，由其他國家經驗來看，憑證標章事實上非常容易被仿冒。標章一旦成為新的走私手段，業者與政府的行政管理成本都將增加。長此以往，標章制度不但無助消弭走私，還會傷害合法業者。東方國際

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Issues terfeiting mechanism. “It is not proper for the government to deal solely with matters in connection with anti-counterfeiting certificates, which should be handled by the industry players respectively instead,” the Ministry of Finance said in a statement. Instead, AmCham has joined the industry in urging the government to intensify efforts to crack down on smuggling – both by vigorously enforcing applicable laws and by raising penalties and bonuses relating to anti-smuggling operations. But at the moment the Directorate General of Customs under the MOF not only appears satisfied with its current performance, it even described those efforts in an August newsletter as “brilliant.” It said it had seized 3,636 illegal shipments in the first half of this year with a value of NT$85.28 million (US$2.66 million). The largest category, accounting for around 15% of all items seized, consisted of textile products, followed by chemical products at 7.2% and then foreign wine and tobacco products at 5.97% – a total of 1,116 items with an overall value of NT$5.69 million (US$178,000). Harris says this outcome does not necessarily indicate that textiles are more frequently smuggled than tobacco. Customs officers could be more suspicious of containers carrying textiles and be conducting more random checks on them, he said, and adds that tobacco smuggling is becoming increasingly sophisticated. One such technique is to remove contraband tobacco from loaded containers sitting in transshipment yards, thus avoiding the payment of import duties. Often the shipping documents will have been falsified to give customs officers the impression that the goods are coming from a strictly law abiding country so as to reduce suspicions. “A game they play is that no one is expecting illegal shipments from Singapore,” Harris notes. While combating smuggling is a tough job, Harris recommends that customs conduct more spot checks and examine shipping documents more carefully.

商業諮詢有限公司董事經理華傑夫就認為，新制只會增加守法業者的麻煩。讓問題更為複雜的是，政府已經表態反對安全防偽辨識憑證制度。財政部甚至表明，防偽機制不宜由政府統一辦理，應由業者依據不同品牌來執行。台北市美國商會與菸品業者的一致建議是，政府應該更積極打擊走私，除落實嚴格執法、提高緝私獎金，更應提高走私的刑責與罰金。然而，負責緝私的財政部關稅總局，不但對現在的成效表示滿意，八月份的新聞稿甚至自稱「成效卓著」，因為今年上半年已經查獲3636件走私案，市值達8528萬新台幣。但仔細分析內容，最大宗的織品成衣佔總件數15%，其次的化工製品佔7.2%，第三的菸酒走私僅佔5.97%，合計116項，總額為569萬新台幣。華傑夫認為，單從統計數據無法判斷織品成衣的走私頻率是否真的高於菸品，因為海關人員可能對織品成衣的更為警覺、更常抽查，而且菸品走私手法的確也越顯細膩。手法之一是，將違法菸品自海關倉庫偷運出關，藉此規避關稅。另外，走私販也常偽造報關文件，誤導海關人員相信貨物來自執法嚴格的國家，因此不必嚴格查驗。華傑夫說，「的確不會有太多人懷疑，從新加坡來的貨會挾帶非法物品」。消弭走私固然難度不低，但華傑夫認為，海關並非完全無計可施，更常開箱抽檢、更仔細查核輸入文件，都是可行之道。

— 撰文／李可珍

— By Jane Rickards

Revisions Adopted to Labor Law Draft The Council of Labor Affairs accepts some of the White Paper suggestions of AmCham’s HR Committee

n the Human Resources section of this year’s Taiwan White Paper, published at the end of June, the number one issue was a lengthy discussion of draft amendments to the Labor Standards Law. AmCham’s HR Committee made numerous suggestions on how the proposed revisions could be improved. At a presentation to the Committee on September 2, Liu Chwan-ming, director of the Department of Labor Relations at the government’s Council of Labor Affairs (CLA), reported that several of those recommendations had been accepted in the latest draft currently under consideration. Two of the changes relate to the use of “dispatch labor,” workers employed by a service provider that are

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Issue s

勞基法修正案的調整勞委會採納商會人力資源委員會於白皮書所提建議

sent to another company to work under the second entity’s supervision and management. The previous draft required a company wishing to use dispatch labor to first obtain approval from its labormanagement council or from the labor union. It further limited the number of dispatched laborers that could be employed to no more than 10% of an enterprise’s total workforce. In the new version, no approval is needed if the proportion of dispatch labor is less than 3% of the workforce. If more labor is needed and if approval is received from the labor-management council, the proportion may be increased to 5% – and if the labor union gives its approval, the level may go up to 20%. Another clause in the original draft specified that dispatch labor may not be used to perform services that would ordinarily be performed by workers out on strike. Arguing against that provision, the White Paper said that this restriction would leave companies with no way to continue business operations during a strike and would “discourage companies from investing in Taiwan, causing unemployment to rise.” Accepting the Committee’s suggestion, the CLA deleted that clause altogether. In addition, the previous draft stated that in the event of a merger, acquisition, spin-off, or other transfer of a substantial portion of a company’s business or assets, existing labor contracts would continue in force and be assigned to the new entity unless the worker involved objected. Under the latest revision, the employees would automatically be transferred only in the case of a merger. In the other circumstances, the current rules under the Business Mergers & Acquisitions Law would still be followed, permitting the old employer and the prospective new one to jointly decide on which employees are to be transferred. In line with Taiwan governmental procedures, the CLA will submit a final draft of the amendments to the Executive Yuan (EY) for review. Once the EY has given its approval, it will be sent to the Legislative Yuan (LY) for deliberation. Seraphim Mar, a labor attorney with Baker & McKenzie and co-chair of AmCham’s HR Committee, expressed mixed feelings about the CLA’s latest revision. “On the one hand, we are pleased that the Council accepted three of the recommendations from the White Paper,” she said. “But on the other, there are still 15 other suggestions that were not adopted. Perhaps some of these can still be considered at the EY or LY level.”

台

北市美國商會人力資源委員會今年六月在《台灣白皮書》的產業優先議題中，最重視的就是《勞動基準法》修法的相關問題。委員會提出多項建議，希望政府修正勞基法的修法方向。行政院勞工委員會勞資關係處處長劉傳名9月2 日向人力資源委員會指出，委員會幾項建議已經納入勞基法修正草案。兩項修正主要與勞動派遣有關–勞動派遣指人力派遣公司雇用員工後，派遣員工至第三方企業工作，並接受第三方企業的監督、管理。勞基法之前的修正草案擬定，企業進用派遣員工前，必須先取得勞資會議或工會同意，且派遣員工不得超過企業員工總數的10%。修正後的草案規定，如派遣員工不超過企業員工總數3%，則不需事先取得勞資會議或工會同意。如經勞資會議同意，派遣員工可達總額 5%；一旦取得工會許可，派遣員工甚至可達總額 20%。原修正草案的另一項規定是，員工罷工時，企業不得進用派遣員工取代。人力資源委員會在白皮書強調，此一規定將使企業無法在罷工期間維持正常營運，勢必「影響企業在台投資意願、導致失業率上升」。勞委會最後決定刪除此一規定。另外，原修正草案規定，企業購併、分割、轉讓多數營業或財產時，除非員工反對隨同移轉，受讓企業仍需遵守原有勞動契約。新的草案則修正為，合併案中，員工得自動隨同移轉；但其他狀況下，仍受《企業併購法》規範，由受讓雙方企業議定員工移轉名額。勞委會擬定完成勞基法修正草案後，將先送行政院會審查。行政院通過後，再交由立法院審查。對勞委會的決定，國際通商法律事務所資深合夥律師、商會人力資源委員會共同主席馬靜如說她感覺有點複雜，因為委員會固然樂見勞委會採納三項建議，但另外還有15項建議未獲採納，只能看看到了行政院或立法院能不能敗部復活。

— 撰文／沙蕩 — By Don Shapiro

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AdvertoriAl

A messAge from irpmA

Assuring a Steady Stream of Innovative New Drugs to the Taiwan Market

he benefits society has derived from advances in medication are so obvious that they are often taken for granted. Compared with our grandparents’ or even parents’ generation, people today live longer, healthier, and more active and productive lives – in large measure because of the new medicines that have been made available. I n Ta i w a n , f o r e x a m p l e , a 2 0 0 5 s u r v e y l e d b y Academia Sinica economist Hsieh Chee-Ruey found that “by conservative estimates” 27% of the increased life expectancy in Taiwan in recent years “could be attributed to the increased stock of pharmaceutical innovation.” In the United States and Europe, there is abundant data demonstrating the value of new drugs in extending the lives and improving the quality of life for patients with cancer, heart disease, and other ailments. In addition, the development of anti-depressant drugs has played a significant role in decreasing suicides. W i t h s p e c i f i c r e f e r e n c e t o Ta i w a n , a m a j o r breakthrough occurred in the 1980s when all new-born babies began to be vaccinated against hepatitis B. The program broke a chain in which infants were infected by mothers who were carriers; later in life, those children often developed chronic hepatitis, then liver cirrhosis, and finally liver cancer – which in Taiwan was usually one of the two leading causes of death by cancer. In the past two decades, the number of carriers has been reduced from 10.5% of the population to under 1%, and the incidence of liver cancer has been dropping steadily. For diabetes, another disease common in Taiwan (the prevalence rate is 5.8%), an array of new drugs – used together with the proper regimen of exercise and diet – has helped patients to control the disease effectively and conveniently, avoiding great disruption to their lives and those of their loved ones. Besides enhancing the welfare of patients and their families, the steady introduction of new drugs has lessened the burden on society of lost productivity and the cost of care, since early treatment now brings many conditions under control before they have progressed to incapacitating levels. The pharmaceutical industry is proud of the contribution it has made to bettering the lives of people

in Taiwan and around the world. But maintaining the flow of new drug discoveries depends on companies’ ability to continue investing in R&D – an extraordinarily time-consuming and expensive process. On average, it takes 10-12 years and US$1 billion-$1.3 billion to bring a new pharmaceutical product to market, as success can typically be achieved in only one out of 10,000 prospective drugs being researched. I n Ta i w a n , t h e r e t u r n o n i n v e s t m e n t f o r pharmaceutical companies has been declining steadily in recent years due to the government’s policy of conducting periodic Price Volume Surveys, followed by substantial cuts in the reimbursement prices offered under the National Health Insurance program. Six such rounds of price cuts have already been carried out over the past decade (a seventh is now under planning), reducing prices by a total of some NT$50 billion. As a result, Taiwan now has the lowest overall drug prices of any major market in the world; on average, the prices of original drugs is only 28% that of the United States. Frequently those reimbursement prices are too low even to cover costs, leaving drug companies with no alternative but to withhold certain products from the marketplace. Longer term, those companies are finding themselves with less income to pour into research, raising the prospect of fewer new pharmaceutical products coming to market in the future, which can continue to improve the efficacy of medical treatment and the overall health of society. That worrisome prospect has prompted the researchbased pharmaceutical industry in Taiwan to engage in numerous discussions with the Department of Health and its Bureau of National Health Insurance (BNHI) in search of a mutually satisfactory remedy. The ideal solution would need to provide industry with a reasonable reward for the introduction of innovative medications, while also assuring BNHI that it can maintain the financial soundness of the national healthcare system. After considerable study, the International Researchbased Pharmaceutical Manufacturers Associations (IRPMA) has come up with a proposal that should meet those twin objectives. The plan, which calls for the adoption of an annual Drug Expenditure Target

IRPMA International Research-based Pharmaceutical Manufacturers Association http://www.irpma.org.tw 9F-8, 188 NanJing e. rd., Sec. 5, taipei 10571, taiwan tel: +886-2-2767-5661 Fax: +886-2-2746-8575

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AdvertoriAl

(DET) through consultation between BNHI and the manufacturers, would commit industry to sharing the risk in case the increased spending on drugs exceeds the projected amount. If that should happen, the manufacturers would make up the difference through a price adjustment the following year. Implementation of a DET process in Taiwan would benefit the general public by assuring stable access to new medical advances long into the future – a crucial consideration given the demographic changes that are rapidly turning Taiwan into an ageing society. For the government, the advantages would be improved medical care for its population, better control over healthcare costs, and the ability to incentivize pharmaceutical companies to invest in this market in support of Taiwan’s

efforts to develop a vibrant domestic biotechnology industry. For the drug companies, use of the DET system in place of compulsory Price Volume Surveys and their devastating price cuts would bring more stability to their business environment and greater capacity to take their business success or failure into their own hands. DOH and BNHI have shown a willingness to consider this proposal in recognition of the clear need to encourage pharmaceutical innovation. On behalf of the industry, IRPMA would like to express its appreciation to the government for its forward-looking thinking on this matter. Although extensive further discussion will be needed before any final conclusions can be reached, the spirit of constructive dialogue that currently prevails is cause for considerable optimism.

確保新藥持續引進台灣藥的研發進步足以增進社會福祉，但正因道理太過淺白，往往被視為理所當然。與祖父輩，甚至是父母親那一輩相比，現在的壽命更長、健康更佳，也更具活力與成就，主因正是不斷改良的藥品。中央研究院經濟研究所研究員謝啟瑞2005年一項研究顯示，台灣人平均餘命的增加，其中估計有27%可歸因於創新藥品的上市。美國與歐洲眾多研究顯示，癌症、心臟病與其他疾病的病患，確實能因新藥而延長壽命、改善生活品質。此外，抗憂鬱藥物也能顯著降低自殺機率。就台灣而言，新生兒自1980年代開始強制接種B型肝炎疫苗。肝癌曾經是台灣癌症死因的前一、兩名，但新生兒B肝接種終止了常見的惡性循環：子女從帶原母親感染B肝，然後長大後發展成慢性肝炎，最後惡化為肝癌。過去20年，帶原人數由總人口10.5%降到1%以下，肝癌的案例也持續減少。台灣另一種常見疾病，盛行率5.8%的糖尿病，一系列新藥，搭配運動與飲食調整，已經可以協助病人有效與方便地控制病情，避免病患與家屬因此生活大亂。除了病患與家屬，新藥的持續引進也降低社會負擔，避免產能降低與看護成本，畢竟早期治療有助穩定病情，避免病情惡化至藥石罔效。藥品製造業一直引以為傲的是，能協助改善台灣與全球民眾的生活品質。但新藥有賴企業持續投資研發，而研發既耗時又費資。一般而言，一種新藥上市之前，需要花10至12年的時間，以及10億至13億美元的經費，而且往往是一萬種原型藥品中只有一種能夠成功。藥廠在台灣市場回收成本的能力近年持續下滑，原因是政府執行定期藥價調查（PVS）後，往往大砍健保給

醫

中華民國開發性製藥研究協會（IRPMA）台北市10571南京東路五段188號9F-8

付價格。過去十年，台灣已經六度降低藥品價格，最近還可能第七度調整，全台整體價格已經減少500億新台幣。影響所及，台灣現在已經是全球主要市場中，整體藥價最低的國家之一；平均而言，台灣的新藥價格只有美國28%。健保給付價格常常低於成本，迫使藥廠放棄引進部分產品。從另一個角度來看，如果藥廠的收入不足以支撐現有研發水準，未來能夠進入市場的新藥種類將會減少，治療效果與公共衛生自然無法持續改善。因此，台灣的跨國藥廠持續與衛生署及其所屬中央健康保險局溝通，希望找出雙方都能滿意的解決之道。理想的方案之一是，在不影響健保財務狀況下，政府可合理獎勵新藥引進。中華民國開發性製藥研究協會（IRPMA）審慎研究後，提出一項雙贏建議案：健保局與藥廠諮商後，訂定年度藥品支出目標（DET）；一旦年度實際支出超過預設目標，藥廠應在次一年度分擔兩者差額。 DET制度如能實施，對民眾而言，公共衛生將能因新藥的穩定持續引進而不斷改善–特別是，台灣人口結構正快速轉向高齡社會。對政府，優點是醫療品質更好、成本管控更佳，也能鼓勵跨國藥廠投資台灣，以協助台灣發展本土生技產業。對業者，相較於P V S與藥價調整，DET制度更能營造穩定的經營環境，並使企業更能掌握經營方向。衛生署與健保局瞭解鼓勵藥品研發的重要，因此表示願意考慮此一提案。IRPMA在此願代表業界，感謝政府的前瞻思維。雖然真正定案之前，還需要許多深入溝通討論，但雙方現階段都能以建設性態度對話，讓業界願意樂觀期待具體成果。

http://www.irpma.org.tw 電話：02-2767-5661 傳真：02-2746-8575

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COVER STORY

The Future for Flat Panel Displays 前瞻TFT LCD產業

phOTO : COUrTESy OF ITrI

he worldwide flat-panel market is dominated by two Korean companies (Samsung and LG) followed by two Taiwanese makers (AUO and CMI). The Koreans have the advantage of branding, while Taiwan excels at cost control and flexibility – and has the inside track in the rapidly growing Chinese market. The Taiwan producers have developed close ties with flat-panel TV makers in China, and the recent ECFA accord and plans for investments across the Strait should further strengthen their foothold on the mainland.

平面顯示器全球前兩大都是南韓廠商–三星與樂金，其後則是兩家台灣廠商–友達與奇美。南韓的長處在品牌包，台灣的優勢則是成本管控、營運彈性，及快速成長的中國市場。台灣廠商早已奠定兩岸合作基礎，ECFA與擴大投資將更強化台灣品牌在中國市場的優勢。 BY JANE RICKARDS

撰文／李可珍

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lim, lightweight, and larger sized than the computer and TV screens that used the now antiquated cathode ray tube (CRT) technology, thin-film transistor liquid crystal display (TFT LCD) panels were first a hit a decade ago. The light-modulating properties of liquid crystals make them easier on the eye and they are conveniently portable. Taiwanese companies were quick to capitalize on this trend, and the TFT LCD flat panel industry became, along with semiconductors, one of the key pillars of the island’s prosperity. But now, with TFT LCD televisions the main driver of panel demand and with Western markets approach-

以

ing saturation, Taiwanese companies – particularly market leaders AU Optronics and Chimei Innolux – must look for new directions. The LCD TV industry is moving from a focus on screen size to one of display quality and sophisticated functions. Taiwanese panel-makers have not been as aggressive as their main rivals – Korean companies Samsung Electronics and LG Displays – in exploring new technologies, and they suffer from a lack of branding for finished products. But improved cross-Strait relations gives the Taiwanese makers an edge over competitors in China, which analysts predict will soon have the world’s largest LCD TV market.

薄膜電晶體–液晶技術（TFT L C D）製成的顯示器，10年前問市時曾經轟動一時，因為比起當時最普遍的CRT顯示器，TFT LCD更薄、更輕，但螢幕更大。液晶顯示容易調控亮度的特性對眼睛更好，也更便於攜帶。台灣廠商很快就發現TFT-LCD的潛力；經過多年積極投入，TFT LCD已經與半導體產業並駕齊驅，成為台灣產業發展的火車頭之一。但T F T-L C D的發展重心已轉向電視，且歐美市場趨於飽和，包括友達光電與奇美電子兩大龍頭在內的台灣業者皆須尋找新的發展方向。TFT LCD電視市場的決勝點已不再是尺寸，而是顯像品質與先進功能。相較於主要競爭對手三星電子及樂金顯示器，台灣廠商開發新技術的態度並不積

Taiwan currently has a 33.5% market share in the global TFT LCD panel industry, says Leu Jang-hwa, director of the Information Technologies Industries Division at the Industrial Development Bureau (IDB) under the Ministry of Economic Affairs. In 2009, according to IDB figures, the Taiwanese display industry had a production value of NT$1.32 trillion (US$41.25 billion), up from around NT$300 billion (US$9.4 billion) in 2002. Last year the industry put in NT$260 billion (US$8.1 billion) in new investment, says Leu, even more than the usual level of NT$100 billion to $200 billion. As of April, 36 flatpanel fabs were in operation across the island, 18 of them with technology of “5th generation” or above. The industry directly employs around 85,250 people, almost double the level of seven years ago. Among TFD LCD flat-panel applications, television sets account for around 45% to 50% of panel maker’s revenues internationally, says Calvin Shao, an equity analyst with Sinopac Securities who specializes in following this industry. Global growth for TFT LCD televisions comes to 20% to 30% a year, with the penetration rate for the product standing at 74% in the first quarter of this year. For TFT LCD computer monitors, in contrast, the world penetration rate is almost 100% and yearly growth is

極，也欠缺品牌包裝。但兩岸關係升溫，台灣業者比起其他對手，將更有機會搶佔即將成為全球最大TFT LCD電視市場的中國。經濟部工業局電子資訊組組長呂正華表示，台灣的T F T L C D全球市佔率約為 33.5%。工業局資料顯示，台灣顯示器產業 2002年的產值為3000億新台幣，2009年已成長為1.32兆新台幣。呂正華說，顯示器產業2009年新增投資為2600億新台幣，高於往年的1000億至2000億新台幣。至今年四月，全台共有36家平面顯示器廠，其中 18家具有第五代或更先進的生產技術，而總雇用人數達8萬5250人，較七年前增加近一倍。永豐金證券面板研究員邵琮淳指出，TFT

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a tiny 1%-2% as PC demand tapers off. Panels for notebook computers are showing growth of 10%-15% as consumers shift away from desktop models, says Shao. Panels sized below 10 inches, used for handsets as well as other diverse applications, are also showing strong growth. As demand increasingly becomes driven by the TV market, causing panel size to get larger and larger, the level of capital expenditure required is mounting – at the same time as stiff competition is generating low returns. It takes around 18 months and billions of US dollars to install a new fab, making it difficult to adjust plans in an often unpredictable market. “It’s hard to project demand for the next year or next two years – that’s the most difficult challenge for panel makers,” Shao says. “If new capacity comes out that doesn’t match market demand, it can quite easily lead to oversupply. Once there is oversupply, panel prices go down quite sharply and panel makers experience a huge loss.” TFT LCD televisions have a much slower replacement rate than handsets, since consumers tend to buy a new TV every five to seven years, rather than every year or two as with handsets. Around seven years ago, the LCD television market experienced rapid growth in Western countries when consumers replaced their old CRT sets, with global year-on-year growth at the time of around 80% to 90%. Global growth

is now a third of this, amid slow replacement rates. Many analysts are already predicting an oversupply. “In the short term, things are not looking so rosy in the LCD industry right now,” says Michael McManus, the managing editor of Digitimes, who notes that while future shipments are likely to be flat, companies are still adding new capacity. McManus adds that oversupply often tends to affect Taiwan companies more than their Korean and Japanese rivals, as branded companies make a certain proportion of panels in-house, while outsourcing the rest to Taiwanese companies. This outsourcing,

he points out, is usually the first thing to get cut during a downturn. S i n o p a c ’s S h a o n o t e s t h a t p a n e l prices in the second quarter of this year were already declining, after inventories became overstocked due to overoptimism about China’ s growth rate in the first half. He says that companies such as AU Optronics Corp. (AUO) have announced plans to lower the average rate of capacity utilization from 98% in the second quarter to 90%-93% in the third, but with companies like Samsung and LG Display continuing to expand output, increased oversupply is likely to occur in the second half of this year,

Shutter glasses must currently be worn to view commercially-available 3D television. Some consumers feel this is a hassle if they want to multitask domestic chores when watching TV at home. photo : cna

LCD出口營收的45%至50%來自電視。TFT LCD電視全球市場的年成長率在20%至30%，今年首季的普及率已達74%。相較之下，TFT LCD電腦顯示器的普及率已近 100%，且因個人電腦市場不振，年成長僅約1%至 2%。邵琮淳表示，因消費者轉用筆記型電腦，筆電顯示螢幕仍有10%至15%的年成長率。手機與其他3C設備使用的10吋以下小面板，也有不錯的成長空間。電視成為TFT LCD的主力，導致面板做越大，除增加資本支出，也因競爭激烈壓縮獲利。T F T L C D新廠興建約需18個月及數十億美元，限縮廠商回應市場變化的彈性。邵琮淳說，面板廠的最大挑戰就是預測未來一年或兩年的需求量；如果產能高於需求，市場供過於求將導致價格大跌，廠商將因損失慘重。

TFT LCD的汰換頻率遠低於手機，因為消費者大概每五至七年才會換購新電視，但每一兩年就可能換手機。七年之前，歐美國家的消費者開始汰換CRT電視，使當地TFT LCD電視市場一度極高速成長，年成長可達80%至90%，但隨著普及率增加，現在的年成長率已經降到30%左右。許多專家認為，供過於求遲早會出現。電子時報主編麥力斯表示，TFT LCD產業短期前景看淡，而且就算需求增加不多，業者還是不斷擴充產能。麥力斯認為，供過於求對台灣的傷害往往高於南韓或日本，因為兩國大廠多半只保留一部份自主產能，其他的生產都外包給台灣公司；一旦供給過剩，外包訂單向來都是第一個被砍的。永豐金證券的邵琮淳指出，今年第二季的價格已經下滑，因為廠商對中國市場上半年的成長率太過樂觀，導致存貨過多。他表示，儘管友達已

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Cover StoRY hurting profitability. While demand is expected to pick up mildly ahead of the China’s October 1 national day holiday, analysts say, fears of a double-dip recession in Western countries are still dampening growth.

Eyes on China A relative bright spot in this scenario is the Chinese market, many analysts say. China escaped the global financial crisis relatively unscathed compared with Western countries. More importantly, according to research firm DisplaySearch, the Chinese market for flat panel TVs will enjoy compound annual growth of 26.7% between 2008 and 2012, with

China’s share of the global market jumping from 32% to 80% in that period. China has an estimated 400 million owners of CRT televisions that could be replaced. “Are they all going to buy LCD TVs?” asks Mc Manus. “I don’t know, but 400 million people is three times the size of Japan’s population.” Although both policy-making and market processes in China tend to be opaque – adding to business risk, as it can be difficult to determine inventory levels or judge whether the government will change stimulus policies, such as one encouraging farmers to buy electronics goods – China is still expected to overtake the United States soon to become the world’s biggest consumer of LCD televi-

sions. “We expect China to become the world's largest market for LCD TVs,” says Alan Eusden, chairman and president of Corning Display Technologies Taiwan, which supplies about half of the Taiwan market for glass substrates for TFT LCD panels. Eusden was more positive about the long-term prospects of the TFT LCD industry than other analysts interviewed. He says Corning projects that global demand for glass substrate this year will be between 2.9 billion and 3.1 billion square feet. There is still room for additional growth, Eusden says, pointing to the rising penetration of LCD televisions in such markets as India and South America. He also notes that while the penetration rate of LCD televisions is already quite high in Western countries, consumers there are still buying new sets. Attracted by the latest styles and functions, they often purchase a new LCD set for the living room and place the old one in another part of the house. Due to the strength of the economic rebound following the financial crisis, Corning has increased its global capital spending from the original budget of

Alan Eusden, Chairman and President of Corning Display Technologies Taiwan, says his company supplies about half the glass substrates that are used by Taiwanese panel makers. photo : courtesy of corning

經宣布，第二季98%的產能利用率，將在第三季降到90%至93%，但因三星與樂金仍持續擴大產能，今年下半年或將出現過度供給，影響產業獲利。專家認為，中國十一國慶假期可望溫和推升買氣，但歐美出現雙底衰退的疑慮仍將影響市場。

放眼中國消費潛力許多專家認為，全球不景氣中，中國TFT LCD 市場大概是前景看好的，因為相較於歐美嚴重受創於本波金融風暴，中國幾乎是毫髮未傷。市場調查公司DisplaySearch的研究指出更關鍵的一點：中國的T F T L C D電視市場2008年至2012年將有 26.7%的複合年成長率，同時佔全球市場的比重將由32%成長至80%。中國約有4億消費者可望將 CRT電視換成TFT LCD電視。電子時報主編麥力斯

表示，「4億人全部都會換購TFT LCD電視？我不敢肯定，但真的有那麼多人的話，那可是日本總人口的三倍」。儘管中國的決策過程與市場機制都不夠透明，導致廠商風險增加，因為難以預測庫存水準，也難以判斷「家電下鄉」等政策何時會改變，但中國仍可望在短期內取代美國，成為TFT LCD電視的最大消費市場。台灣TFT LCD廠的玻璃基板，有半數來自台灣康寧顯示玻璃；而其董事長暨總經理余智敦表示，「我們估計中國很快就會成為全球最大的液晶電視消費市場。」比起其他受訪的專家，余智敦對TFT LCD產業的長期展望較為樂觀。他說，台灣康寧預估，玻璃基板今年的全球需求量應在29億至31億平方呎。余智敦認為，TFT LCD電視應該還有額外成長空間，因為印度與南美的市場尚未飽和，而歐

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around US$700 million to US1.2 billion for this year and has restarted plans to expand its operations in the Central Science Park in Taichung (he declined to give the starting date, or specific figures for the new investment in Taiwan). The company also has plans for another expansion in Taichung that is expected to bring on more capacity in 2012. But in a sign that Corning may be hedging it bets, Eusden says it may serve a number of purposes. “It allows us to keep growing in TFT LCD – our core business – but it also gives us the capability of expanding in other areas if we choose.” Some possibilities are photo-voltaics and the extra-durable Gorilla glass Corning has developed. In the TFT LCD market, Eusden says he is less concerned about oversupply than market volatility. “The question always is do we have capacity at the time the market surges, as there are often swings in demand and seasonal swings as well.” As an example, he points to a sharp downturn at the start of 2009, which suddenly reversed in the second quarter. These swings are amplified by changes in supplychain inventories, he says, as suppliers also attempt to anticipate market changes and ramp up or down, sometimes leading to shortages of critical components. (For example, other analysts have pointed to a shortage of glass in the second half and first half of this year). But the main cause of volatility is the seasonal sales cycle, Eusden says. Increased sales may be expected before Christmas or China’s national day, but it is difficult to predict exactly how high that demand will be. The highly capital-intensive nature of the industry has spurred several rounds of consolidation in the sector in Taiwan. Chimei Innolux Corp. (CMI) and AUO have now emerged as the main players in the TV-panel market, with other companies now shunted into niche categories involving smaller panels. CMI,

美國家的普及率雖高，但受到最新款式與功能的吸引，消費者還是會添購新電視放在客廳，然後將舊的擺到家中其他地方。鑑於經濟復甦力道，台灣康寧今年的資本支出已由7億美元上調至12億美元，並重新啟動位於中部科學園區台中廠的擴建計畫–不過余智敦不願說明計畫開始時間及新增投資額度。康寧同時也正計畫進一步擴建台中產能，新增產能預計2012年開始生產。但余智敦表示，擴建計畫並非僅為單一業務，顯示康寧也非對TFT LCD孤注一擲。他說，擴充產能固然能提升核心業務TFT-LCD的產能，但也能用於其他產品，包括太陽光電及康寧研發的或學強化Gorilla玻璃。余智敦認為，對TFT LCD市場，他對市場波動的擔心高於供給過剩，「問題永遠是，在

A Few Distractions

wo recent incidents affecting the TFT LCD industry have attracted much media attention in Taiwan, though analysts consider that they ultimately will have little impact on the sector’s overall development. The first case involves a series of proposed AUO expansion projects in the Central Science park near Taichung. This summer the high Administrative Court ruled that the projects could not proceed after farmers whose land was due to be expropriated charged that the government had failed to carry out a reliable environmental impact assessment. Media reports said that AUO intended to invest NT$400 billion (US$12.5 billion) to build two “11th generation” flat-panel fabs plus solar energy facilities. AUO suggested resolving the problem through a land swap with the farmers, but the idea was rejected. While this episode sparked rumors that Taiwan’s environmental policies would encourage AUO and other players to move offshore, most sources expect the government to find a solution to enable the projects to go forward, though that may take several months. The National Science Council and the Environmental protection Administration have been assigned to try to resolve the matter. “high-tech investment in Taiwan is so important, so it is pretty unlikely that the government will halt the whole process,” says raymond hsu of Taiwan ratings. In the other incident, a U.S. court recently barred three AUO top executives from leaving the United States after they had voluntarily flown there to testify in an LCD-panel pricefixing probe. The case arises from a U.S. Justice Department action over the past few years against Korean, Japanese, and Taiwanese panel makers who allegedly engaged in a conspiracy to set worldwide prices between 2001 and 2006. A grand jury in June indicted AUO CEO Chen Lai-juh, along with other executives from the company, but AUO and its officials have insisted on their innocence and vowed to prove it in court. The AUO strategy differs from the other companies and executives indicted, who chose to plead guilty to the charges, accepting fines and even prison sentences. Those companies were Chunghua picture Tubes, Chi Mei Optoelectronics, and hannstar Display. Industry analysts see the AUO strategy as a gamble. The other companies accepted the punishment but can now put the matter behind them. If AUO eventually wins in court, it will be exonerated, but if loses, it won't face any stiffer penalties than if it had admitted to committing violations. Michael McManus, managing editor of Digitimes, considers that the bad publicity and monetary losses from the fines will affect the industry only temporarily and should have little effect on the companies’ long-term business operations.

— By Jane Rickards

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Cover StoRY Taiwan’s biggest maker of panels by capacity, is the result of a November 2009 merger between computer monitor maker Innolux Display Corp., an affiliate of the giant Hon Hai Precision Industry Co., and Chimei Optoelectronics. The company posted net profits of NT$9.54 billion (US$298 million) in the second quarter of this year, more than doubling its performance in the first quarter. AUO, which was formed by the 2001 merger of Unipac Optoelectonics and Acer Display Technology, in 2006 further merged with Quanta Display Inc. The company posted second quarter profits of

NT$11.2 billion (US$350 million). Now, says Shao, the global market share ranking for panel makers in terms of units shipped puts Korea’s LG Display first with 24.1%, followed by Samsung Electronics at 22.4%, CMI with 17.9%, and AUO at 17.4%. Two other Taiwanese manufacturers, Chunghwa Picture Tubes (part of the Tatung group) and Hannstar Display Corp., were both once large-size panel makers, but they were eventually unable to drum up enough up-front investment to continue to compete in that sector, says McManus. Now CPT, although still

making some panels for televisions, is mainly serving the computer notebook and monitor market, which is also the current specialty of Hannstar. Another notable example of a panel maker that has become a niche player is Prime View International, which boasts that it built the first TFT LCD factory in Taiwan in 1994, and now has reinvented itself in the e-paper business by purchasing U.S.based E-Ink Corp. and renaming itself E-Ink Holdings. Meanwhile, reports McManus, component makers over the years have consolidated into two different groups that supply either AUO or CMI.

LEDs propelling growth A new trend currently driving growth is LED televisions, which use light-emitting diodes instead of the traditional fluorescent lights for backlighting liquid crystal displays. Some of the advantages of LED televisions are decreased power consumption and less environmental impact upon disposal. Shao projects that the LED penetration rate will surpass 60% in 2012 and that 3D TV (see sidebar) will exceed 60% in 2015.

Bright outlook: Corning has expansion plans, with more plant capacity to be added in Taichung by 2012. photo : courtesy of corning

市場需求大增的時候，產能跟不跟得上，因為需求往往起伏很快，也會有淡旺季之分」。他說，其例之一是，需求在2009年初突然大跌，但第二季就突然反轉。他說，需求起伏會因為供給鏈的庫存變化而更為明顯，因為供應商也會預期市場變化而增加或減少產能，有時會引發關鍵元件的缺貨–例如其他專家曾指出，TFT LCD玻璃的去年下半年與今年上半年就曾經缺貨。但余智敦表示，需求波動的主因還是季節性變動。耶誕假期與中國國慶會帶動買氣，但也很難準確預估需求的增加幅度。 TFT LCD產業高資本密集度的特性，曾經引發台灣廠商幾波的整併。奇美電子與友達光電現在已是TFT LCD電視的龍頭，其他公司則轉向小面板等利基市場。台灣面板產能最高的奇美電子，是鴻海集團的群創光電與奇美集團的奇美電子於

2009年11月合併而成。奇美電子今年第二季獲利 95.4億新台幣，較第一季增加一倍多。友達光電前身為宏碁集團的達碁科技，2001 年與聯友光電合併後更名友達光電，2006年再度合併廣輝電子。友達光電今年第二季獲利為112 億。永豐金的邵琮淳表示，以出貨量區分，全球第一大是市佔率24.1%的樂金顯示器，第二大是 22.4%的三星電子，奇美電子與友達光電以17.9% 與17.4%居於其後。電子時報的麥力斯表示，台灣另外兩家大廠，大同集團的中華映管與瀚宇彩晶，原本都是大面板廠，但因資金不足而轉向其他產品。中華映管雖然還有生產電視面板，但主力已經轉向筆電與顯示器；瀚宇彩晶同樣轉向筆電與顯示器市場。元太科技雖然早在1994年就設立台灣首間 TFT LCD工廠，但現在也同樣轉向利基市場，並

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“The industry is changing from size competition to functionality,” says Shao. “In future, you’ll see additional functions added to TVs in order to attract consumers.” According to DisplaySearch, of the LCD TV panels shipped in the second quarter of this year, 18.5% had LED backlights. That represented 110% growth from the previous quarter, and panel makers are forecasting that LED penetration will exceed 50% in the middle of next year. The manufacturers are currently investing heavily to develop lower-cost LED backlit panels, in part because “it expands panel makers’ markets outside LCD panels, because they can leverage that [technology in] the general lighting market,” says McManus. While overall LCD TV demand was quite weak in the second quarter, demand for LED televisions was strong, notes Shao. Although AUO has made known that it wants all its panels to be LED backlit by 2013, this technological innovation has been led by Samsung. For the fourth quarter of this year, according to DisplaySearch, AUO aims to have LED panels account for 26.9% of its shipments of TV panels, with CMI roughly the same. But Samsung plans to reach a level of 58.3% of shipments with LED backlighting in the same quarter, with LEDs likely to be the future backlighting source of all of the brand’s LCD televisions. As Samsung and LG Display compete

neck-and-neck against CMI and AUO, analysts say the Koreans’ more ambitious technological research and a greater appetite for risk-taking with new products are among their advantages over Taiwanese companies. Tristan Liu, an economist at the Taiwan Institute of Economic Research, describes the Taiwan panel makers as stuck in a “comfort zone” and “risk averse.” He foresees Korea as leading Taiwan technologically in three to five years. “Of course there is a possibility that the Koreans might fail,” says Liu. “But if they succeed, there will be a huge market waiting for them in North America and Europe.” On the other hand, Taiwan’s panel makers are considered to have compar-

且在併購美商E-Ink後，將英文名稱由PVI改為E-Ink Holdings，進軍電子紙市場。麥力斯指出，中上游廠商經過多年整併後，現在也分別納入奇美與友達的供給鏈。

LED背光螢幕強勢登場 TFT LCD產業的嶄新動力來自LED背光技術–以 LED發光模組取代冷陰極燈管（CCFL）。LED背光液晶電視的優點在耗電量更少，回收處理的污染疑慮也低。永豐金的邵琮淳預估，LED電視的普及率2012年可突破60%，3D電視2015年也將超過六成。他說，「產業競爭已經由尺寸轉向功能」，「為了吸引消費者，電視的功能會越來越多」。 DisplaySearch指出，今年第二季出貨的TFT LCD 電視，18.5%採用LED背光，較第一季增加110%。

Chimei-Innolux displays one of its latest models – a 27” TFT LCD 3D television with touch panel functions – at an international flat panel display trade fair in Japan. Some economists feel Taiwan TFT LCD companies, while adventurous with new technology, do not take as many gambles on new inventions as their Korean rivals. photo : cna

面板廠預估，LED機種的比例明年中將超過50%。電子時報的麥力斯指出，業者正積極研發低成本 LED背光面板，原因之一是便於業者跨足LED照明市場。永豐金的邵琮淳表示，整體而言，TFT LCD電視今年第二季的表現不佳，但L E D電視卻是一枝獨秀。國內媒體報告，友達希望筆電能在2011 年全面換用LED背光，電視則在2013年全面升級 LED，但已經晚了三星一步。DisplaySearch預估今年第四季的出貨狀況，友達的L E D電視將佔總量的26.9%，奇美的比例也差不多。但三星第四季的 LED電視比例可望達到58.3%，接著就是全面換用 LED背光。南韓三星、樂金與台灣奇美、友達的激烈競爭中，專家認為野心勃勃的研發計畫與大膽嘗試高風險新產品的特質，是南韓廠商優於台灣的地

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Cover StoRY ative advantages in terms of cost control, operational flexibility, and efficiency in integrating indepen dently run supply chains (whereas branded companies such as Samsung do nearly everything in-house). The Taiwan manufacturers also lack branding, which can be a disadvantage in a downturn, as mentioned earlier, but also can provide an edge in some circumstances. “It can be an advantage if the brands don’t see them as a competitor,” points out Eusden. The characteristics of the Taiwan industry, combined with the liberalized cross-Strait economic policies of the administration of President Ma Ying-jeou, will make it easier for the Taiwanese panel makers to team up with branded Chinese TV, who in turn need the partnership to make up for their lack of technological skills. This joining of forces is widely considered likely to be the future trend. TIER’s Liu points out that the Taiwan companies are already concentrating on making panels suitable for ordinary Chinese consumers who might buy medium or small-sized flat-panel TV sets, rather than focusing on fancy gadgetry

that might appeal more to buyers in advanced countries. The focus in Taiwan is on “good quality” or “fairpriced” models, he says. “We’re not going to get into the luxury goods market. We’re walking down a different path from Korea.” Shao notes that although CMI and AUO trail Korea’s Samsung and LG internationally, in China it is already a different story, with the Taiwanese panel makers occupying 50% of the Chinese TV market. Following the recent signing by Taipei and Beijing of the Economic Cooperation Framework Agreement (ECFA), moreover, the relationship between Taiwanese panel makers and Chinese manufacturers and markets will only get closer. Eusden says that LCD panel glass products, which currently face a 3% tariff in China – far lower than the WTO rate of around 17%, possibly because China needs glass substrates for developing its own local panel makers, one analyst said – will enjoy zero-tariff treatment by 2013 under ECFA. “ECFA will give Taiwan companies an advantage over the Korean ones, which won’t enjoy the same benefits,” Shao says.

方。台灣經濟研究院副研究員呂曜志認為，台灣廠商偏好既有模式與低風險經營。他說，南韓的技術有機會在三五年間領先台灣，「南韓當然可能失敗，但萬一賭對了，北美與歐洲市場將唾手可得」。相對的，台灣的長處則在成本管控、營運彈性，以及有效整合獨立運作的供應鏈–三星等自有品牌廠的零件幾乎都是自產自用。台灣廠商欠缺品牌包裝，雖然在不景氣中可能吃虧，但如台灣康寧的余智敦所說，只要不被大廠視為競爭對手，沒有品牌反而是種優點。台灣廠商憑藉既有優勢，加上馬英九政府改善兩岸關係的政策，將更容易與中國的電視品牌結盟，因後者欠缺先進技術。一般認為，兩岸合作將是未來趨勢。台經院的呂曜志認為，比起先進國家偏好的豪華機種，台灣廠商更重視中小型機種，以迎合中國一般消費者。他認為，台灣品牌的賣點在平價、優質，不同於南韓發展精品電視的方向。永豐金的邵琮淳指出，以國際市場而言，奇美、友達雖然落後於三星、樂金，但單就中國市場，台灣品牌的市佔率已達五成。兩岸簽訂經濟

Guarding technology B u t w h i l e t h e E C FA i s f o s t e ring closer cross-Strait ties, it is actually likely to help keep Taiwan’s panel makers and their technology on the island, rather than migrating to China, analysts say, especially since the government has placed restrictions on investments on the mainland by the TFT LCD industry. In addition, the inclusion of glass substrates on the ECFA “early harvest” list eliminates the risk that China might one day choose to apply the WTO tariff rates when it has sufficient local glass supply or if it wants to push for complete self-sufficiency. Taiwanese panel makers view the restrictions on mainland investments as far more significant than ECFA, as those regulations act as a considerable brake on their activities in China, M c M a n u s s a y s . I n F e b r u a r y, t h e government relaxed the rules to allow panel makers to set up fabs in China, provided they kept their most advanced technologies in Taiwan and made equivalent investments on the island. Previously, Taiwanese companies had only been allowed to assemble panel

合作架構協議（E C F A）後，兩岸廠商與市場只會越來越緊密。台灣康寧的余智敦指出，台灣製玻璃基板進口中國的關稅，現在已經遠低於世界貿易組織（W T O）17%的水準，因為中國需要玻璃基板以發展國內TFT LCD產業。但現行3%的稅率，還將因ECFA在2013年進一步降到零關稅，因此邵琮淳認為，ECFA將給台灣廠商獨特優勢，因為南韓並沒有如此優惠的稅率。

技術保護專家認為，儘管ECFA有利兩岸合作，但由於政府並未放寬TFT LCD產業對中國的投資限制，因此與其說廠商與技術會自此外移對岸，還不如說台灣會更能留住廠商與技術。此外，玻璃基板納入ECFA早收清單，避免中國國內貨源足夠或決定推動產業自主時，可能提高稅率至WTO平均水準的風險。電子時報的麥力斯表示，TFT LCD產業的兩岸投資管制措施，明顯侷限產能轉移至對岸的空間，業者因而多半認為法令限制的影響遠高於 ECFA。政府最早僅開放在中國進行組裝；今年二

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modules (joining panels and frames) in China. Shortly after this announcement, AUO submitted an application, now under review by the Industrial Development Bureau, to set up a “7.5 generation” fab in Jiangsu Province, less sophisticated than its “8.5 generation” fab in Taiwan. The project would involve an investment of US$3 billion, part of which would be likely to be covered by loans from Chinese local authorities. Industry analysts expect CMI to launch plans for its own China fab in light of the revised regulations. The IDB’s Leu says the bureau has received inquiries from CMI, but as yet no concrete proposal. Local Chinese governments, keen to develop their own tech industries, have offered the Taiwanese panel makers significant enticements, including loans and tax incentives, McManus notes. “My feeling is that because of the subsidies, Taiwan panel makers would probably prefer to build an 8.5G LCD plant in China,” he says. “But if the subsidies disappeared and they had to fund everything themselves, they would probably root for ECFA.” TIER's Liu sees a possibility that Taiwan may

further relax its restrictive regulations before the 2012 presidential election. Meanwhile, Samsung and LG Display have both announced plans for “8.5 generation” fabs in China, as have two Chinese companies. China has been aggressively building up its flat-panel manufacturing capacity, and Eusden says that Corning – in anticipation of a more developed Chinese panel industry in future – will open its first glass melting facility in China in the first half of 2012 in the Beijing area. But despite China’s efforts, “we think Chinese local makers will eventually need to cooperate with Korean or Taiwan makers due to a lack of R&D talents,” Shao wrote in a report. “Therefore, the top panel maker’s market positions won’t change a lot.” TIER’s Liu notes that China is likely to continue its economic stimulus program in an effort to rely less on exports and more on domestic economic activity as the source of GDP growth. But he and other analysts stress that China, with its complex distribution system and opaque government processes, is not an easy market for outsiders to enter. “You have to have

月雖然放寬面板業者赴中國設廠生產，但同時要求業者必須將最先進的技術留在台灣，並對台灣做等額投資。友達在此之後向工業局提出申請，赴江蘇設立7.5代廠，台灣則使用8.5代技術；其投資額為30億美元，部分將來自中國地方政府的貸款。專家預期奇美應該也會跟進，但工業局的呂正華表示，奇美雖有探詢，但尚未正式提案。電子時報的麥力斯指出，急於發展科技產業的中國省市政府，往往提供優惠條件吸引台灣面板廠，包括貸款及租稅優惠。他說，「我的猜測是，如果這些優惠措施能夠持續，台灣廠商可能願意跨海設立8.5代廠；但如果只是短期，廠商大概寧可等待E C F A落實」。台經院的呂曜志則認為，2012年總統大選前，禁令有可能進一步放寬。同時，三星與樂金已經宣布在中國新建8.5代廠，兩家中國企業也決定跟進。台灣康寧的余智敦指出，中國正積極發展面板製造能力，而康寧認為中國TFT LCD產業將漸趨成熟，因此計畫 2012年上半年於北京地區開設首座玻璃基板熔爐製造廠。永豐金的邵琮淳曾在一份報告中指出，儘量官

a good domestic partner selling your products,” Liu says. “You have to form a strategic alliance, maybe with giant retailers in the Chinese market.” AUO and CMI have already made strong inroads into the Chinese television industry, with AUO developing strong ties with its main customer, Changhong, and CMI working with Skyworth and Hisense. “Now that Taiwan has signed ECFA, we can integrate [more easily] with mainland branded companies,” IDB's Leu says. “It will be positive synergy to combine China’s market with Taiwan’s advanced manufacturing and creativity.” Raymond Hsu, associate director for corporate and funds ratings at Taiwan Ratings (an affiliate of Standard and Poor’s), and other analysts point out that Taiwanese companies are wellpositioned to cooperate with Chinese manufacturers due to cultural similarities – and to being viewed as fellow Chinese, whereas Koreans or Japanese may be seen as outsiders. In that respect, the near-term may still be difficult for Taiwan’s TFT LCD industry, but the longer-run prospects look highly promising.

方大力扶植，但欠缺研發能量的中國廠商，遲早還是得和南韓或台灣合作；因此，對幾個龍頭大廠的市佔率影響不大。台經院的呂曜志指出，中國經濟振興方案應該不會取消，以持續刺激國內消費，降低外銷的過度依賴。但他與其他專家都認為，中國的產銷制度太過複雜、政府決策又不夠透明，不懂門道的很容易吃虧。呂曜志因此建議，「廠商一定得找個好的合作伙伴銷售產品，也需要結成策略聯盟，最好是大型零售商」。友達與奇美算是已經打好基礎：友達與主要客戶長虹關係緊密，奇美則是與創維、海信合作。工業局的呂正華表示，後ECFA時代，台灣廠商更容易與中國品牌整合。中華信用評等企業暨基金評等部資深協理許智清認為，「台灣的製造與創意，結合中國的市場，將能發揮高度綜效」；其他專家則認為，台灣與中國文化相近，業者合作挑戰較低，而且相對於南韓或日本，台灣還算得上是「自己人」。以此而言，台灣TFT LCD產業近期固然挑戰不少，但長遠來看深具發展潛力。

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3D tV – the Next Big Fad? This technology and other new flat-panel innovations are on the horizon.

Taiwan’s Industrial Technology Research Institute is researching ways that 3D television can be watched by the naked eye rather than through shutter glasses. Research is in its early stages and not likely to be commercially available for some years. photo : courtesy of itri

iewed on a television screen at Taiwan’s Industrial Technology research Institute (ITrI), a cartoon superhero – half man, half bee, and garishly decked in a black-and-yellow outfit – picks up a rock and hurls it at a foe. The rock startlingly appears to hurtle out of the television and through the air toward the viewer, who is strongly tempted to duck out of the way. This kind of sensation is what awaits in the world of three-dimensional television. It may prove to be the next hottest craze and stimulate consumers to buy new sets that can operate in the 3D mode, a boon for panel makers – or perhaps consumers may simply dismiss it as something that induces dizziness and consider it a hassle to don glasses whenever they want to watch TV. “ We need a killer application,” says John Lai, deputy manager of ITrI’s display research department in its Electronics and System research Division within the Industrial Economics and Knowledge Center. “Just like the way you use an e-reader to read an e-book, if you can create 3D technology that

gives a good performance, people will think it’s wonderful.” Currently, 3D TV viewed with specialized shutter glasses is poised to go mainstream in the next 12 months, with companies such as Sony, Samsung, panasonic, and LG aggressively leading the charge. Broadcasters are also taking its potential impact into account. Sports network ESpN, for example, launched its first 3D channel during this year’s soccer World Cup. But several obstacles may stand in the way of widespread popularity, especially the need to wear the shutter glasses. According to a report by the Nielsen Company and the Cable and Telecommunications Association for Marketing, American consumers like the immersive feeling created by 3D television, but are put off by the glasses as they prevent multitasking while watching a program. Calvin Shao, an equity analyst with Sinopac Securities, also noted in a report that 3D television’s low penetration rate so far can be attributed to immature 3D technology in TFT LCD televisions and a lack of 3D TV content. Costs are also much higher, he notes, another factor that might put consumers off, although brands such as Samsung and panasonic are working hard to narrow the price gap with new models. When costs come down, analysts think, the product will attract a much larger market. Korea’s LG says it expects the global 3D TV market to grow by around 3.8 million units this year and to more than 13 million in 2011, according to a reuters report. And Shao says he expects the global penetration rate to surpass 60% in 2015. he also notes that as more 3D games and movies are developed, consumers are more likely to want to try it. ITrI, says Lai, will leave it to private industry to come up with 3D television technologies that require those shutter glasses. Being a research institute, it has taken on the more foresighted task of developing 3D

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ITRI is also researching ways in which 2D and 3D technologies can cooexist on one display screen. In this picture, the writing is viewed two-dimensionally, while the illustration of flowers is viewed in three dimensions. photo : courtesy of itri

technology that can be seen with the naked eye. “We believe that will be the ultimate scenario for 3D technology, maybe three or five years later,” Lai says. The rock-hurling cartoon superhero, a creation of Taiwanese college students, could be seen by the naked eye on ITrI’s television screen. Lauren Chang, an ITrI showroom guide, explains that a slim barrier of optical film is on the television’s display. With the help of software that converts twodimensional images to three-dimensional ones, “the optical film allows the eyes to watch two different images without overlapping – that is the 3D effect.” she explains. The main problem ITrI has encountered so far is the quality of the resolution and thus image clarity, which makes some viewers too “dizzy,” says Chang. But since content creation for the 3D industry is an industry the Taiwan government wants to develop, ITrI is continuing its research to try to perfect the technology. “We want to push this technology into home applications, digital applications, and hospitals,” Lai says. Two other technologies that experts say may revolutionize the panel industry and become mainstream a decade from now are flexible panel displays and panels using organic light-emitting diodes (OLED) technology. OLED panels, which are in the early stages of development, use organic chemical com-

pounds and can function without backlighting. “With OLED displays,” says Lai, “the attraction is that it has beautiful color and has less power consumption,” making them more environmentally friendly. Many small devices, such as portable phones and tablet pCs, already use OLED technology. The OLED panels can be much thinner than TFT LCD panels, a boon for devices such as handsets, but the key obstacle to their mass commercialization is that the chemical material does not have a long lifetime, says Shao. This is less of a problem for handsets, which generally are used for just two to three years, but it is far more problematic for televisions, a much more profitable category for the flat-panel industry. OLED is unlikely to replace TFT LCD technology for at least the next three to four years, experts say. So far OLED technology is not well-developed in Taiwan, especially compared with Japan and Europe, but Taiwanese giants Chimei Innolux and AU Optronics have expressed interest in its potential to ITrI. Another future trend is likely to be flexible displays – displays that can be rolled up or physically manipulated to change their shape. ITrI has been conducting confidential research in this area with U.S. company Kent Displays, a joint venture between Kent State University and Manning Ventures, Lai says. ITrI’s research has been aimed at creat-

ing flexible displays that use low amounts of power, reflecting the green trend, says Lai. These may involve OLED technologies. The research is also focusing on roll-to-roll processing, the creation of electronic devices on a roll of flexible plastic or metal foil. ITrI is seeking to develop flexible displays as thin as 0.3 to 0.1 mm, which would be thinner than glass-based TFT-LCD panels, Lai says, but the thinness that can be achieved depends on the sealing process. “For flexible displays, we need thick sealing for waterproofing,” he says. The main obstacle to commercialization, says Lai, is that ITrI’s flexible displays currently lack high enough resolution. In addition, they can be rolled up somewhat, but not into a full circle. A flexible display that looks like tinfoil pasted onto black paper was on display in the showroom. Chang says it can play videos, but again the resolution is not high. Lai sees ITrI’s efforts as important for maintaining Taiwan’s competitiveness in the flat- panel industry, with strategic ramifications not only for the flat-panel makers, but also the domestic components suppliers and ICT industry generally.

— By Jane Rickards

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law

Learning to Value Patent Quality Patents should be regarded as valuable corporate assets. Given appropriate attention and resources, they can be a source of revenue, not only a defense mechanism.

BY ANDY CHU

s a n i n d i c a t o r o f Ta i w a n ’s prowess in technology innovation, government and media sources in Taiwan frequently cite the large number of patents domestically based companies have received in the United States. In 2009, for example, only four other countries – the United States itself, Japan, Germany, and Korea – were awarded more U.S. patents than the 7,781 registered by Taiwanese companies and institutions. Before 2008, when Korea moved up on the list, Taiwan was in fourth place as a source of patents. But a rarely asked question is whether the quality of Taiwan’s patents is commensurate with their quantity. In recent years when some patent infringement cases have gone to trial, Taiwanese patent-holders have learned to their dismay on a number of occasions that their patent protection was not as strong as they imagined. As a

result, they have suffered some financial losses – either having to pay out compensation to a competitor or missing the opportunity to collect some potential returns. So as not to further incur such losses, several of the larger and more established Taiwanese companies have made a concerted effort in recent years to strengthen their patent portfolios. Although experts in the patent field consider that local companies have made significant progress in improving the quality of their patents, they believe that substantial room for improvement still exists. Taiwan has received wide recognition as a center of innovation, especially in the area of high-tech industries. Such brands as HTC, Asus, and Acer are now well-known around the world. And in the various international competitiveness surveys that regularly assess countries’ strengths and weaknesses as

an investment climate, Taiwan invariably scores quite high in the category of innovation. That is in sharp contrast to just a few decades ago, when Taiwanese companies typically relied on samples of products provided by overseas buyers. But despite the substantial funding being put into research and development (R&D) and marketing in Taiwan, and the large number of products being launched each year, legal specialists note that “good” patents – meaning those that will stand up to challenge in the courts – are not nearly as prevalent as one would hope. It is critical to understand that patents only give holders the right to exclude others from using the idea that is patented. In other words, the patent system is primarily designed as a protective mechanism for innovators – for the purpose of encouraging further innovation. In addition to the defensive function, however, companies have also

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historically pursued patents in order to generate profits and reap a return on their R&D investment. Since patents can be licensed out for hefty royalty fees, bringing lawsuits against patent infringers can lead to quite remunerative judgments or settlements. As a defensive mechanism, patents are most commonly used in bringing counterclaims when competitors claim that one’s company is itself in violation – or in raising the threat of counterclaims to deter rivals from taking such legal action. Larger corporations usually build up a large portfolio of quality patents in order to make themselves a less attractive target for patent violation lawsuits. In sum, wellwritten patents provide their owners with a competitive edge. “As the attorneys’ fees associated with a small U.S. patent litigation average three million dollars through trial, a quality patent portfolio can be the least expensive method of decreasing the likelihood of facing a suit,” advises Douglas S. Weinstein, managing partner of Fei Han Foreign Legal Affairs, the Taipei arm of the U.S. law firm of Finnegan, Henderson, Farabow, Garrett & Dunner. Taiwan enjoys a good legal infrastructure for patent protection, with statutes on the books that generally follow international standards and practices. The system is compliant with World Trade Organization (WTO) regulations on intellectual property rights (IPR), and in recent years the enforcement regime has also been increasingly supportive of those rights, as demonstrated by the inauguration of a specialized Intellectual Property Court a little over two years ago to hear cases at the appellate level. (Some issues still remain, however, such as the nature and extent of discovery into infringement that is allowed in Taiwan as compared with the United States.) “ G e n e r a l l y s p e a k i n g , Ta i w a n ’s patent environment is good,” says Richard L. Thurston, Senior Vice President and General Counsel of Taiwan Semiconductor Manufacturing Com-

pany, Ltd.. (TSMC). He notes that if some Taiwanese companies have faced problems with patent protection in recent years, it is not primarily due to any shortcomings in the Taiwan legal system, but has more to due with a company’s failure to manage its “patents as business assets.” Unlike most U.S.-based companies, many Taiwanese enterprises do not necessarily perceive patents as an essential element in business success. As a result, management of the patent portfolio tends to receive considerably less corporate attention “until lawsuits arise, by which time it is often too late,” Thurston notes. He adds that “all com-

nies with their own legal departments, the effectiveness of the department is hamstrung. Furthermore, patent departments are often placed under the control of a finance director, Chief Technology Officer, or even an engineering manager, and are viewed as a cost center. Without an active general counsel on the staff or another legal officer with the authority and influence to gain the attention of top management and the board, local companies are prone to becoming short-sighted on intellectual property matters. Making do with lesser personnel who may have difficulty understanding the convoluted nature of legal writing, Taiwanese corporate decisionmakers may not have a complete picture of the value of a quality patent portfolio.

A quality patent portfolio can be the least expensive method of decreasing the likelihood of facing a suit. panies, whether large or small, should integrate innovation, invention disclosure, and patent prosecution into business planning as part of a strategic and comprehensive intellectual capital management process.” In addition, many local companies – especially the small and medium enterprises (SMEs) and start-ups that are most prevalent in the economy – choose not to spend heavily on their patent portfolio because of budgetary constraints. Given their limited resources, and since they tend not to view patents as key investments, they often prefer to use their funds elsewhere. Good patents – ones that have the broadest scope of validity – can be expensive because of the large amount of time needed by lawyers to research the background and write a solid patent application. Many domestic companies decide that such an expense cannot be justified, so that even with compa-

The big take the lead

Despite the remaining problems, Taiwan’s business sector has made steady progress in the last decade in the way patents are treated. As would be expected that progress has been most evident among the most prominent corporations, such as TSMC and Hon Hai Precision Industry, which maintain strong legal departments and whose patents portfolios make them as formidable as any major player in the international arena. Hon Hai, in fact, last year ranked 14th in the world among companies in the number of new U.S. patents (1,060). Of course, numbers matter little if the quality is not high, and both of these companies maintain high standards for the quality of their patents. But the same cannot be said for many smaller companies, which continue to regard the cost of patents as outweighing the potential benefits. This attitude has led to an outright neglect of obtaining patent protection for some products, or in other cases obtaining weak patents that end up not really protecting anything. With Taiwan’s largest companies trailblazing on the legal front, the hope among

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legal experts is that the smaller companies will follow. But even companies willing to spend money on developing or buying patents, or on holding onto ones obtained in the past, may adopt a misguided strategy if they believe that a large patent portfolio is synonymous with a strong one. On the contrary, the patents found in the holdings of many Taiwanese companies tend to be narrow in scope and thus limited in effectiveness. The result may be a bunch of useless patents that either cannot stand up in court or fail to cover the products or processes of their competitors. In lawsuits that have come before Taiwan’s IP Court, for example, a number of rulings have found existing patents to be invalid because they were either not new or lacked the inventive step required for a valid patent. Unless the IP Court is hostile to patents – which is hardly likely given the overall environment favorable to IPR protection that the government has promoted in recent years – the only logical explanation for this outcome is that the quality of the patents involved was inadequate. For those Taiwanese companies that appreciate the need for patents, the next step is to recognize that the number of patents is far less important than their quality. “Taiwanese companies should get fewer, better patents,” advises Finnegan’s Weinstein. “As Dr. Thurston has advised, patents are business assets and they should pay for themselves in terms of income from licensing revenue, increased profit margins from covered products, or savings realized from reduced royalties in cross-licensing negotiations or better settlements in litigation.” If they do not, they are useless. Besides the role of corporate management in facilitating the development of Taiwan’s patent environment, the parts played by two other primary players must also be taken into consideration: investors and the government. Currently, few prospective investors examine the patent portfolio quality

For a patent program to be effective, a company must also increase its global coverage.

of Taiwanese companies when considering making an investment – focusing instead on the more easily measured value of quantity. But if they come to recognize the value of good patents, and start demanding better patent policy as a condition for their investment, Taiwanese companies will have a stronger motivation to improve the quality of their patents. Until recently, smaller companies in Taiwan did not know where to start when it came to accumulating good patents. Whether it was a question of cost or a lack of awareness, SMEs faced the problem of not knowing what was worth protecting and how to best go about creating that protection. The government has been trying to help them solve this problem by enlisting the assistance of a number of prominent universities. Through a series of seminars held at the Taiwan Intellectual Property Office (TIPO) of the Ministry of Economic Affairs and at National Taiwan University, National Chengchi University, and other schools, the government has sought to heighten companies’ consciousness of the importance of proper patent protection and to educate them on the steps they should take to achieve it. Other organizations, such as the Licensing Executive Society (LES Chinese Taipei), the Industrial Technology Research Institute (ITRI), and law firms such as Finnegan, also hold regular seminars teaching and promoting the acquisition of a quality patent portfolio. With the government having laid the necessary platform, it is now up to Taiwanese businesses and investors to put more emphasis on patents if improvement is to be made. But

as with most business decisions in Taiwan, change must come from the top. Taiwanese business leaders must come to recognize – whether through seminars, lessons learned from lawsuits, or following the lead of bigger companies – that the quality of their patent portfolio is as essential as R&D and marketing. There are indications that Taiwan is already headed in the right direction. The larger, betterestablished companies have have been building stronger legal departments that include a team of patent specialists with global experience and with the authority to build and maintain a quality patent portfolio over time. In the past, smaller companies have tended to follow the lead of these larger corporations in many other matters and in time may also do so for patent management. Additionally, the cost of acquiring good patents for companies with strong in-house programs has generally decreased over the last decade. But Thurston advises that “in order for a patent program to be effective, a company also must increase its global coverage (that is, filings in multiple countries) and pay maintenance fees on a growing number of aging patents in its portfolio, all of which do increase costs over time.” Nevertheless, the value-added should be considerable. Once more companies start viewing patents as crucial business assets, Taiwan’s patent culture will develop more soundly and the legal environment will mature with it. Today, Taiwan stands on the global stage as a leader in technology and innovation. In that position, it is only natural that its companies should put more emphasis on quality patents as a critical component in sharpening their business competitiveness.

— Andy Chu is a law student at Georgetown University

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In Agriculture, the Goal is “High-Value” The sector was selected as an "Emerging Industry" because of its ability to compete on the basis of quality rather than price. BY MICHAEL SCHULMAN AND DON SHAPIRO

photos: courtesy of council of Agriculture

hen the government announced last year that it intended to promote “high-value agriculture” as one of Six Emerging Industries to receive government encouragement and support, it was the first time that most members of the public had come across the term. The rationale for promoting emerging industries in general seemed clear. During the recent global economic downturn, Taiwan’s exportoriented high-tech sector was hit sharply by falling demand. With an eye to providing more of a cushion against future slumps in the world market, government planners sought to identify promising new sectors that would help to diversify the domestic economy and create a substantial number of new job opportunities. Besides high-value agriculture, the other five sectors are Biotech, Cultural and Creative Industries, Green Energy, Healthcare, and Tourism. But what exactly does the government have in mind when it talks about high-value (or sometimes “high-end”) agriculture? Vice Minister Huang Yutsai of the Council of Agriculture (COA) says that the potential revenue a crop can earn is only one of the considerations. Although the government is stressing the quality of the product and

For the lovely Phalaenopsis orchid, Taiwan accounts for an estimated 40%-50% of the world market.

the efficiency of the production process – both crucial factors if the product is to be competitive in foreign markets – it is also assessing whether the production is environmentally friendly and conducive to sustainable development, he notes. Currently accounting for only 1.7% of Taiwan’s GDP, agriculture – even if it were to double in value – would

not constitute a major engine for the economy. But it can provide increased employment and contribute to the population’s health and enjoyment of their surroundings. As Huang puts it: “Agriculture is the only industry that can provide people with both healthy food and a clean environment, broadly serving the public welfare.” Taiwanese agriculture suffers from a lack of economies of scale – the average farm occupies only about one hectare (around five acres) of land, just a few times larger than an American suburban housing plot. For most commodities, that makes the cost of production too high for the output to be competitive internationally. Yet making up for that disadvantage is that many of Taiwan’s farmers are well-educated and eager to adopt new technologies, often assisted by highly trained agricultural extension officers. As a result, Taiwan has been able to cultivate a number of specialty agricultural items – especially among varieties of fruits, flowers, and fish – where the quality or uniqueness of the product is a more crucial factor than the price. Many of these items are not only being sold domestically but are being produced for export, often to China, a business that should benefit from the

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recently implemented cross-Strait Economic Cooperation Framework Agreement (ECFA). The COA has earmarked 29 items as having particularly good potential [see the table on the next page] and their export levels have been rising steadily. Three of the “champion” categories, due to their high quality and success in the marketplace, are considered to be orchids (particularly the variety known as Phalaenopsis), groupers, and decorative fish for tropical fish tanks. Within the fruit categories, Taiwan’s bananas, mangos, pineapples, guavas, star fruit, grapes, wax apples, and fresh litchis win high marks from consumers both domestically and in foreign markets. Besides groupers among food fish, Taiwan has a good reputation for its tilapia, milk fish, and eel. In promoting high-value agriculture, the COA is in large part building on its existing threefold policy of encouraging agriculture that is “Healthful, Excellent, and Compatible with Lifestyles of Health and Sustainability (LOHAS).” To help ensure healthful food for Taiwan’s consumers, for example, the Council in recent years has implemented accreditation and labeling systems to assure the authenticity of organic foods, the safety of processed foods (the Certified Agricultural Standards or CAS), and the control of pesticide levels on fruits and vegetables

(Good Agricultural Practice or GAP). To promote organic farming, the COA has budgeted about NT$1.5 billion (US$47 million) to create specialized chemical-free production areas, as well as to carry out product certification and quality inspection. The goal is to expand organic agriculture acreage to 5,000 hectares and increase annual output to NT$3 billion (US$94 million).

Quality over quantity As reflected by the “excellence” theme, a primary goal of the high-end agriculture strategy is to assist farmers in transitioning to a focus of quality over quantity. Among the projects being planned to foster this development are the establishment of innovation incubation centers around the island to aid worthy new agricultural ventures, and the creation of a logistics center to aid exporters of orchids, groupers, and other products expand their overseas markets. In addition, an Agricultural Technology Research Institute will be built in Nantou’s Jhongsing New Village, in an attempt to do for farming what the Industrial Technology Research Institute (ITRI) has done for the island’s industry. . As that plan implies, the government is keen to promote efficiency in farming by helping to bring modern technology into the agricultural sector. The suc-

cess of Taiwan’s orchid industry – now among the strongest in the world – is a prime example. New varieties are developed through tissue culture, and they are grown in a controlled environment in which temperature, humidity, and sunlight are all carefully regulated for the different stages of growth. “This is all controlled by computer programs, so just a few people can manage a large orchid farm,” says Huang. In the case of the grouper, a favorite fish of diners throughout East Asia (who often enjoy it served fresh, just minutes after being plucked from the tank at a restaurant), Taiwan’s scientists have developed techniques for the artificial propagation of five of the six species of the fish. The third theme, LOHAS, aims at improving the income of the farming sector in order to help rejuvenate Taiwan’s rural areas – and to further increase the popularity of trips to the countryside, often with overnight stays at “tourist farms,” for the island’s urban dwellers on weekends and vacations. Besides beautifying the rural environment to increase its attractiveness, the government is also assisting local communities in developing specialty products such as teas, wines, and handicrafts to offer to the visitors. With proper certification and effective branding by locality, these gifts and souvenirs are likely to appeal to large numbers of domestic as well as foreign tourists. The plans for development of LOHAS agriculture call for the construction of forest recreation areas covering over 1,000 hectares, as well as the building of dedicated marinas and fishing harbors. To create better economies of scale, the COA has devised a program that helps younger farmers to lease additional land from elderly neighbors, who are usually reluctant to sell land for fear of being criticized in the community for spurning their legacy from their ancestors. Ordinarily they are also unwilling to rent plots to tenants, recalling how the government’s land-reform movement in the 1950s expropriated the fields of landlords to award land to “the tillers.” The COA program eases

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their fears by having the local farmers’ associations ratify the rental contracts. With increased production from the larger acreage, the younger farmers are able to raise their incomes, encouraging more of them to remain in the countryside rather than seek work in the cities, thus stabilizing rural society. But aside from the size of land holdings, Taiwan also faces some other constraints in its ability to develop high-value agriculture. One such obstacle is the weather, since Taiwan sits directly in the path of many Pacific typhoons. The resulting flooding can be devastating for crops. “We were very worried after Typhoon Morakot last year that the flooding would delay our whole program,” says Huang. But in fact the recovery was faster than expected. “All the orchid farms recovered in two months, so in recent months the export value of Phalaenopsis came to more than 39% higher than the year before.” For grouper aquaculture, another challenge is to make the operations more environmentally friendly. The fish are raised in ponds along the seacoast that use a combination of fresh and sea water. Too high a proportion of seawater slows their growth, but pumping too much groundwater can cause the ground to subside. The COA is also studying how best to design and construct “public seawater supply systems” to pump the seawater from offshore and then discharge it offshore after use to lessen pollution. In an effort to understand how best to help the orchid growers expand their markets, the COA commissioned the Chung-Hua Institution for Economic Research (CIER) to survey the growers. One question was whether the industry would welcome a program to establish and promote a national brand. The idea was welcomed by many smaller growers, but the larger enterprises almost universally opposed it, arguing that they had already successfully established international reputations and expressing concern about the ability to enforce consistent quality under a common brand.

Another complication is that orchids are typically exported from Taiwan as a stem with a single small bud, since most foreign countries will not allow soil to be imported. The stems are then planted and grown to maturity in nurseries in the United States and Europe before being sold as a finished product. The overseas nurseries would not necessarily favor the imposition of a Taiwan brand. Instead of branding, the government is now more likely to consider a quality certification system. CIER research fellows Wu Chia-Hsuan and Wen Fang-I also found that the growers had their own suggestions for how the authorities could help the industry, including expediting the inspection process at customs, assisting breeders in registering their intellectual property rights for new varieties, and establishing a trade information platform to facilitate contact between Taiwan’s growers and everseas buyers. Whether with flowers, fish, fruit, or other items, the objective of HighValue Agriculture is to extend the reputation for quality and innovation that Taiwan has already achieved for its industrial products, while making the island a greener, more attractive place to live in or to visit.

Target Product Categories Export value,

Unit: US$1,000

Product

品項

first half of 2010

74,674.0 eel 鰻魚 38,009.7 phalaenopsis 蝴蝶蘭 35,985.4 taiwan tilapia 吳郭魚 30,629.2 green soybeans 毛豆 20,056.4 grouper 石斑魚 9,825.3 Banana 香蕉 7,832.5 Mango 芒果 taiwan tea 全發酵或部分發酵茶 7,188.3 5,993.9 oncidium 文心蘭 5,729.3 Milk fish 虱目魚 4,861.5 pork 豬肉 3,400.9 head lettuce 萵苣 2,627.6 Duck 鴨肉 2,451.7 lisianthus 洋桔梗 1,995.8 poultry egg products 帶殼禽蛋 1,963.0 Anthurium 火鶴 1,671.1 star fruit 楊桃 1,632.4 chrysanthemum 菊花 1,621.6 guava 番石榴 1,556.2 carrot 胡蘿蔔 1,538.3 chicken 雞肉 1,482.4 Aquarium fish 觀賞用魚 1,347.2 litchi 荔枝 1,168.1 pineapple 鳳梨 901.5 rice 稻米 371.5 grapes 葡萄 341.4 Wax Apples 蓮霧 167.9 cobia 海鱺 80.5 papaya 木瓜

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photo : Ja sons Market place

photo : franz collection

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Evolving with Consumer Demand

photo : giant

april 2006 â&#x20AC;˘ taiwan business topics

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A Report on the Retail Sector

Supermarket chains expand rapidly with the use of low-price strategies Several companies have been opening smallersized stores to serve individual neighborhoods. BY PHILIP LIU photo : Ja sons Market place

in this survey • Supermarkets Expand Rapidly on LowPrice Initiatives p.36

• The Taiwanese Love Direct Selling p.38

• Uni-President has a Hit with Foreign Retail Brands p.41 • Exporters Who Have Turned to the Home Market p.44

n contrast to the market saturation facing most other retail operations, supermarket chains in Taiwan have continued to expand vigorously in recent years, thanks to aggressive pricing, diversification of their business scope, and the opening of new small-scale outlets. In 2009, the total sales of Taiwan’s supermarkets increased by 4.5% to reach NT$126.6 billion (US$4 billion). According to the Ministry of Economic Affairs (MOEA), that was the highest growth achieved by any retail sector. It was followed by department stores, with sales growing 3.3% to hit NT$231.9 billion (US$7.2 billion), hypermarkets with a 1.8% rise to NT$148 billion (US$4.6 billion), and convenience stores staying virtually flat at NT$212 billion (US$6.6 billion). Overall, the sales of the generalmerchandise retail industry increased by 2.34% to reach NT$856.4 billion (US$26.8 billion). During the five-year period from 2005 through 2009, supermarket sales jumped 25.4%, much higher than the 13.5% growth achieved by hypermarkets, the 12.2% of convenience stores, and 8.6% of department stores. The overall growth of the general-merchandise industry reached 12.6% during the period. In 2009 when most local retail outlet chains slowed down their expansion,

Pxmart, the leading supermarket chain, continued to increase the number of its outlets by 20% to 508, with revenue reaching NT$50 billion (US$1.6 billion). In contrast, the number of 7-Eleven outlets decreased last year and now stands at 4,760. Pxmart, an indigenous brand, already surpassed RT-Mart, the second largest hypermarket chain, in revenue several years ago, and is rapidly gaining on Carrefour Taiwan, the leading hypermarket chain. Over the past five years, Pxmart’s revenue has been growing at an annual clip of 20% on average, while Carrefour saw its revenue stagnate at NT$56 billion (US$1.8 billion) over the past three years. Pxmart opened 34 new outlets in the first seven months this year and expects to see the number rise to 600 by yearend and to 700 in 2011. Most of its outlets have space of 100-300 pings (one ping equals 36 square feet). Wellcome supermarket, the second largest brand, opened 62 new stores in 2009 for a current total of 312 outlets, with another 40 or more due to be opened this year. Owned by Hong Kong’s Dairy Farm Group, the chain registered revenue of more than NT$30 billion (US$938 million) last year. Another competitor, Taiwan Fresh

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A Report on the Retail Sector

Supermarket, now has 40 outlets, mainly in central Taiwan, with revenue amounting to NT$3.7 billion (US$116 million) last year. It plans to expand at an annual clip of six new outlets in the coming years, and to extend its reach to Hsinchu and Chiayi. Just inaugurated in 2006, Smart (Simple Mart) Supermarket, invested in by Mercuries and Associates, has opened 200 outlets, mainly in northern Taiwan, and plans to boost the number to 1,000 in five years. The policy of fast expansion has enabled the supermarket chains to achieve economies of scale, strengthening their bargaining leverage with suppliers. This posture has reinforced the low-price strategy of Pxmart, which has been a major factor behind its meteoric rise over the past years. Lin Min-hsiung, chairman of Pxmart, says the low gross-margin strategy has been the secret behind the chain’s expansion from 68 to 515 stores during the 12 years since its inception in 1998. Employment over that stretch has increased from 1,000 to 7,000. The prices of dry goods sold at Pxmart are typically 15-20% lower than at its competitors, according to Lin. To lower costs, Pxmart outlets are very simply decorated and demand payment in cash. In addition, Pxmart’s bargaining power is even stronger than the hypermarkets’, thanks to its limited variety of merchandise (only 6,000 stock-keeping units, compared with over 20,000 at Carrefour). Backed by the low-price strategy, Pxmart has extended to virtually every corner of the island, including remote towns that the foreign-invested companies shy away. Its aggressive marketing has forced many local supermarkets, mostly opened by local farmers’ associations, to close shop. Even in Penghu, there are now four Pxmart outlets. Smart Supermarket has been able to expand its network at an extraordinary pace mainly by emulating Pxmart’s lowprice strategy. It boasts that it combines “the convenience of convenience stores, merchandise range of supermarkets, and prices of hypermarkets.” Smart generally locates its stores on side streets inside residential communities, utilizes a very

simple décor, and provides home-delivery service to customers in the surrounding neighborhood.

Shortage of good sites In response to Pxmart’s aggressive expansion, as well as to the growing competition from hypermarkets and convenience stores, other supermarket chains have begun to open smaller-sized stores (usually under 100 pings), to get around the increasing difficulty of finding good sites in urban areas for full-scale outlets. S i n c e 2 0 0 7 , f o r e x a m p l e , We l l come has opened over 100 mini outlets, dubbed “X-marts,” each occupying around 60-80 pings or around onethird the area of a regular store. The average monthly revenue for a smaller store, which sells both dry goods and some perishables, is NT$4.5 million (US$140,000), compared with NT$6 million-$7 million (US$188,000$219,000) for full-scale outlets. Thanks to the lower operating cost of those small outlets, Wellcome’s profits grew at a faster rate than did revenue last year, enabling the company to attain its profit target despite the domestic recession in the wake of the global financial tsunami. According to a ranking Wellcome offi-

INDUSTRY F

cial, the number of new outlets opened this year will be comparable to last year’s 62. Most of them will be smaller stores, and many will be located in southern and central Taiwan as Wellcome extends the concept from its original base in the north. In addition, Wellcome continues to stress its perishables business, a segment in which it lays claim to being the market leader. Another chain, Matsusi Supermarket, a joint venture between Matsusi of Japan and Taiwan’s Wei Chuan Corp., is also adopting the small-store model. So far it has opened three small outlets, dubbed “Mini Matsusi,” each taking up 60-80 pings of space, whereas the chain’s 75 full-sized outlets typically occupy 300 pings. The company’s revenue reached NT$5 billion (US$156 million) in 2009. A t P x m a r t , i n a d d i t i o n t o f u rther increasing the number of outlets, another strategy for maintaining growth momentum has been to make a foray into the field of perishables. After acquiring the five domestic outlets of a Japanese brand in 2006, the following year it took over the supermarket outlets of the Taipei Agricultural Products Marketing Corp., a move that brought it the sophisticated preservation technology needed for the sales of perishables. Pxmart estimates that adding the sale

Wellcome and other chains have been following a “small is beautiful” strategy by placing mini markets in more and more neighborhoods. photo : Wellcome

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of perishables typically boosts the customer traffic at an outlet by 20-30%. The company is extending its low-price strategy to perishables so as to uphold a key feature of its brand image, even though it projects losses in that department – some NT$200 million (US$6.3 million) for the first year – for the coming three to five years, according to Chairman Lin Min-hsiung. By year-end, Pxmart expects to boost the number of outlets with a perishables section to 300, up from the current 200. In contrast to Pxmart’s stress on low prices, Matsusi has positioned the brand as a small but sophisticated supermarket, targeting mainly higher-income customers. To highlight that image, it spent some NT$150 million (US$4.7 million) from 2005 to 2009 to upgrade its facilities. President Chang Min-kun credits the move with boosting sales per outlets by 10-30%. A n u m b e r o f p r e m i e r s u p e r m a r-

kets are thriving by catering to the tastes of affluent customers in urban areas. Jasons Market Place (a Wellcome affiliate), for instance, now has seven outlets, including stores in Taipei, Banqiao, Hsinchu, and Kaohsiung. The three in Taipei are located in the TAIPEI 101 Mall, the Dayeh-Takashimaya Department Store in Tienmu, and Q Square near the Taipei Railway Station. Although the supermarket specializes in imported food products, it also sells premier local agricultural products, such as Alishan tea. City’s Super, a premier supermarket brand in Hong Kong, was introduced into Taiwan by the Far Eastern Group in 2004, when the first outlet was opened in the Metro Mall next to the Far Eastern Plaza Hotel. A second outlet followed in 2006 in the Sogo BR4 department store at the corner of Zhongxiao and Fuxing Roads, and a third last year in the new Pacific Sogo Department Store in Tienmu. City’s Super offers a wide variety

of food products from the United States, Europe, and Japan, mainly with own brands. The Tienmu outlet, spanning 400 pings of space in the first basement, features a section with complete lineup of Japanese Sake and other wines. It also has a kitchen studio, where famous chefs give cooking classes to customers. The U.S. chain of Dean & Deluca has only one outlet in Taiwan, located in Taipei’s Breeze Center. It offers imported food products and premier local agricultural produce, and also provides cooked foods and a catering service. Taiwan Fresh Supermarket boasts that its centralized perishables processing center is the only one in Taiwan that has passed all three certifications of ISO9002, HACCP (for fish processing), and CAS (for meat processing). It claims to be the only supermarket capable of conducting complete testing for the residues of antibodies, pesticides, melamine, bacteria, and preservatives.

The Taiwanese Love Direct Selling In what is already a major market, some companies are expanding by adding various forms of “physical presence.” BY KATHLEEN CARROLL

or the direct sales industry, Taiwan over the past decade has been one of the world’s hottest markets, with a record of rapid growth that is showing no signs of slowing down. Incredibly nearly one in every five Taiwanese is a registered distributor for a direct selling company (also known as multi-level marketing), underlining the extent to which the industry has established itself as a major player in the Taiwanese economy and a fundamental part of its people’s lifestyle.

More than 300 direct sales companies are active in serving the domestic market of 23 million people. According to the World Federation of Direct Selling Associations, the Taiwan industry’s annual revenue – at US$1.73 billion – ranks as the 11th largest in the world, and the sales force is the fourth largest, behind only the United States, Indonesia, and Thailand, all countries with much larger populations, Direct selling is not new to the island. Major companies like Amway, Avon, and Nu Skin were the pioneers in the mid-

1980s, with others such as Herbalife and Mary Kay following a decade later. But the past few years have seen a sharp increase in the industry’s market share and in the participation of Taiwanese citizens. “From night-market vendors to taxi drivers, Taiwanese people want to be their own bosses,” notes Joseph Hsueh, general manager of cosmetics company Mary Kay Inc., in seeking to explain the reasons for the industry’s success in Taiwan. “People want to have their own business, no matter whether big or small,

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photo : herbbalife

photo : nu skin

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photo : Mary kay

Left to right, Herbalife executives and children from the Taiwan Fund for Children and Families at the company’s 15th anniversary celebration, executives from Nu Skin, and Mary Kay’s annual gala sales meeting, held in Taichung.

and direct selling is the closest model to owning your own business. Participants can choose their customers and when they work, and they themselves determine how successful they become.” Besides the entrepreneurial spirit that characterizes Taiwanese culture, another factor is the nature of social interaction on the island. With direct sales, faceto-face contact by the sales force (also known as “beauty consultants” and “distributors”) is paramount in generating revenue, as opposed to the advertising or in-store purchases utilized by other channels. Charlene Chiang, president of Nu Skin Taiwan, suggests that the societal norms common to Taiwan have played an integral role in the success of direct sales. “Taiwanese society emphasizes strong bonding among people,” she says. “If you trust people in a trustworthy society, it is easier for this word-of-mouth marketing strategy to go over well.” This factor might also help explain why health and beauty products are the leading items in direct sales. Besides the fact that customers continuously need to replenish their stocks of these items, trust is a crucial element when deciding what to “put on your face or in your body,” says Chiang. Beauty products in particular, adds Mary Kay’s Hsueh, are “easy to talk about face-to-face, easy to share with others,” making individual distributors a more effective marketing tool than advertising or an in-store presence. Avon

Cosmetics General Manager Karen Wang touches on a similar theme when she says the company’s strength lies in “understanding women better than women understand themselves.” The large number of players in the Taiwan market makes for fierce competition and consumers who can afford to be choosy. In the words of Shirley Chen, Amway’s general manager in Taiwan, “it’s easy to survive here, but it’s not easy to succeed.” The ones who do best are those who are most acutely aware of changes in consumer preferences, she says. Amway, the local market leader, considers it no accident that of the company’s top five distributors in the 80-some markets in which it operates worldwide, three are in Taiwan. “People are willing to spend a higher proportion of their income on wellness here than in South Korea or even some European countries,” adds Angela Lue, the Herbalife Taiwan general manager. Taiwanese consumers have come to take their health very seriously and in recent years have become accustomed to taking vitamins and dietary supplements on a regular basis. While changes in consumer habits have improved the overall environment for direct selling, the key to individual companies’s success remains their sales force. “It’s all about the beauty consultants,” says Hsueh. At Avon, Wang emphasizes the importance of empowering women to contribute to their family

income and thereby improve the quality of life in Taiwan. As the market has matured, however, the selling process has had to become more sophisticated. Amway’s Shirley Chen, who is also chairman of the Taiwan ROC Direct Selling Association, says that in the early years sales were often concluded chiefly because of the personal relationship between the customer and the distributor, not because of the quality of the product. But today people demand more information about the products they buy, especially if they are ingested or applied onto the body. With so many brands for consumers to choose from, companies must be able to distinguish themselves from their competitors, and the biggest players are doing this by increasing their focus on the consumers, not merely on the distributors. “The brand reputation must be built up,” says Chen. “Investment in customer service has risen, and we have moved from being a so-called ‘personal sales channel’ to more of a retail channel.” Instead of relying on the distributor as the sole face of the company for customers, she says, “now we are more directly connected.”

More brick and mortar Along with this shift has come a marked increase in the physical presence of direct selling companies. Since 2004, the number of brand centers, nutrition

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clubs, skincare classes, and other physical locations where consumers can tangibly access products has skyrocketed, with more being built each year. These days “it’s important in Taiwan that people can see you,” says Chiang of Nu Skin, which has opened Nu Skin Plaza on ZhongXiao East Road, Section 4. But for personal-care products, you still “need someone present to explain the product better than advertising can,” she says. With the help of attentive salespeople at the store, customers can purchase products on-site. Other companies are following suit, with outstanding results. Herbalife’s 1,400 nutrition clubs scattered across the island are operated solely by the distributors, who have the freedom to choose what hours to keep and which products to offer. Lue says this increase in physical access has “over one million people consuming our products on a daily basis in Taiwan.” At Amway, Chen refers to the opening of seven brand centers [in Taiwan] as “a start,” and says the company plans to establish mini-shops in second-tier cities, starting with Banqiao. “We hope to build one in each of Taiwan’s 23 counties over the next three years,” she reports. These physical centers also provide a way for companies to target their marketing mes-

sage, rather than relying solely on the ability of the individual distributors to inform the public about their products. Not all direct sales companies have shifted strategies, however. At Mary Kay, Joseph Hsueh states that while “other companies are hybrid now, with shops or experience centers where people can drop in and buy something, we remain very strict about providing all products solely through our beauty consultants.” The company considers that the traditional approach of relying on the wordof-mouth interaction and personal networking remains as valid as ever. The nature of the direct sales business appears to have rendered it largely immune to the occasional economic downturns that trouble other industries. When times are hard, “people want to feel good, so they buy things to make themselves feel and look better,” says Chiang. “In difficult times, people can skip the luxury vacation or wait to buy the new car, but a lipstick or something else that makes you feel more confident about facing hardship is still an attractive option.” While the overall Taiwan economy was in recession, she notes, Nu Skin’s sales grew by almost 10% in each year of the past two years. Another reason why direct sales com-

Herbalife officials and young participants in an Asian regional baseball tournament it sponsored. photo : herbalife

panies tend to thrive during periods of economic difficulty is because of sales representatives’ greater motivation to increase their earnings to help supplement the family income. At Avon, the lipstick department capitalized on that notion by making distributors of 40,000 women who were previously unemployed, says Karen Wang. Many companies have reported record numbers of distributor applications over the last two years, with a total of 670,000 new applicants in 2009. Despite direct selling’s popularity among Taiwanese consumers, the government has shown itself to be a bit more hesitant about welcoming these international companies and the products they bring into Taiwan. Multi-level marketing executives consistently express perplexity and frustration at the tight restrictions the Department of Health (DOH) places on their goods. Obtaining approval for imported dietary supplements is particularly arduous, since the DOH categorizes them as a food (though, as Chen points out, no other food item needs such stringent regulatory approval). It generally takes three to six months and a formidable amount of paperwork for a multinational company to launch a new supplement here, whereas local makers of supplements need not even apply for approval before introducing a new product. This discrepancy puts the multinationals at a severe competitive disadvantage in this product line. Tariff levels are another obstacle. The import duty on nutritional supplements is 30%, the highest in the world (Japan, known for high import duties, charges only 15%). “We need our prices to be affordable, but the import duty forces us to increase our prices compared with local products,” laments Chen at Amway. “This is really unfair.” But in other respects, says Lue, Taiwan’s regulatory practices are strict but even-handed. Whether you are a direct selling company, a store, or an online marketer, she notes by way of example, you cannot advertise that a weight-loss product is definitely effective or show before-and-after pictures. The Fair Trade Act at least provides clear guidance on the ground rules.

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In addition, Taiwan is gradually making progress in aligning its standards with other countries in the region. While the industry would appreciate speedier progression, it welcomes this evolution as a promising start. As for the future, the Taiwan companies have their eye on China. The PRC has kept a tight leash on multi-level marketing, but is slowing liberalizing its policy. Eventually, says Chiang, China will represent a huge market for direct selling. “We speak the same language, and we have the same product preferences, so Taiwanese people will have a

huge advantage there,” she concludes. In terms of the domestic market, Herbalife’s Lue says the challenge will be to gear products toward the consumers of the next generation, who are increasingly concerned about their health, especially as it pertains to physical appearance. “Herbalife may begin to emphasize nutritional supplements designed for athletes,” she says. Diversification of the product line is also on the agenda at other companies. Avon, for example, introduces over 1,000 new products each year in Taiwan, and is especially looking to

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appeal to younger members of the work force. Amway plans to invest more of its research dollars in the future on weight management and nutritional supplements, as well as on beauty products designed to promote healthy skin. Unlike their parents, says Amway’s Chen, the younger generation “equates weight and physical beauty to health.” The evolution of direct sales in Taiwan over the last decade reflects the market’s shift toward a more discriminating consumer pool. In response, the quality of customer service and goods continues to increase steadily.

Uni-President has a Hit with Foreign Retail Brands Localization helps Starbucks, Mister Donut, and others assure a strong foundation in the Taiwan market. BY PHILIP LIU

hat do Starbucks, Mister Donut, Cold Stone, Afternoon Tea, Muji, Hankyu Department Store, and Yellow Hat all have in common? They are all successful foreign retail brands introduced to the Taiwan market by the Uni-President Group’s President Chain Store Corp. (which also runs the 7-Eleven convenience stores in Taiwan). With its financial clout, experienced management, and logistics prowess, the company has been well-positioned to identify promising retail brands from the United States and Japan and successfully introduce them to the Taiwan market. In the process, the group has built up a sprawling retail network that is even extending its reach to the other side of the Strait. The seven foreign retail brands, operated in Taiwan variously as joint ventures or franchises, come under the Uni-President Logistics Subgroup, spearheaded by President Chain Store. The subgroup, consisting of over 40 enterprises in the fields of retail, logistics, and leisure enterprises, employs a total of 10,000

people and serves some 6 million consumers daily. Of the subgroup’s consolidated revenue of over NT$200 billion (US$6.3 billion) in 2009, half came from President Chain Store, which runs the 4,750 7-Eleven outlets throughout Taiwan. The Uni-President Group – which also has other subgroups for food and beverage manufacturing, trading, and investment – has become a multinational with operations spanning Taiwan, China, and Southeast Asia. The food business is the core operation, responsible for revenue of NT$90 billion (US$2.8 billion) in 2009, including NT$45.6 billion (US$1.4 billion) in Taiwan and 9.1 billion yuan (US$1.3 billion) in China. The foreign retail brands have joined the omnipresent 7-Eleven outlets and other Uni-President retail operations in becoming part and parcel of the daily life of many Taiwanese. Starbucks Coffee entered Taiwan in 1998 as a joint venture between Uni-President Enterprises (the flagship firm of the UniPresident Group), President Chain Store, and Starbucks Coffee

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Mister Donut, left, has been able to attract Taiwanese consumers far more effectively than other American doughnut chains in Taiwan due to its catering to Asian tastes in the doughnuts’ flavoring with the use of relatively more salt and less sugar. Above, children enjoy Cold Stone ice cream. photos: dirk diestel

International. There are currently 224 outlets on the island. In 2009, the number of customer visits to local Starbucks outlets plunged to 1.2 million, from 2008’s 2 million, due to the effects of the economic downturn plus the emergence of lowpriced coffee brands, including City Café at 7-Eleven outlets. But Starbucks rebounded last year after enhancing its manpower efficiency and diversifying its product lineup by launching such higher value-added products as tea, local staples such as moon cakes, and proprietary souvenirs such as mugs with Chinese motifs. Its net profits in 2009 jumped 20%, with the net margin exceeding 50%, outperforming other Starbucks operations worldwide. Mister Donut, the leading doughnut brand in Japan, made quite a stir when the first local store was opened in Taipei’s Tianmu district in October 2004. Long lines could be seen in front of the outlet every day, with some customers waiting three to four hours just to order doughnuts. Some people hired proxies to wait in line for them, and some customers immediately couriered their hard-won supply to relatives in southern Taiwan. The outlet sold 10,000 doughnuts a day, priced at NT$30 (nearly US$1) each. The crazed reception was repeated at the second store at the Breeze Center Department Store in downtown Taipei, which was opened shortly afterwards. In half a year, the two outlets sold 2.5 million doughnuts, enabling the company to break even. As of now, there are 45 Mister Donut outlets throughout the island, offering doughnuts made on site. Cold Stone, a premium U.S. ice cream brand, debuted in Taiwan in April 2007 when the first store was opened at the New York, New York shopping center in the Xinyi district of Taipei. The local operation, 100% owned by President Chain Store, is a franchise from the U.S. company. The ice cream caught on quickly among young customers, thanks to its stress

on on-site production and efforts to provide service with a flair. With 25 stores now in Taiwan (due to increase to 28 by yearend), Cold Stone has already sold some 4 million servings in Taiwan. The operation already broke even in the first quarter this year. Taiwan has five domestic Afternoon Tea outlets, offering food and household items inspired by a casual European-style lifestyle. The brand, which originated in Japan, developed a large following among Japanese women, thanks to its attention to detail in its service. The shops use exquisite Japanese chinaware, for example, and the teapot is wrapped in cloth to maintain the optimal temperature. Taiwanese women have also taken to the concept. The Taiwan operation, a joint venture between President Chain Store and Asazaby League of Japan, now has six outlets, five in the greater Taipei area and the latest one in Kaohsiung’s Hanshin Department Store.

Lifestyle appeal Following its debut at the Breeze Center in April 2004, retailer Muji Taiwan registered revenue last year of NT$1.35 billion (US$42.2 million), up 15%, and scored another 30% sales growth in the first half of this year. It runs 18 stores in Taiwan, and plans to add another by year-end. The outfit is a joint venture among Ryohin Keikaku Co. of Japan (which owns the Muji brand), Mitsubishi, Uni-President Enterprises, and President Chain Store. Muji regards itself as a lifestyle store, offering unbranded products that feature simplicity, natural materials, and high quality. The extensive range of merchandise includes apparel, furniture, household items, and foods. Muji boasts that its quality is comparable to national brands in Japan, but with prices 30% lower, thanks to savings on brand marketing, mini-

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malist designs, and simple packaging. Wang Wen-hsin, president of Muji Taiwan, reports that “green products,” such as apparel made of organic cotton or organic linen, or notebooks made from recycled paper, accounted for 20% of the company’s sales last year. Another specialty is “pressure-alleviating products” such as casual sofas, cushions, aromatic essential oils, and candles. A new concept store, Muji to Go, featuring travel-related goods, was opened near the Taipei Railway Station last year. Due to expanded sales, Muji Taiwan has been able to start receiving direct shipments from factories in various locations, including China and Taiwan, rather than going through Muji’s logistics center in Kobe. The change has led to considerable savings on transportation costs. The first Hankyu Department Store in Taiwan, located inside the Uni-President-owned Dream Mall Shopping Center in Kaohsiung, was inaugurated in May 2007. Jointly invested in by President Chain Store and Uni-President Enterprises, it is a franchisee of Japan’s Hankyu Department Store. Last year the operation took in revenue of NT$1.9 billion (US$59.4 million), expected to grow by 10% to NT$2.1 billion (US$65.5 million) this year. Based on that solid foothold, a Taipei store in the Xinyi district is due to kick off in October. With total investment of NT$800 million (US$25 million), it is located near the newly opened Taipei City Hall Bus Station, with its daily traffic of some 100,000 people passing by. The new store will mainly target female customers in their late twenties or early thirties. Yellow Hat of Japan, which offers a comprehensive range of auto parts and accessories, as well as auto maintenance and repair service, entered the Taiwan market in 2001 and now has four outlets – three in Taipei city and the other in Zhonghe in Taipei County. It is a joint venture between the Uni-President Group (which has a 50% stake), the Yellow Hat Co. and Itochu of Japan. Revenue reached NT$300 million (US$9.4 million) in 2009, and is expected to hit NT$360 million (US$11.3 million) this year. Encouraged by these brands’ solid performance in Taiwan, President Chain Store has started extended their operations to the Chinese market. Starbucks Shanghai was established in 2000 as a joint venture between President Chain Store (30%), Uni-President Enterprises (20%), and Starbucks Coffee International (50%). It has so far opened 167 outlets in Shanghai, Hangzhou, Kunshan, Suzhou, Ningbo, and Nanjing. Despite having fewer outlets than Starbucks Taiwan, the unit contributed over NT$100 million (US$3.1 million) in profits to President China Store last year, even more than the contribution from Starbucks Taiwan. Mister Donut also landed in Shanghai in 2000 as a 50-50 joint venture between President Chain Store and Duskin, the Japanese owner of the brand, and the number of its outlets has now reached 42. Cold Stone debuted in Shanghai in 2007 as a wholly owned President Chain Store venture, and has opened 35 outlets in Shanghai, Beijing, Shenzhen, Tianjin, and Suzhou. Following its arrival in 2007, Afternoon Tea now has three outlets in Shanghai. President Chain Store also opened its first 7-Eleven

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outlet, a wholly owned venture, in Shanghai last year. It had 26 outlets as of this spring; the number is expected to rise to 50 before the end of the year. A major factor in the extraordinary performance of President China Store in transplanting foreign retail brands into the island has been the strong support it provides to these operations in the areas of manpower, finance, logistics, auditing, and information systems. As an example, Muji Taiwan started up with a headquarters staff of only 10 persons, which it could still operate effectively thanks to President Chain Store’s logistics and backoffice support. In addition, the various brands provide one another with mutual support. An example of this synergy is the opening of joint outlets. In addition, executives of the different brands attend a monthly meeting convened by President Chain Store, where they can exchange business information and make important decisions. They also benefit from the valuable localization expertise that President Chain Store painstakingly developed through running the 7-Eleven franchise, which didn’t turn a profit until its seventh year. The localization experience has enabled these operations to develop products tailored to local market needs. In addition to moon cakes and proprietary souvenirs, for instance, Starbucks Taiwan has rolled out a number of tea drinks to tap into the huge local tea market, estimated at NT$70 billion (US$2.2 billion) a year, compared with NT$20 billion (US$625 million) for the coffee market. A special tea corner in Oriental design has been set up at the Longmen outlet at the intersection of Zhongxiao East and Dunhua North Roads. Tea drinks and products already accounted for 20% of Starbucks Taiwan’s revenue in 2009. It hopes to promote its tea products in neighboring market, just as its moon cakes have become popular items at the Starbucks operations in Singapore, Hong Kong, and China. Moreover, in a departure from Starbucks’ traditional strategy of adhering to its “premium coffee” positioning and avoiding price competition, Starbucks Taiwan conducted a “one additional free coffee” campaign – a de facto 50% discount – in 2009. In 2010, it further launched a “Vanilla Caffé Misto” coffee, priced at only NT$45, the lowest Starbucks coffee worldwide, which is limited to breakfast service. These moves have helped the local franchise successfully contain the competitive threat from lowpriced coffee brands, which emerged in 2000 amid the local “twin-card” (credit and cash cards) financial storm. In addition, the local franchises of Starbucks, Mister Donut, Afternoon Tea, and Cold Stone have successively plunged into the eating-out market. Mister Donut, for instance, last year started selling curry-flavored products, suitable for heating by microwave oven. They now account for 2-4% of its revenue. The share of salty foods is expected to hit 10% next year with the launch of sandwiches and hamburgers. Chang Chien Yun-hui, president of Cold Stone, who also oversees the operations of all the food-outlet brands under the UniPresident logistics subgroup, estimates that the light-meal business can increase the revenues of those brands by at least 10%.

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Exporters Who Have Turned to the Home Market Greater affluence and consumer sophistication in Taiwan have attracted some companies who were once focused only on overseas markets.

A Giant-run store in Taichung. photo : giant

BY KATHLEEN CARROLL

fter building up solid reputations and substantial business volumes based on producing for far-flung export markets, some of Taiwan’s wellknown manufacturers in recent years have also been paying increased attention to opportunities in their own backyard. In some cases, they even established their own retail channels in Taiwan to better penetrate the domestic market. Although the Taiwan market is relatively small, it is home to an affluent and increasingly sophisticated population. Companies also find it helpful to have closer contact with consumers in order to gain quicker feedback on product and market trends. In addition, the trend is related to the shift by many companies away from too much reliance on contract manufacturing for foreign brands – the so-called OEM

(original equipment manufacturing) or ODM (original design manufacturing) model. Instead they have sought to develop and promote their own brands in addition to – or sometimes even instead of – the OEM/ODM business. Branded products carry the potential for more attractive profit margins. As a result, branding is a way to contend with the increasing competition from Chinese rivals by emphasizing the high quality and distinctiveness of the Taiwan companies’ products. A prime example of this phenomenon is Giant Bicycle Inc. When it was established in 1971, the company engaged solely in OEM production, and for years – starting in 1976 – its biggest customer was Schwinn, one of the leading international brands. Jeffrey Sheu, special assistant and spokesman at Giant, recalls that when

he joined the company in 1985, “almost 75% of Giant’s revenue came from Schwinn – only a very small percentage came from our own brand business, which we operated solely in Taiwan.” Today, Giant has grown into the world’s largest bicycle company, with a 10% market share. Its own “Giant” brand, sold around the globe, now generates over 70% of the revenue. The turning point came in 1985 when Schwinn set up its first factory in China, and Giant saw that the volume of orders it could expect from the U.S. company would inevitably decline. At this point, says Sheu, “we had two options: find a new OEM customer, or else speed up the growth of our own brand business.” Giant chose the latter, and in 1986 opened its first international store, located in the Netherlands.

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I t w a s n ’t u n t i l 2 0 0 0 t h a t G i a n t decided to create its own network of retail stores as a sales channel in Taiwan, rather than relying entirely on dealers. Prompting that decision, Sheu explains, was the awareness that Taiwan’s economic development had reached a stage where consumer lifestyles were changing dramatically. Traditionally, the Taiwanese regarded bicycles only as tools of transportation, rather than for sports or recreation, and in fact that is still their primary function, especially for students. But at the same time, the market for recreational bicycles had grown significantly, and Giant saw an opportunity to tap that mounting demand. There are now 320 stores in Taiwan exclusively selling Giant bicycles, and 60 of them are owned by the company itself. One of the purposes of these flagship stores is to set high standards for aesthetic presentation and customer service as a model for the independent dealers to emulate. “As we continue to introduce new kinds of high-end, innovative bicycles, we must provide state-of-the-art customer service – and stores in which to show them off – in order to prove to our customers that these products are worth the price tag,” says Sheu. In Taiwan, which accounted for about 8% of Giant’s revenue this past year, “the largest potential is in the high-end market, as people here begin to put more emphasis on physical fitness.” Marketing to women has also become a special focus, since female cyclists – once a very small percentage of the company’s customers – are now more and more numerous. Giant has opened three domestic stores for products specially geared towards women in Taiwan within the last three years. For men as well as women, the increasing consciousness in Taiwan of the importance of exercise in daily life has been the major impetus behind Giant’s domestic success. Between 2005 and 2008, the number of bicycles sold annually in Taiwan rose from about 700,000 units to 1.3 million. As Giant looks to the future, its plans include further efforts to attract female consumers; the development of more high-end, performance models, and increased R&D on elec-

tric bicycles to help reduce the number of high-emission motorcycles on the road. Through the close customer contact it has established through its domestic retail channels, it receives continuous feedback from cyclists on their riding habits and preferences – information that can be used to bring out new products to fulfill their wants and desires.

Franz Collection At Franz Collection, makers of high-end ceramics, the story is similar. President Francis Chen says the company’s wish to achieve long-term stability and better profits led to developing a local market in Taiwan – and then to gradually shutting down most of Franz’s OEM export operations. “We had been in the OEM business for over 30 years,” says Chen. “But we always thought that our own selling channel would allow us to be more sustainable, especially within the last 10 years, with the tremendous increase in the number of [competing] factories in China.” In 2001, the year the company started its own brand, Franz’s factory in Taiwan employed 400 workers; now, there are fewer than 20, since most of its production has been outsourced to Chinese manufacturers with far lower costs. Franz began opening its own retail stores in Taiwan in 2003, and now operates in 34 locations on the island. The success of Franz’s stores in Taiwan

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also encouraged it to expand to China, where it now runs 89 of its own outlets. It also sells its branded products through partners in more than 50 other countries. The branded business has been so successful that next month the company plans to terminate its OEM business altogether. “This is a big change for Franz – in 2009, OEM comprised about 50% of our revenue,” notes Chen. “We were brave enough to cut this off, however, because we really believe in focusing on our own brand in Taiwan, China, and worldwide.” Over the past seven years, Franz’s operations in Taiwan have generated a nearly 25% increase in revenue each year. As the number-one seller of ceramics in Taiwan, Franz has succeeded in keeping up with the evolution of preferences among local consumers. The main reason consumers buy its products is to give as gifts, following by using them as home décor and treating them as collectibles. “In Taiwan, giving a gift has a purpose – people often think of these as investments, so they are often willing to pay a lot more,” explains Chen. As a result, larger and more expensive pieces – vases in particular – are more popular in this market than elsewhere, making Taiwan a particularly lucrative market within this industry. In addition, pieces that incorporate good-luck symbols tend to sell better. “Red pieces tend to be the most popular here, whereas other markets pay less attention to symbolism,” says Chen. “We therefore need to be espe-

Johnson has staked out a 35% market share in Taiwan in both the commercial and homemarket sectors. photo : Johnson

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Franz Collection, the number one seller of ceramics in Taiwan, has abandoned the OEM business to concentrate on branded marketing. photo : franz c ollection

cially careful about what symbols we include when we design our products.” Chen does not believe that local consumers pick Franz over imported brands on principle. “They are not loyal to us simply because we are Taiwanese; they are loyal to us because they truly love the products.” Going forward, he says “our dream is to someday position ourselves in the first-tier of the brand pyramid, with companies like Mason and Wedgwood.” With a stable grip on the Taiwanese market and close proximity to the mainland Chinese, Franz sees unlimited opportunities ahead.

Johnson Fitness Since its inception in 1975, Johnson Fitness has steadily moved up in the ranks of health and fitness equipment manufacturers and is now the thirdlargest such company in the world. Johnson established itself as an OEM manufacturer, and for 20 years specialized in making dumbbells for companies like Schwinn and Tunturi. But in 1996, Johnson began its own-brand business, marketing fitness equipment in the United States under the name “Vision Fitness.” Initially, this initiative was a response to the rapidly growing presence in the international market of cheap merchandise from China that threatened the survival of higher-quality Taiwanese factories. The new brand was met with great success, however, prompting Johnson to start a second brand, “Horizon Fit-

ness,” in 1998, followed by “Matrix,” a high-end line of health and lifestyle products, in 2003. That same year, Johnson opened its first Asian retail outlet in Taichung under the name of Johnson Fitness, reminding consumers of its long-standing presence here and establishing itself as a new player in the local market. The company saw a good opportunity at the time, says Harry Tsai, general manager of Johnson Fitness Taiwan, because “the East still didn’t have a strong sales channel in fitness – there’s no Dick’s here,” referring to one of the largest American dealers of fitness equipment. “Our reputation [in Taiwan] was good. We had been here a long time, and people recognized our name from the work we had done in the past as a distributor” for imported products. Sales in Taiwan did not exactly skyrocket from the outset. Even today, revenue from the domestic market contributes only 1% to Johnson’s overall earnings. But Johnson’s high-end products, impressive-looking showrooms, and knowledgeable sales force have served to meet the gradually emerging demand in Taiwan’s maturing market, appealing in particular to the upper echelon of Taiwanese consumers. The treadmill, Johnson’s most popular product worldwide, became more accepted here as time went on, especially after Johnson introduced a collapsible model that appealed to many consumers in Taiwan, where living space tends to be smaller than in the West. People appre-

ciate the ability to slide the machine under the bed after use. Unlike the customer profile in most Western markets, the most frequent patrons of Johnson Fitness shops are over the age of 45. “Many people come to us after being advised by their doctors to begin exercising,” says Tsai. “One of our beliefs is that ‘exercise begins at home’ and we try to encourage people to change their behavior according to this idea.” In line with that pattern, Johnson’s two peak seasons in this market are Mother’s Day and Father’s Day, when grown children buy the products as gifts for their parents. Johnson lays claim to a 35% market share in Taiwan, in both the commercial sector (equipment sold to fitness centers and hotels) and the home market. It currently operates 29 stores in Taiwan, and hopes to increase the number to 50 over the next few years. The company is also looking at giving increased attention to wellness products, noting that the Taiwanese wellness market’s NT$5 billion (US$156 million) yearly revenue eclipses the fitness industry’s NT$700 million (US$22 million). Tsai says that while wellness is “a very small part of what we currently focus on, there is great potential here” for future growth. The prospects for the wellness market underscores the Taiwan market’s unique emphasis both physical activity and nonexertive activities designed to improve overall health. “After all,” says Tsai, “only in our Taiwanese stores do we sell massage chairs.”

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The “Kingdom of Bicycles” Comes of Age

t o u r i s m B u r e a u , r e p. o f C h i n a

hile readers are probably used to the “Republic of China,” “Taiwan,” and even the earlier “Formosa” as the various names for this island, they might not immediately recognize “Kingdom of Bicycles” as another alternative. Yet within cycling circles, Taiwan has been known by that name for several decades. Until recently, however, the reason was not the beauty of its flower-adorned riverside bike paths and high-altitude mountain passes, but because Taiwan-made and Taiwan-designed cycles dominated world markets. One bike maker, Giant Manufacturing Co., grew to become the world’s largest maker of bicycles. But the situation has changed over the past few years as local citizens adopted the “iron horse” (鐵馬) as one of their favorite leisure activities, and central and local governments have responded by constructing thousands of kilometers of bicycle-only routes in, around, and between cities. Bike paths in the Taipei area alone run both sides of the main rivers, from Xindian in the south to Danshui in the north, with an eastward extension along the Keelung River to Wudu, and westward extensions to Sanxia and Yingge, and from there on into Taoyuan County. The ultimate plan is to connect those with paths in Hsinchu and Miaoli counties, and eventually to create bike routes encircling the entire island.

Cycling “huandao” (環島; “around the island”), a trip of around 1,000 km, is already a s tandar d c oming-of- age achi evem ent among local riders, after which many go on to attempt the country’s highest road, which ascends to more than 3,250 meters at Wuling on the Central Cross-Island Highway. Overseas cycling enthusiasts are coming to Taiwan in increasing numbers to do these challenging but enjoyable routes. The round-island itinerary is especially popular, as it takes in many of the main historical sites – such as Hsinchu, Lugang, and Tainan – down the west coast, and offers a relaxing break at the beach and nature resort of Kenting at Taiwan’s southern tip before returning up the magnificently beautiful east coast, with its three, four, or more days of mountain climbs. The riders can then enjoy a final sightseeing-and-shopping stop in Taipei, the usual starting and ending

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point. The three cross-island highways – North, Central, and South – offer a more challenging route for experienced cyclists. Each entails significant ascents but rewards with equal measures of fine views and sense of achievement. It is not even necessary for cyclists to bring in their own bikes, as Taiwan’s major bike makers, such as Giant and Merida, offer a wide range of road and off-road machines for rent through their franchise stores. Often visitors take advantage of Taiwan’s competitive prices to buy a bike here, using one or more cycles on trial over several days and then selecting one for a roundisland trip and to take home. Although Taiwan’s summers are not oppressively hot, nor its winters overly cold, the most popular seasons for longdistance cycling are spring and autumn. To mark the “Kingdom of Bicycles” coming of age, this autumn the Tourism Bureau is launching an inaugural 2010 Taiwan Cycling Festival. Lasting over a week and expected to attract

around 10,000 visitors to the east coast counties of Hualien and Taitung, the festival kicks off on October 16 and 17 with the Taitung Triathlon, an event held annually for the past decade, and winds up on October 24 with the Taiwan Cup, a new 200-km road race for international professional racers, and a shorter Elite Road Race for local cyclists. There will also be a mass-participation event, entitled the Challenge Yourself Race, for entry-level cyclists to gain certification for their new hobby. The rise in popularity of cycling fits nicely with the rise in consciousness about the need to reduce greenhousegas emissions and address the problem of man-made climate change. In Taiwan’s cities, this concept is being p r o m o t e d t h r o u g h R i d e - t o - Wo r k campaigns and initiatives by the Directorate-General of Highways to improve road conditions for cyclists and reduce speeds of large vehicles on sections popular with two wheelers.

Participants in the 2010 Taiwan Cycling Festival events do not need to worry, however, as the island’s eastcoast counties have the country’s lowest population densities and least number of cars and trucks on the roads. W h i l e i n H u a l i e n a n d Ta i t u n g , cyclists and their families and friends will have plenty of hotels and homestays to choose from, as the east coast is a very popular weekend break destination with urbanites from throughout Taiwan. Taroko Gorge, for example, which runs inland from near Hualien City, is one of the nation’s most popular tourist spots. Other local features include Hualien’s Ocean Park theme park and Butterfly Valley Resort for family entertainment, as well as cliffs, mountain trails, and rivers for hiking and white-water rafting. Taitung is known for its eco-tourism, hot springs, and recreational farms, as the gateway to the outlying Green Island and Orchid Island, and as home to the National Museum of Prehistory and Beinan Cultural Park, Taiwan’s largest and most important archaeological site. Taitung is the best place in Taiwan to experience aboriginal culture, with 15% of the county’s population belonging to seven of Taiwan’s 14 officially recognized indigenous tribes. This remote corner of Taiwan was the last to be settled by immigrating Chinese, and retains much of its original natural beauty and rural charm. While performances of traditional aboriginal songs and dances can be seen at many hotels, to really understand the aborigines’ way of life and sustainable approach to their environment, visitors are recommended to get back on their bikes and tour the numerous buluo (部落) or small tribal villages. Many communities are eager to welcome outsiders, and may even have a craft shop or arts center. Staying in an aboriginal bed-and-breakfast and getting to know the owners will not only contribute to the local economy but also provide an unforgettable firsthand experience of tribal life. Wherever one winds up going, doing it on the back of a bicycle is without doubt the best way to take in Taiwan’s magnificent scenery and to meet its hospitable people.

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59 Years and Counting p ho t o s : di rk di es t el, laura kao

AmCham Taipei celebrated the 59th anniversary of its founding on September 8 with a deluxe cocktail reception and buffet dinner in the Grand Hall (also known as the Siecle de Lumieres) of the new Palais de Chine Hotel. Chamber members and guests gathered amid the rich velvets, shimmering chandeliers, and copper curtains of the venue, the designer’s tribute to the Opera National de Paris. The cocktail reception featured Patron Tequila, Patron Perfect Margaritas, Patron Perfect Cosmos, and XO Café Martinis. Courtesy of China Airlines, there was also a raffle price of a round-trip ticket to any destination in North or South Asia. American Institute in Taiwan Director William Stanton was a special guest, and AmCham President Andrea Wu and Chairman Alan Eusden made welcoming remarks. Eusden used the occasion to mention some of the Chamber’s numerous accomplishments over the past year and to introduce two new key members of the AmCham staff: Director of Government and Public Affairs Angela Yu and Director of Membership and Events Marketing Sharon Tao. AmCham is now looking ahead to next year’s year-long celebration of its 60th anniversary – a very special milestone on the Chinese-calendar cycle.

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taiwan business topics â&#x20AC;˘ september 2010

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