Taiwan Business TOPICS, March 2014

www.amcham.com.tw THE AMERICAN CHAMBER OF COMMERCE IN TAIPEI

Taiwan Business

Topics

TAIWAN BUSINESS TOPICS March 2014 | Vol. 44 | Issue 3 中華郵政北台字第 號執照登記為雜誌交寄 5000 3_2014_Cover.indd 1

DRAM MAKES POST-SHAKEOUT COMEBACK (p.15)

DRAM產業暴落後重整旗鼓 Restructured Health Ministry (p. 32) Industry Focus on Retail (p. 37)

March 2014 | Vol. 44 | Issue 3

NT$150

ISSUE SPONSOR

Published by the American Chamber Of Commerce In Taipei

2014/3/6 1:56:42 PM

CONTENTS NEWS AND VIEWS

6 Editorial ma rCh 2 0 1 4 vOlumE 44, N umbE r 3 一○三年三 月號

“Without Portfolio” is a Misnomer

「不管部部長」可以管很多

7 Taiwan Briefs Publisher

By Jane Rickards

發行人

Andrea Wu

吳王小珍

Editor-in-Chief

11 Issues

Welcoming Foreign Universities; At Long Last, Hope for Chiropractic Recognition?; Helping Taiwan Youth

總編輯

Don Shapiro

沙蕩 美術主任 / 後製統籌

Art Director/ Production Coordinator

Katia Chen

Develop Their Creativity

歡迎外國大學來台設校；脊骨神 經醫學問題終於可望解決？；台 灣年輕人搞創意 美國創新中心來 幫忙

By Don Shapiro

陳國梅

Manager, Publications Sales & Marketing

廣告行銷經理

Caroline Lee

李佳紋

Translation

COVER SECTION

翻譯

Yichun Chen, Frank Lin, Sonia Tsai 陳宜君, 林怡平, 蔡函岑

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 Taiwan Business 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 2014 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, 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108台北市萬華區長沙街二段66號 發行日期：中華民國一○三年三月 中華郵政北台字第5000號執照登記為雜誌交寄 ISSN 1818-1961

OFFICERS: Chairman/ Thomas Fann Vice Chairmen/ Scott Meikle / William J. Farrell Treasurer: Cosmas Lu Secretary: Fupei Wang 2013-2014 Governors: Thomas Fann, William Farrell, Ajit Nayak, Neal Stovicek, Stephen Tan, Fupei Wang, Bill Wiseman.

2014-2015 Governors: William E. Bryson Jr., Sean Chao, Rodney Van Dooren, Douglas Klein, Cosmas Lu, Scott Meikle, Dan Silver, Ken Wu.

2014 Supervisors: Anita Chen, Midee Chen, Joseph Lin, Louis Ruggiere, Vincent Shih.

COMMITTEES: Agro-Chemical/ Melody Wang; Asset Management/ Christine Jih, Derek Yung; Banking/ Victor Kuan; Capital Markets/ Miranda Liaw, C.P. Liu, Shirley Tsai; Chemical Manufacturers/ John Tsai, Michael Wong; CSR/ Lume Liao, Fupei Wang; Customs & International Trade/ Stephen Tan; Education & Training/ Robert Lin, William Zyzo; Greater China Business/ Helen Chou, Cosmas Lu; Human Resources/ Richard Lin, Seraphim Mar; Infrastructure/ L.C. Chen, Paul Lee; Insurance/ Joseph Day, Dan Ting, Lee Wood; Intellectual Property & Licensing/ Jason Chen, Peter Dernbach, Jeffrey Harris, Vincent Shih; Manufacturing/ Thomas Fan, Hans Huang; Marketing & Distribution/ Wei Hsiang, Gordon Stewart; Medical Devices/ Susan Chang, Tse-Mau Ng, Dan Silver; Pharmaceutical/ Margaret E. Driscoll, David Lin, Jun Hong Park; Private Equity/ William Bryson; Public Health/ Jeffrey Chen, Dennis Lin; Real Estate/ Tony Chao; Retail/ Prudence Jang, Douglas Klein, Ajit Nayak; Sustainable Development/ Kenny Jeng, Kernel Wang; Tax/ Cheli Liaw, Jenny Lin, Josephine Peng; Technology/ Revital Golan, Scott Meikle, Jeanne Wang; Telecommunications & Media/ Thomas Ee, Joanne Tsai, Ken Wu; Transportation/ Michael Chu; Travel & Tourism/ Anita Chen, Pauline Leung, Achim v. Hake.

4

15 DRAM Makes Post-Shakeout Comeback

DRAM產業暴落後重整旗鼓 In what was a notoriously volatile industry, Taiwan manufacturers overexpanded and found themselves in deep financial trouble. But the sector has now stabilized, in part because of consolidation spurred by the decision of U.S.-based Micron Technology to greatly increase its stake in Taiwan.

Another factor in the more positive environment is the product diversification to more applications, reducing

dependence on PC memory.

By Timothy Ferry

23 Where are They Now? 24 Going Beyond DRAM

TAIWAN BUSINESS 28 Compensation and Hiring Trends 2013-14 A Bó Lè Associates survey enables comparisons between Taiwan and overall trends in various sectors.

taiwan business topics • march 2014

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marc h 2014 • Volume 44 n umber 3

iSSuE SPONSOr

IN GOVERNMENT CIRCLES

32 New Ministry’s Role Combines Health and Welfare Given Taiwan’s rapidly aging population, MOHW will face a number of diverse challenges.

OvErviEW

By Philip Liu

35 Restructuring the Executive Branch

iNDuSTrY

F

CuS

A Report on the Retail Sector

Catering to the Shoppers

micron technology is a global leader in the semiconductor industry. For more than 35 years, micron has dedicated itself to collaborating with customers and partners to engineer technology that drives innovation and transforms what’s possible.

aT a GlaNCE FOuNDED october 1978 | boise, idaho

micron offers the industry’s broadest portfolio of silicon-tosemiconductor solutions—starting with foundational Dram, nanD, and nor Flash memory, and extending to ssDs, modules, mcps, hmcs, and other semiconductor systems. this best-in-class technology powers leading-edge computing, consumer, enterprise server and storage, networking, embedded, automotive, industrial, and mobile products.

FY 2013 NET SalES $9.1 billion

as the only u.s.-based Dram manufacturer, micron leverages an expansive global footprint and proven technology leadership to make it easier for customers to try new things and gain competitive advantages in their markets. miCrON iN TaiWaN recognized by the General chamber of commerce of the roc as an outstanding Foreign enterprise, micron’s strong presence in taiwan includes a state-of-the-art, 300-millimeter wafer fabrication facility in taichung and sales and technical support offices in taipei supported by more than 2,000 employees.

During the past five years, micron and nanya technology corporation (a member of the Formosa plastics Group) have also enjoyed a strong and productive partnership, including the joint venture inotera memories. at the heart of inotera are two fully integrated, state-of-the-art, 300-millimeter wafer fabrication facilities with more than 3,000 employees. inotera is positioned for success thanks to its proven business model, strong strategic partnerships, cutting-edge memory foundry capabilities, and world-class management team.

38 Department Stores Focus on Renovation and Dining Options

By Philip Liu

42 Convenience Stores Want Customers to Stay Awhile

By Catherine Shu

45 Rapid Growth in E-Commerce, Whether B2B, B2C, or O2O

3 Contents.indd 5

EmPlOYEES 30,000+ worldwide lEaDErShiP mark Durcan | ceo, Director mark adams | president PrODuCT POrTFOliO Dram Dram modules nor Flash nanD Flash ssDs phase change memory (pcm) multichip packages (mcps) hybrid memory cube (hmc)

micron is committed to growing its operations and business in taiwan and will continue to leverage its global expertise, industry insight, and rich traditions to provide products and solutions that are synonymous with technology innovation and market growth.

By Jens Kastner

taiwan business topics • march 2014

NaSDaQ SYmbOl mu

5

©2013 micron technology, inc. all rights reserved. micron and the micron logo are trademarks of micron technology, inc. all other trademarks are the property of their respective owners. products are warranted only to meet micron’s production data sheet specifications. products and specifications are subject to change without notice.

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“Without Portfolio” is a Misnomer

I

n the U.S. political system, there is no such office as minister without portfolio, and to American ears the title may even sound a bit quaint. Over the years, however, AmCham Taipei has come to appreciate the significant value that certain ministers without portfolio have been able to bring to the policymaking process.

To a large extent, the holders of this office do have a portfolio – they are just not administratively responsible for the operation of a given government ministry, such as Foreign Affairs, Interior, or National Defense. But they are in fact assigned to particular areas of responsibility – for example, economic and financial affairs, science and technology, or social affairs – in line with their backgrounds and expertise. Besides having the duty of vetting proposed legislation in their areas of specialization, ministers without portfolio may also be assigned special projects by the Premier, serving in effect as his high-level staff. To cite but one recent example, Yang Chiu-hsing, who has now left the Cabinet to return to elective politics, as minister without portfolio brought clear thinking and fair-mindedness to the review of a number of draft laws of concern to AmCham member companies.

Historically, some ministers without portfolio have been senior officials with long experience in government. After serving with distinction as economics minister in the 1960s and finance minister in the 1970s, for instance, Li Kwoh-ting (K.T. Li) made a crucial contribution to promoting Taiwan’s foundation in science and technology as a minister without portfolio. On the other hand, the job is sometimes the first position held by a newcomer to high government office. Prominent economist Hu Sheng-cheng first entered the Chen Shui-bian administration as a minister without portfolio before becoming minister of the Council for

Economic Planning and Development and later chairman of the Financial Supervisory Commission (FSC). The latest such case was the elevation late last month of Minister Without Portfolio Simon Chang, a former Google executive, to become the first head of the newly established Ministry of Science and Technology.

In the same Cabinet reshuffle, Schive Chi, one of Taiwan’s most distinguished economists and a former chairman of the Taiwan Stock Exchange Corp., stepped down as Minister Without Portfolio after only about a year in office. But Schive had largely achieved what he had set out to accomplish, helping to redirect the orientation of government policy to place it firmly on the path of economic liberalization. In that effort, Schive was joined by such other officials as Minister Kuan Chung-ming of the National Development Council (himself a former minister without portfolio) and FSC Chairman William Tseng.

Succeeding Schive as the Minister Without Portfolio in charge of economic matters is John C.C. Deng, who has served as a vice chairman of the National Security Council and deputy minister of economic affairs. In making the appointment, Premier Jiang Yi-huah stressed that Deng – with his long experience as an international trade negotiator – would have the particular assignment of guiding Taiwan’s preparations to qualify for participation in the emerging Trans-Pacific Partnership (TPP) trade grouping.

AmCham Taipei has repeatedly emphasized the vital importance of TPP membership for Taiwan’s economic future. The Chamber welcomes Deng’s appointment, and hopes that it will lead to yet another example of the key role that ministers without portfolio can play in shaping policy formation and implementation.

「不管部部長」可以管很多

美

國的政治體制沒有「政務委員」（Minister Without

務。著名經濟學者胡勝正先在陳水扁政府擔任政務委員之後

P o r t f o l i o，戲稱「不管部部長」）這個職務。

才出任經濟建設委員會主任委員，最後出任金融監督管理委

Minister Without Portfolio這個頭銜對美國人來

員會主任委員。最新的一個例子是曾在Google擔任高層主管

說，甚至有點奇特。但這些年來，台北市美國商會體認到，

的張善政。他先出任政務委員，上個月升任為新成立的科技

有些政務委員可以在決策過程中發揮很大的作用。

部的首位部長。

事實上，擔任這個職務的人在很大程度上有特定的業務，

在最近這次內閣改組當中，薛琦卸下政務委員的職務。他

只是不負責管理個別政府部會的運作，例如外交部、內政部

是台灣最傑出的經濟專家之一，先前曾任台灣證券交易所董

或國防部。但每位政務委員依他們的背景和專長，被賦予特

事長，在政務委員的位子上工作大約只有一年，但他已大致

定領域的責任，例如經濟和財政、科學與技術或者社會事

完成自己設定的目標，就是把政府政策明確帶往經濟自由化

務。政務委員除了依個人專業審核法案，也可能奉行政院長

的方向。薛琦在做這項努力時，有其他官員的配合，例如國

指示負責專案，性質有如閣揆的高層幕僚。最近的一個例子

家發展委員會主任委員管中閔（原本也是政務委員）和金管

是楊秋興。他在辭職準備回去參選高雄市長之前，曾以政務

會主委曾銘宗。

委員身分，為台北市美國商會會員公司所關心的多項法案在 其審查過程賦予清楚而公平的思維。 回顧歷史，長期在政府擔任要職的傑出政務委員裡以60年 代李國鼎先生為首。李先生以優異的表率在1960年代擔任

取代薛琦出任經濟政務委員的鄧振中，曾任國家安全會議 副祕書長和經濟部次長。閣揆江宜樺在任命鄧振中時強調， 他具有國際貿易談判的多年經驗，要專責帶領台灣做好加入 跨太平洋夥伴協定（TPP）自由貿易區的準備工作。

經濟部長，在1970年代擔任財政部長，而後再以政務委員

台北市美國商會多次強調，TPP對台灣的經濟前途極為重

身分，為台灣的科技發展的基礎做了非常重要的貢獻。對有

要。本商會歡迎鄧振中出任新職，並希望他能再次證明，政

些人來說，政務委員則是新加入政府高層所擔任的第一個職

務委員在政策的制定和執行上能扮演關鍵性的角色。

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— by jane ri ckards —

MACROECONOMICS HOLiDaY bLUes Or sOMetHinG seriOUs? Exports did not perform at all well in January. But it remains to be seen whether the situation is simply the result of fewer working days in the month due to the Chinese New Year holidays or instead to more basic economic forces.

In addition, Ministry of Economic Affairs data showed that export orders, an indication of shipments to come in the next few months, in January amounted to US$36.11 billion, falling 2.8% from the same month a year ago for the first contraction in six months.

Export orders to the United States posted the biggest drop at 5%, followed

by China at 3.9%.

January exports declined by 5.3% year-on-year to US$24.31 billion, while imports dropped 15.2% from a year earlier to US$21.34 billion for a favorable trade balance of US$2.97 billion.

While exports to Japan, the United States, and Europe all rose – by 4.8%, 4.6%, and 0.4% respectively – exports to China/Hong Kong fell by a hefty 10.3% and to the ASEAN-6 nations by 4.7%, the Ministry of Finance reported.

Government officials attributed the drop to soft demand during the Chinese New Year season, when offices and factories close for long periods in the Chinese-speaking world. The holiday started in late January this year while last year they fell in February, which skewed comparisons using the previous year as a baseline. But other factors may also have been at work in causing the steep drop in exports to China and Hong Kong. The Chinese economy has been slumping as it pushes for restructuring, including localization of its supply chain. Although the world economy is slowly improving, the poor export figures might also reflect a post-Christmas season slump in demand for popular high-tech products as well as heightened competition for Taiwan’s tech exports from other countries. Yet another

global factor cited by analysts is the tapering of the U.S. quantitative easing monetary policy, which may be slowing growth and weakening consumption in emerging markets.

With regard to GDP growth forec a s t s , h o w e v e r, t h e g o v e r n m e n t i s somewhat more optimistic than it was a few months ago. In mid-February, the government’s Directorate General of Budget, Accounting and Statistics raised its forecast for this year to 2.82%, up from a November forecast of 2.59%.

While DGBAS noted that Taiwan’s manufacturing sector faced increased pressure from overseas competition, it concluded that the recovery now underway in advanced economies such as the United States and Europe would boost Taiwan’s growth. Even more optimistically, Standard Chartered Bank is forecasting growth of 3.9% for this year, citing increased international demand for new tech products and greater domestic public spending ahead of the year-end municipal elections.

HISTORIC MEET — The first direct contact by official government delegations from Taiwan and the People's Republic of China took place in Nanjing in mid-February. photo : cna

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CROSS-STRAIT taiwan, CHina HOLD first fOrMaL MeetinG In a landmark meeting that represented the first formal contact between officials of the Communist Chinese and Taiwan governments, the head of Taiwan’s Mainland Affairs Council, Wang Yu-chi, in mid-February met in Nanjing with his Chinese counterpart, Zhang Zhijun. Although no substantial agreements were concluded, the mere fact that the meeting took place was considered remarkable. All previous contacts between the two governments were conducted through two non-official organizations – Taiwan’s Straits Exchange Foundation and China’s Association for Relations Across the Taiwan Strait.

China continues to refuse to recognize the legitimacy of the Republic of China, which for over six decades has ruled over Taiwan and its outlying islands.

The two ministers agreed to set up representative offices in one another’s territory as soon as possible, although numerous technical obstacles need to be resolved, and to set up a communications and liaison mechanism for resolving urgent cross-Strait matters.

However, Zhang rebuffed a Taiwan-

Taiwan sTock exchange index & value

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

8750

145

8500

130

8250

115

8000

100

7750

85

7500

70

7250

55

7000

40

6750

25

6500

10

January data source: twse

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unit: nt$ billion

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ese request for Chinese leader Xi Jinping to meet with Taiwanese resident Ma Ying-jeou at an Asia Pacific Economic Cooperation (APEC) summit in Beijing later this year.

The choice of Nanjing as the site of the talks was deeply symbolic. It was China’s capital for much of the period of Kuomintang rule and is also the burial place of Sun Yat-sen, the founder of modern China, revered on both sides of the Taiwan Strait.

The United States and Europe praised the meeting for easing historic crossStrait hostilities. “We welcome the steps both sides of the Taiwan Strait have taken to reduce tensions,” said Jen Psaki, the U.S. State Department spokeswoman, while Evan Madeiros, the U.S. National Security Council’s senior director for Asian affairs said the United States “strongly supports efforts between Taiwan and China to improve crossStrait relations and we are glad to see the recent meeting.” European Union High Representative spokeswoman Catherine Ashton also said the meeting was warmly welcomed.

DOMESTIC arMeD fOrCes tO be CUt

bY UP tO One-fiftH The government in late January said it planned to reduce the size of Taiwan’s armed forces by as much as 20% over the next several years. Defense Minister Yen Ming said military personnel would be cut from a current level of 215,000 to an estimated 170,000 to 190,000 by 2019, but stressed that defense capabilities would not be compromised as the goal is to create “smaller but leaner and more professional armed forces.” Yen said the cuts would come from across the army, navy, and air force but did not give a breakdown. President Ma also confirmed Taiwan’s determination to convert its armed services to an all-volunteer force, despite difficulties so far in meeting recruitment goals.

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The main entrance to the Presidential Office building undergoes repair after being rammed by a heavy truck. photo : cna

trUCK raMMeD intO PresiDentiaL bUiiLDinG A man crashed his 35-ton gravel truck into the Presidential Office in late January in one of the most serious security breaches to the building in years.

Police said the driver, Chang Te-cheng, had a criminal record and reportedly was frustrated with what he considered to be an unfair sentence handed down to him in a domestic violence case. Although no one was injured, the damage to the building’s ground floor was estimated at over NT$3 million (US$100,000).

wOrLD war ii bOMb reMOVeD in taiPei An unexploded 227-kilogram bomb, believed to have been dropped by an American warplane during World War II when Taiwan was under Japanese colonial rule, was removed from the Xinyi financial district in mid-February after construction workers conducting excavation work found it underground at

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BUSINESS

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Taiwan's JanuaRY 2014 TRade FiguRes (YeaR on YeaR coMPaRison)

HK/China

Japan

ASEAN

TOTAL

2.39 4.57

2014

2013

2014

Europe 2.36 2.43

U.S.

2013

2014

2013

2014

Imports

Exports

for Qualcomm, the global king of smartphone microchips, but as the Taiwanese company specializes in chips for low-end handsets, they see it as unlikely to unseat Qualcomm from its dominance in the high-end phone market.

HOn Hai tO inVest in inDOnesia, U.s.

Taiwan’s Hon Hai Precision Industry, the world’s largest contract electronic manufacturer and maker of iphones

2013

21.34 24.3

4.8 2.9

2013

25.16 25.67

2.97 1.66

2014

3.8

2013

2.77 2.4

Four Taiwanese were arrested in mid-February for smuggling US$162 million worth of methamphetamine from China into Australia, Agence France Presse reported. The 183 kilogram haul was discovered during a joint Australian Federal Police and Customs Border Protection Service operation at Sydney’s container port. Australian border officials selected a consignment of kayaks in a container from China for X-ray inspection and found that 19 of the 27 kayaks contained packages of methamphetamine or crystal meth. The four Taiwanese, along with an Australian involved, were denied bail by a Sydney court and face as much as a life sentence if convicted.

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aUstraLia arrests fOUr in DrUG bUst

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2.34 2.66

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the site of the former second hall of the Taipei World Trade Center. A military spokesman said the bomb posed no immediate danger and would be dismantled at a military base in Hsinchu.

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2014

Unit: US$BN Source: BOFT

and ipads for Apple Inc., in early February signed a letter of intent to invest up to US$1 billion in Indonesia, in a sign that it is seeking to diversify away from China, where labor and other production costs are rising. The investment projects, to be completed in three to five years, will involve R&D facilities, electronics software design, internet-related business, and the assembly of electronic products. The company, also known as Foxconn, in late 2013 also announced

MeDiateK tO OPen OffiCe in san DieGO MediaTek, a major Taiwanese integrated circuit designer and a leading supplier of chips for inexpensive Chinese smartphones, is planning to expand its presence in the United States by establishing a new office in San Diego. Kristin Taylor, MediaTek’s vice president for U.S. corporate marketing, was quoted by Reuters as saying the company is planning to hire an additional 150 engineers and business development and marketing staff in the United States this year, in addition to its existing 300 employees in San Jose, Boston, and Austin.

Analysts interpreted MediaTek’s expansion in the United States as a challenge

INVESTMENT SITE — Hon Hai Precision has committed to build a large plant in Indonesia. The site is reportedly this fishing village in coastal North Jakarta. photo : cna

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it was planning to invest US$40 million in manufacturing and research facilities in the United States. Speaking at Hon Hai’s Chinese New Year party, Chairman Terry Gou said “the U.S. is a mustgo-to market.” He told the assembled company employees that many customers and strategic partners have asked Hon Hai to open shop in the United States, as they would like to have its advanced manufacturing located closer to their home bases.

KratOn in DeaL witH LCY CHeMiCaL COrP. Ta i w a n ’s L C Y C h e m i c a l C o r p . announced in late January that it will combine the styrenic block copolymer (SBC) portion of its business with that of Houston-based Kraton Performance Polymers Inc. The two companies will become 50/50 partners in a new company, Kraton Performance Polymers plc, to be incorporated in the U.K. and listed on the New York Stock Exchange.

SBC materials are used in a wide range of products, including adhesives, coatings, consumer and personal care products, sealants, and lubricants.

The assets of the new company will include LCY’s SBC plant in Huizhou, China. “The combination of LCY’s innovative SBC manufacturing technology and geographic focus in higher growth markets with Kraton’s leading R&D resources will make the new company a leading global player in SBCs,” said Bowei Lee, chairman and CEO of LCY. The deal is expected to be completed in the fourth quarter, subject to approvals from regulators and shareholders from both companies. Kraton is already in a joint venture in Taiwan with the Formosa Plastics Group to produce hydrogenated styrenic block copolymers in the Mailiao industrial area of Chiayi County. Both LCY and Kraton Formosa Polymers Corp. are members of AmCham Taipei and its Chemical Manufacturers Committee.

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taiwan firM Offers sKYPe-OnLY sMartPHOne LinkTel has released a Skype-only smartphone, with its creators hoping the phone will render landlines and phone bills obsolete, the South China Morning Post reported in mid-February. The LinkTel Android phone does not require a SIM card, but uses Wifi connectivity to allow users to make free voice and video calls and send instant messages to other Skype users. Calls can also be made to landlines and mobiles at relatively low rates with Skype credit. The phone, which has a 4.3-inch display and a 2-megapixel camera, retails at NT$1,990. LinkTel is Skype’s first c o - p a r t n e r. S k y p e , w h i c h h a s 3 0 0 million users worldwide and last year accounted for an estimated 39% of all international calls, was acquired by Microsoft in 2011.

taiwan sOLar PaneLs in U.s.

DUMPinG DisPUte T h e U . S . I n t e r n a t i o n a l Tr a d e Commission (ITC) in late February voted unanimously in favor of a complaint brought by SolarWorld AG against imports of solar panels from Taiwan and China. The move will potentially extend import duties on Chinese solar-energy products to include parts

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from Taiwan in an ongoing anti-dumping case. The vote is the first of four that SolarWorld must win before duties are placed on solar photovoltaic products from the two sources, the commission said. The duties may help American manufacturers of these products, including the U.S. unit of Germany-based SolarWorld, to compete with low-cost panels from Asia. SolarWorld says it is acting on behalf of 244 companies in the United States.

In response to an earlier SolarWorld complaint, the Commerce Department in May 2012 imposed countervailing duties of as much as 250% on solar cells produced in China. Chinese manufacturers responded by buying some solar cells from Taiwan, which allowed them to avoid most of these duties and continue to flood the U.S. market with cheap products. The current case would expand the protection to American producers by applying duties to products from Taiwan.

In a statement, the Taiwan Economic and Cultural Office in the U.S. denied that Taiwanese solar manufacturers have engaged in dumping practices.

Shares of Taiwanese companies Motech Industries and Neo Solar Power were down more than 2% after the ITC decided to pursue the trade dispute, Reuters said.

econoMic indicaToRs Unit: US$ billion Current Account Balance (2013 Q3) Foreign Trade Balance (Jan.)

Year Earlier 14.91

12.30

2.97

0.51

New Export Orders (Jan.)

36.11

37.2

Foreign Exchange Reserves (end Jan.)

416.9

406.6

Unemployment (Dec.)

4.08%

4.18%

1.875%

1.875%

Economic Growth Rate 2013 (Q3)p

1.66%

1.35%

Annual Change in Industrial Output (Dec.)p

5.07%

2.10%

Annual Change in Industrial Output (Jan.-Dec.)p

0.75%

-0.25%

Annual Change in Consumer Price Index (Dec.)

0.33%

1.60%

Annual Change in Consumer Price Index (Jan.-Dec.)

0.79%

1.93%

Discount Rate (Feb.)

note: p=preliminary

10

b

sources: moea, dG bas, cbc, boFt

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Issues

Welcoming Foreign Universities The Free Economic Pilot Zone plan calls for creating broader educational opportunities.

A

s the number-one issue it presented in its position paper in AmCham Taipei’s 2005 Taiwan White Paper, the then newly established Education Committee (now the Education and Training Committee) urged the easing of regulations to enable foreign universities to set up operations in Taiwan. With some modification in wording, the same issue has been included in the Committee’s White Paper submission every year since then.

Each time, the response from the Ministry of Education offered scant hope that any change could be expected. Remaining in place were stringent regulations – basically requiring any foreign university interested in entering this market to invest in creating a full-fledged campus covering a large plot of land, encompassing a broad selection of departments and course offerings, and employing a minimum number of faculty and staff. The high entry barrier deterred any would-be applicants.

In consequence, as the years went by Taiwan was left out of a trend within the region for leading U.S. institutions of higher learning to establish branch campuses or cooperative programs to serve Asian students. Examples include the joint MBA program between the University of Singapore and UCLA, the University of Chicago Business School in Singapore, New York University’s offshore campus in Shanghai, Duke University’s Medical Research Center in Singapore and its offshore campus in Kunshan in China, and Johns Hopkins University’s Nanjing Center in China. The absence of such opportunities for Taiwanese students to obtain an internationally focused education within Taiwan, combined with the declining number of Taiwanese youngsters going abroad for study, has contributed to an increasingly narrow view of the world among young people in this society. In AmCham Taipei’s annual Business Climate Survey, multinational corporate executives among the Chamber’s members laud the quality of the Taiwan workforce in most respects but bemoan the insufficient “international-mindedness” of employees and job candidates.

Thankfully, the Taiwan government has now recognized this problem and is taking steps to rectify it. The current plan to push economic reform through a network of Free Economic Pilot Zones (FETZ) was recently expanded to add educational institutions to the list of undertakings allowed to operate within the Zones (the original four areas were smart logistics, value-added agricultural processing, financial services, and medical tourism). Under the FETZ scheme, which envisions the liberalized conditions as extending to both physical and “virtual” zones, the foreign universities could register an office in one of the designated areas but locate the actual campus anywhere on the island.

歡迎外國大學來台設校 自由經濟示範區

創造跨境教育機會

台

北市美國商會2005年發佈《台灣白皮 書》時，新成立的「教育委員會」（今 已更名為『教育及訓練委員會』）提出 的第一項建議，就是敦促台灣政府放寬法令，讓 外國大學可以在台灣營運。從那年起，此項議題 每年都納入《台灣白皮書》教育委員會的建議書 當中，只是文字上稍有不同。 然而，從教育部每次的回應中，看不出來情況 會有什麼改變。台灣的相關規定還是很嚴格，基 本上，外國大學若要進入台灣教育市場，必須在 大面積的土地上建置完整的校園設施，提供多樣 的科系與課程，並聘用一定數目的教職人員。這 麼高的門檻，讓有意申請來台的外國大學打退堂 鼓。 結果是，台灣被排除在區域各國近年的一 個趨勢之外。這些年，美國多所知名高等學府 在這個區域設立分校或合作計畫，服務亞洲學 生，例如新加坡國立大學與加州大學洛杉磯分校 （UCLA）共同推出MBA 碩士課程、芝加哥大學 商學院在新加坡設立分部、紐約大學在上海設立 海外分校、杜克大學在新加坡成立醫學研究中 心、在中國崑山設立海外分校、約翰‧霍普金斯 大學與南京大學合作，設立中美文化研究中心 等。台灣學子沒有這類機會，可以在國內接受國 際性的教育，加上台灣學生留學海外人數逐年下 降，使得台灣的年輕族群越來越缺乏宏觀的國際 視野。台北市美國商會年度《商業景氣調查》指 出，跨國企業經理人十分讚賞台灣勞動力在各方 面的素質，但對於企業員工與求職者「缺乏國際 視野」表示惋惜。 幸好台灣政府已經體認到這個問題，並且開 始採取改善的步驟。目前政府計畫透過幾個自由 經濟示範區來推動經濟改革，並在原本設定的四 大領域（智慧物流、農業加值、金融服務、以及 國際健康）之外，近來更將範圍擴及教育創新項 目，讓教育機構可在示範區內運作。自由經濟示 範區規劃開放實體與虛擬區域，因此外國大學只

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Issues Some media reports had indicated that foreign universities registering under the FETZ program would be permitted to enroll only foreign students, which would seem to defeat the whole purpose of the market opening. At a recent introduction of the FETZ plan at an AmCham luncheon, Deputy Minister Chen Chien-Liang of the National Development Council refuted those reports as absurd, stressing that the educational opportunities would certainly be open to Taiwanese students. He expressed his hope that each one of Taiwan’s major public and private universities would propose cooperative programs with international counterparts under the FEPZ umbrella.

“This development is extremely welcome, and shows the virtue of persistence,” says AmCham Taipei President Andrea Wu. “The Education and Training Committee ran into a brick wall many times over this issue, but it continued to make the case, and eventually it was heard. The winner will be Taiwanese students, who will gain access to a wider variety of educational opportunities and hopefully will be better able to prepare themselves to work in an increasingly globalized economy.”

—– By Don Shapiro

需要將辦公室登記在一個自由經濟示範區內，實 體校園可設於全台任何地點。 有部分媒體報導，自由經濟示範區的外國大 學僅能招收外籍學生，如此一來似乎有違開放國 內教育市場的目的。國家發展委員會副主委陳建 良近日出席台北市美國商會午宴，向商會成員說 明自由經濟示範區的規劃；他在會中駁斥相關報 導，強調台灣學生也能享有外國大學在台提供的 教育機會。陳建良表示，他期望台灣各個公私立 大學能夠配合自由經濟示範區，向國外大學院校 提出合作方案。 台北市美國商會執行長吳王小珍表示：「我 們非常樂見這個發展趨勢，這證明了持之以恆的 功效。『教育與訓練委員會』在這項議題上多次 面臨阻礙，但仍努力不懈遊說各方，如今政府終 於聽見這項建議了。受惠最多的將會是台灣的學 子。他們將能享有更多元的教育機會，使他們在 日益全球化的經濟當中更具競爭力。」

— 撰文／沙蕩

At Long Last, Hope for Chiropractic Recognition?

The National Development Council has asked the health authorities to present a feasible plan.

A

nother longstanding White Paper issue – it has appeared in the document every year since 2007 – has been the Taiwan health authorities’ lack of acceptance of the chiropractic profession. According to information compiled by the World Federation of Chiropractic, an NGO affiliated with the World Health Organization, of the 93 countries in the world having practicing chiropractors, 83 have provided a legal basis for the profession.

In another eight, including China, the legal status is unclear, but chiropractic is accorded de facto recognition. In some jurisdictions without their own examination and licensing system for chiropractic, the solution was to extend recognition to those holding licenses from advanced countries.

Until recently Taiwan was one of only two countries in the world – the other was South Korea – in which not only was the legal status unclear, but chiropractors were at risk of prosecution for portraying themselves as being anything but “folk healers” or “back soothers.”

Taiwan’s chiropractors – mainly holders of U.S. licenses after being trained in five-year post-graduate courses at specialized colleges of chiropractic – find themselves vulnerable to periodic office raids and the imposition of heavy fines for such offenses as operating a website.

Now, following a public backlash after the medical community pressed the health authorities to crack down on chiropractors, Korea has decided to change course, leaving Taiwan alone in the 12

脊骨神經醫學問題終 於可望解決？ 國家發展委員會要求衛生當局 提出可行方案

台

灣衛生主管機關不認可脊骨神經醫學， 是另外一個白皮書長期關注的議題。從 2007年以來，每年的白皮書都有提到此 事。世界脊骨神經醫學聯盟是與世界衛生組織具 有合作關係的非政府組織。根據這個組織所彙整 的資料，在全世界93個有脊骨神經醫師執業的國 家當中，有83國為這個專業制定了法律基礎。另 有8個國家，包括中國在內，法律的基礎並不明 確，但實質上承認脊骨神經醫學。有些國家和地 區本身沒有脊骨神經醫學的考試和證照制度，便 採認先進國家所發的執照。 一直到最近，世界上只有兩個國家─台灣和南

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Issues world in its attitude toward chiropractic. A bill to legalize the profession is currently going through the legislative process in Korea, and in the interim the foreign-trained, foreign-licensed chiropractors in Korea are being allowed to practice without interference.

When a group of Taiwan lawmakers sought to introduce a similar bill in the Legislative Yuan about eight years ago, they were given so much pressure by doctors of Western medicine that they dropped the initiative. Instead, Taiwan’s health authorities have continued to insist that a three-step path of “Education, Examination, Licensure” must be followed, with the first step consisting of establishment of a department of chiropractic at a local university.

That policy has effectively blocked any further progress, however, since no school has been willing to consider investing to create a department to train students who have no assurance of being able to legally practice their profession.

The chiropractic issue was one of several discussed at a recent meeting convened by the National Development Council (NDC) to examine AmCham’s outstanding 2013 White Paper issues. Although the representative of the Ministry of Health and Welfare (MOHW) simply repeated the health authority’s stance that “Education, Examination, Licensure” is the only way forward, the meeting brought hope that the future of chiropractic in Taiwan may get a fresh hearing. One development was that the Ministry of Education went on record as disagreeing with the proposition that instruction within a Taiwan university must be a prerequisite to recognizing a given profession.

Even more significantly, the NDC reminded the MOHW that Taiwan is clearly out of step with the rest of the world on this issue; that chiropractic can serve a real need, especially givenTaiwan’s ageing society; and that in the absence of any formal recognition for well-trained professionals, patients are left without any guidance in determining who is a trusted practitioner. The NDC requested the Ministry to come back with a clear and workable proposal for how to resolve the problem.

—– By Don Shapiro

韓─不僅脊骨神經醫學的法律基礎不明確，而且 執業人士只能自稱是「民俗治療師」或「脊背調 理師」，否則就可能吃上官司。台灣的脊骨神經 醫師，主要是在脊骨神經專門院校受過五年大學 以上教育並取得美國執照的人士，但在台灣，他 們的診所可能不時遭到突擊檢查，而且會因設立 網站等行為而遭到重罰。 現在，南韓醫療界要求衛生當局打壓脊骨神經 醫師，引發民眾反彈，南韓政府決定改弦易轍， 因此在全世界，台灣對脊骨神經醫學的立場算是 獨一無二。南韓正在立法，要使脊骨神經醫學合 法化，在這個過程中，在外國接受訓練和取得執 照的脊骨神經醫師可以執業，不受干擾。 台灣有幾位立法委員大約八年前曾想要推動 類似立法，但在國內西醫的壓力之下放棄。台灣 的衛生當局繼續堅持採取「教、考、用」三階段 做法，第一步是本地大學要先成立脊骨神經醫學 系。但這樣的政策根本阻礙了進展，因為既然訓 練出來的學生不保證可以合法執業，就不會有學 校願意考慮投資成立這個科系。 國家發展委員會最近召開會議，討論台北美國 商會2013年白皮書尚待解決的多項問題，脊骨神 經醫學便是其中之一。衛生福利部的與會代表僅 重申「教、考、用」是唯一解決途徑，但這場會 議為脊骨神經醫學在台灣的前途帶來一線希望。 一項新的發展是，教育部公開表明，反對某項專 業須以台灣的大學設有科系為先決條件才能獲得 承認。 更重要的是，國家發展委員會對衛生福利部 指出，台灣在這個議題上明顯與世界其他國家脫 軌，而且脊骨神經醫學符合民眾實際需求，特別 是因為台灣正在走向高齡化社會。國發會說，如 果不給予受過良好訓練的專業人士正式認可，民 眾就不知道如何選擇可靠的執業醫師。國發會要 求衛生福利部研究出明確可行的方案，來解決這 個問題。 — 撰文/ 沙蕩

Helping Taiwan Youth Develop Their Creativity The new American Innovation Center is jointly sponsored by AIT and the Taiwan Design Center.

W

ithin a month of its opening on January 16, the American Innovation Center (AIC) – despite the week-long Chinese New Year holiday during that period – had attracted more than 2,000 visitors, enrolled over 200 members, and signed up some 700 fans on Facebook. The high degree of interest bears out the validity of the concept

behind its establishment: providing free public access to a facility committed to helping young people navigate the new digital economy.

The first such center in Asia (there are four in Europe), AIC is equipped with computers, 3D printers, scanners, multimedia devices, books, DVDs, and online databases, and offers lectures,

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Issues workshops, DIY activities, and programs on four major themes – innovation, entrepreneurship, digitalization, and culture and design.

A cooperative venture of the American Institute in Taiwan (AIT) and the Taiwan Design Center (TDC), a non-profit, semi-official foundation dedicated to promoting high-quality industrial design, the project arose from a successful AIT bid for seed money from a special U.S. State Department fund aimed at encouraging innovation. The funding covered the purchase of the necessary equipment, and AIT then partnered with TDC, which arranged for staffing and the venue inside a onetime tobacco warehouse in what is now the Songshan Cultural and Creative Park.

AIT Public Diplomacy Section Chief Joe Bookbinder ticked off several reasons why Taipei is an excellent location for such a center. “Taiwan is a vibrant democracy where talent and creativity thrives, and Taipei has a well-educated, tech-savvy population who can take full advantage of and benefit greatly from the American Innovation Center,” he said. In addition, he noted that Taipei has been selected as the 2016 World Design Capital, reflecting the great effort Taiwan has been putting into promoting design and innovation in recent years.

“The Center provides a platform to enable Taiwan designers to connect to leading technology from the United States,” says Oliver Lin, TDC’s Deputy CEO. Besides showcasing American technology, it also serves as a place where young people can improve their English, get information about the United States, and meet with experts on art and design. Technology-oriented American companies are invited to collaborate with the Center by providing materials, organizing workshops, or sending specialists to conduct classes or give speeches. Among the companies that have already been participating, or have committed to programs in the coming months, are IBM, Microsoft, Ebay, and Autodesk, a specialist in 3D design software.

One of the most popular features of AIC is the opportunity for visitors to work on 3D printers and on computers installed with specialized design software.

During the initial period, the 3D printers were preloaded with designs of various models, but from this month it will be possible for users to create their own projects – all free of charge.

With an eye to encouraging the next generation of designers, AIC is also organizing family-style events for parents and children. A recent program organized by IBM introduced the principle of flotation and gave the youngsters a chance to design and build their own model boats, with a prize to the vessel that could carry the heaviest load without sinking.

AIC is open Tuesdays through Saturdays, 1 p.m. to 5 p.m. To ensure access to the equipment, visitors are requested to make appointments by calling 2745-8199 ext. 678.

台灣年輕人拼創意 美國創新中心來幫忙 美國在台協會與台灣創意設計中心合作， 共同 設置了美國創新中心。

美

國創新中心自1月16日開幕以來，雖然遇上一週的 農曆新年假期，一個月內仍吸引超過2000位訪客， 並且有200餘人成為會員，且臉書也有超過700位 粉絲說讚。各界展現如此高度興趣，證實了設置這個中心 是創造一個能夠讓年輕人自由使用的新數位經濟的初衷是 正確的。 歐洲已有四個地方設立美國創新中心。台北是亞洲第一 個除配備有電腦、3D列表機、掃描器、多媒體裝置、書 籍、DVD和線上資料庫，也具有舉辦講座、工作坊和DIY等 各種活動的能力，同時也提供以「創新、創業、數位、文 化與設計」為四大主軸的課程。 美國在台協會和台灣創意設計中心資源共同設置的這個 中心是個非營利的半官方基金會，致力於推廣高品質的工 業設計。美國在台協會在爭取到美國國務院所提供的種子 經費後，利用這筆經費購買必要設備，並與台灣創意設計 中心合作，由後者籌備人員與場地，地點在原本是菸草倉 庫的松山文創園區。 美國在台協會文化新聞組組長周書龍（Joe Bookbinder） 舉出幾個理由，說明台北為何是設立這個中心的絕佳地 點。他表示：「台灣是個生氣蓬勃的民主社會，人才輩 出，創意旺盛，台北更有許多教育良好而技術嫻熟的居 民，他們可以充分利用美國創新中心，並且受益無窮。」 此外，他指出，台北已獲選為2016年世界設計之都，這反 映出台灣近年大力推廣設計與創新的成果。 台灣創意設計中心副執行長林鑫保說：「這個中心提供 一個平台，讓台灣的設計師能連結美國的領先科技。」除 了展示美國的科技之外，這個中心也提供一個場所使年輕 人能讓他們的英語更進步，取得有關美國的資訊，以及接 觸藝術與設計專家。美國以科技導向的公司如國際商業機 器公司（IBM）、微軟公司 （Microsoft）、電子海灣公司 （eBay）和3D設計軟體專業業者歐特克公司（Autodesk）也 開始參與，並承諾在今後的幾個月提供課程、舉辦研討會 或派專家來授課或演講。 美國創新中心最受歡迎的特色之一，是訪客有機會試用 3D列表機和裝有特殊設計軟體的電腦。剛開始時3D列表機 預載了不同模式的設計，但自這個月起使用者也能免費自 行創作。為著眼於鼓勵新一代的設計師，美國創新中心也 會適時舉辦親子活動。如IBM就舉辦了一項讓兒童們有機會 設計和打造自己的模型船課程藉以學習漂浮的原理，並獎 勵那些能夠設計出載運最重貨物而不沈沒的船的兒童。 美國創新中心開放時間為每星期二至星期六下午1時至5 時。為確保能使用各項設備，建議訪客先電話預約：電話 2745-8199轉分機678。

— 撰文/ 沙蕩 — By Don Shapiro 14

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Cover story

MeMory Chips

DRAM MAkes PostshAkeout CoMebACk DRAM產業暴落後重整旗鼓

BY TIMOTHY FERRY

撰文 / 法緹姆

photo : inotera

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2014/3/6 1:34:25 PM

M

In what was a notoriously volatile industry, Taiwan manufacturers over-expanded and found themselves in deep financial trouble. But the sector has now stabilized, in part because of consolidation spurred by the decision of U.S.-based Micron Technology to greatly increase its stake in Taiwan. Another factor in the more positive environment is the product diversification to more applications, reducing dependence on PC memory.

在以變化無常著稱的DRAM產業，台灣製造商過度擴張， 結果陷入財務困境。不過這個產業如今恢復穩定，部分原 因是總部位於美國的美光科技（Micron Technology）決定 大幅增加在台投資，激勵台灣業者整合。當前出現較正面 環境中的另一個因素是產品應用多樣化，減少對個人電腦 （PC）記憶體市場的倚賴。

台

灣DRAM產業十多年來起起伏伏，記憶體 製造業的產量依然很高，只不過大部分 公司不再由台灣所有。 台灣D R A M產業自1990年代中期開始發展以 來，一直隨著全球市場的暴起暴落起起伏伏。 全名為動態隨機存取記憶體的DRAM製造技術複 雜，幾乎所有具有計算功能的產品都少不了它， 導致它特別容易受到供需失衡與價格大起大落的 衝擊。擁有龐大高科技電子產業的台灣，發展 DRAM似乎必然會成功。事實上，力晶、南亞科 和茂德等台灣DRAM製造業者在本世紀第一個十 年結束之前，掌握全球30%的市場。 不過台灣業者在2005至2007年間對產能進行 過度投資，接著2008年全球金融海嘯帶來接二 連三的打擊，重創本土DRAM產業。之前在產業 蓬勃發展時期舉債擴產的製造商，此時無能負擔 生產成本或償還貸款，因為DRAM價格跌幅之深 前所未見。 這個拼命求生的產業在2009年處於危險中。 讓主要製造商合併為由政府注資的台灣創新記憶 16

ore than a decade into the boom and bust of the domestic DRAM industry, Taiwan’s memory-chip manufacturing output remains high – it’s just no longer mainly under Taiwanese ownership.

Since its beginnings in the mid-1990s, Taiwan’s DRAM sector has followed global markets on a roller-coaster ride of ups and downs. DRAM – short for dynamic random access memory – is a technologically sophisticated and vital component for nearly all computing, making it particularly vulnerable to supply and demand imbalances and steep price swings. Taiwan, with its huge high-tech electronics industry, seemed like a sure-fire environment for success. Toward the end of this century’s first decade, in fact, Taiwanese DRAM makers such as Powerchip Semiconductors, Nanya Technology, and ProMOS Technologies held some 30% of the global market.

But overinvestment in manufacturing capacity by Taiwanese makers between 2005 and 2007 and the onset of the global recession in 2008 were a one-two punch that sent the local industry reeling. DRAM manufacturers that had borrowed money to build capacity during the industry’s salad days suddenly found themselves unable to cover production costs or make loan payments as prices dropped to unprecedented depths.

By 2009 the very survival of the industry was in jeopardy. Talk of consolidating the

體公司的產業整合談判毫無成果，DRAM價格長 期暴跌導致業者損失慘重。茂德在2012年出售 旗下晶圓廠，力晶則因不堪虧損，最終在2013 年初從台灣證券櫃檯買賣中心下櫃。南亞科在母 公司台塑集團的龐大財力支持下撐了下來，但退 出標準型DRAM的業務，步上華邦電子的後塵。 在此同時，瑞晶電子和華亞科賤價賣給美商美光 科技。 如今台灣在全球D R A M市場的市佔率不到 15%，其中大多牢牢掌握在美光陣營手中。 D R A M產業的虧損估計在60億到100億美元之 間。台灣美光記憶體公司總經理陳正坤表示：「 我們是本土公司，卻懷抱著夢想，希望在全球競 爭中成為國際性公司。」陳正坤是前瑞晶總經 理，當公司更名為台灣美光記憶體時，他繼續擔 任同一職務。他說：「這個夢想非常困難，如今 已告破滅。」 不過陳正坤認為，瑞晶被美光併購，整體而言 是正面性的發展。他指出，除了感謝美光讓瑞晶 的3千名員工保住工作，而且享有和過去差不多

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sector by folding the major manufacturers into a state-invested Taiwan Memory Co. came to nothing, and the prolonged slump inflicted heavy losses. ProMOS sold off its fab in 2012, while Powerchip suffered such high losses that it was eventually delisted from the GreTai Stock Exchange in early 2013. Backed by the deep pockets of its parent Formosa Plastics Group, Nanya endured but exited the commodity DRAM business, as did niche player Winbond Microelectronics.

Rexchip Electronics and Inotera Memories, meanwhile, came under the direction of U.S. maker Micron Technology at firesale prices.

Today Taiwan commands less than 15% of the global market and most of this capacity is squarely in the Micron camp. Estimates of industry losses range from US$6 billion to $10 billion. “We were local companies, but we had a dream that we could become global players in the worldwide competition,” says Stephen C.K. Chen, the former head of Rexchip who continued in the same role when the company name changed to Micron Memory Taiwan. “That dream was very difficult and now it’s gone.”

But Chen sees the acquisition of Rexchip by Micron as being a positive development overall. Besides being grate-

ful that the operation’s 3,000 workers continue in their jobs at similar pay scales, he notes that “we have become part of the one of the biggest companies in the world. This is a good opportunity for us. We have truly become an international company.”

Industry insiders differ on whether the shakeout in Taiwan’s DRAM industry represents a failure or simply the regular evolution of the industry, and in many respects the development reflects global trends. Japan was once the world’s leader in DRAM, but its foremost company in the field, Elpida Memory, was bought

by Boise, Idaho-based Micron in 2013 for US$2.5 billion. Qimonda – a spinoff of Germany’s Infineon Technologies, which itself was a spinoff from a Siemens business unit – also collapsed under the weight of its own poor finances. At that point, Qimonda sold its share in Taiwan’s Inotera, a joint venture with Nanya, to Micron.

According to Scott Meikle, a longtime Micron executive who is now president of Inotera, the fallout and consolidation in Taiwan’s DRAM industry is “hugely to Taiwan’s benefit.” Meikle notes that “we’re very much able to combine our energy to focus on making the Taiwan DRAM industry competitive and world

的薪資外，「我們成為全世界數一數二企業的一員， 這是我們的好機會，我們已真的成為國際性企業」。 對於台灣DRAM產業的暴落，究竟是代表一個失敗 經驗，抑或純粹是產業的正常演變，而且就許多方面 來看是反映全球趨勢的發展，業界人士看法不一。日 本曾是全球的DRAM龍頭，其中最重要的業者就是爾 必達（Elpida Memory），卻在2013年被總部位於美 國愛達荷（Idaho）州首府波夕（Boise）的美光以25 億美元價格併購。德國西門子（Siemens）將半導體 部門分割成立英飛凌科技（Infineon Technologies）， 後者又將部分業務分拆成立的奇夢達（Qimonda）記 憶體公司，也迫於財務困難而倒閉。奇夢達曾在台灣 和南亞科合資成立華亞科，奇夢達倒閉後，將華亞科 的持股轉給美光。 由美光長期高層主管轉任華亞科總經理的梅國勳 （Scott Meikle）指出，台灣DRAM產業引發的效應和 整合「對台灣利益攸關重大」。他表示，「我們非 常擅長將所有精力集中於促進台灣DRAM產業的競爭 力，成為世界級業者，對抗非常難纏的南韓競爭對 手」。

class against very difficult competition in Korea.”

The global DRAM industry that emerged from the slump of 2009-2012 is markedly different from its predecessor.

Global capacity has been consolidated into just three companies: Samsung and SK Hynix, both of Korea, and Micron. At the same time, the range of DRAM applications has exploded. Whereas 10 years ago 80-90% of DRAM production was in PC DRAM, the rise of mobile communication and cloud computing has relegated PC DRAM to a sideshow. The uptick in demand and the consolidation of supply has led to a balancing of supply and demand that has caused prices to rise consistently since 2012, with far less volatility than in other periods.

全球的DRAM產業走出2009到2012年間的衰退後， 如今已和過去大為不同。全球的生產陣線經過整合 後，只剩下南韓的三星（S a m s u n g）和海力士（S K Hynix），以及美光三家業者。在此同時，DRAM的應 用領域迅速擴增。DRAM在十年前有80%到90%都是用 於個人電腦，行動通訊和雲端計算崛起後，PC DRAM 隨之式微。需求暢旺加上供應整合，讓DRAM供需平 衡，因此價格自2012年起不斷走揚，而且波動幅度 比過去任何時期都穩定。 產業分析機構集邦科技（T r e n d F o r c e）估計，去 年全球D R A M的產值為344億美元，較2012年成長 30%。除了供需更為平衡外，產能佔全球5%的海力士 中國無錫廠2013年發生火災而停工數月，促使2014 年初的4GB DRAM合約價推升至34美元。不過集邦指 出，海力士晶圓廠復工後，DRAM價格可能會稍微滑 落。 台灣依然是D R A M的主要製造基地，而且台灣的 DRAM產業在許多方面比過去數年都更為健全。美光 和南亞科合資經營的華亞科，已經從被賤賣的資產蛻 變為高科技業的火車頭，去年的股價績效表現高居台

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Cover story Industry analytic firm Trendforce estimates the value of global DRAM production last year at US$34.4 billion, a 30% rise over 2012. Besides the more balanced supply and demand, a fire at SK Hynix’s Wuxi plant that took 5% of global capacity offline for several months in 2013 and early 2014 contributed to pushing contract prices for 4GB DRAM to US$34, although Trendforce says prices are likely to come down somewhat with restoration of production at the Hynix fab.

Taiwan continues to be a major manufacturing site for DRAM, and in many respects its DRAM sector is healthier now than at any point in the past few years. The Inotera joint venture between Micron and Nanya has gone from distressed asset to high-tech powerhouse and last year had the best performance of any shares on the Taiwan Stock Exchange. Micron’s fab, the former Rexchip operation, continues to produce much of Micron’s – and the world’s – PC DRAMs.

Viewing the downside Some observers, though, are less sanguine. The failure of Taiwan’s DRAM industry to consolidate as an independent global competitor “is a failure of

both the government and the private sector,” asserts Tang Ming-Je, professor of strategic management at National Taiwan University. He faults investors for recklessly putting money into building DRAM manufacturing capacity, swamping the market, and criticizes the government for not taking aggressive enough steps to consolidate the industry. Tang calls Taiwan’s DRAM industry “another example of a failed industrial policy of promoting a capital-intensive industry without a clear strategy for winning.”

Avril Wu, vice president of the Trendforce Memory and Storage division, attributes much of the problem to the lack of “strategic-centric” thinking among Taiwan’s industrialists. “They don’t really care about market intelligence and use their gut feeling to make projections,” she observes. “So if the ASP (average selling price) is good, they expand their capacity, but it quickly leads to a supply-demand imbalance.”

Stephen Chen of Micron Memory Taiwan, however, considers that Taiwanese makers were well aware that DRAM is subject to the huge price swings and frequent booms and busts that are typical of commodity industries. But the economic collapse in 2008-2009 and the ensuing drop in demand sent prices

plunging far lower than anticipated and for a much longer of time, he notes.

“A 20% or 30% price decrease might have been acceptable for most Taiwanese DRAM companies, but after the 2008 financial crisis the price went down 50-70% a year and continued for three years. That made it difficult for Taiwan DRAM to survive.”

DRAM (pronounced Dee-Ram) is the most common form of RAM or memory chips for PCs, tablet computers, mobile devices and servers. Consisting of storage cells made up of capacitors and transistors, DRAM is volatile, needing to be electrically refreshed every few milliseconds, unlike static RAM. DRAM was invented in the United States, and American companies such as Intel and Texas Instruments held 90% of the market in the 1970s. By the 1980s, American dominance waned as Japanese conglomerates such as Toshiba, Hitachi, and Mitsubishi relied on cutting-edge technology and a huge domestic appetite from a vast electronics industry to take the leading position. By 1987, seven of the top 10 DRAM makers worldwide were in Japan.

The recession that hit Japan in the early 1990s slowed its electronics industry down, drying up DRAM demand

灣股市之冠。美光併購自瑞晶的晶圓廠，持續為美 光和全世界生產大量PC DRAM。

DRAM走下坡原因

Speaking in March 2012, Nanya Technology Chairman and President Wu Chia-chau said that in the wake of the Elpida bankruptcy, Nanya’s technology cooperation with Micron will bring substantial advantages. photo : cna

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不過部分觀察家的看法較不樂觀。台灣大學國際 企業系教授湯明哲堅稱，將台灣DRAM產業整合為單 一全球性公司的計畫告吹，「是台灣政府和民間業 者的失敗」。他不但歸咎投資者貿然將錢投入擴充 DRAM產能，導致市場陷入困境，還抨擊政府整合產 業的行動不夠積極。湯明哲認為台灣DRAM產業是「 產業政策失敗再添一例，希望促進資金密集產業升 級，卻沒有明確的致勝策略」。 集邦科技記憶體儲存事業處協理吳雅婷把大部分 的癥結歸因於台灣業者缺乏「以策略為中心」的思 維。她觀察發現，「他們其實並不在乎市場情報， 只靠直覺規劃」，「所以倘若平均銷售價格（ASP） 行情好，他們就擴充產能，但這樣很快就導致供需 失衡」。 不過台灣美光的陳正坤認為，台灣製造商很清楚 DRAM容易因為價格巨幅波動而經常出現暴起暴落，

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just as Korean chaebols Samsung, Goldstar, and Hyundai were ramping up their investments in DRAM making. These Korean companies copied the Japanese model of R&D-driven manufacturing, but without as large a domestic market they were forced to play on a global field.

International competition taught the Koreans how to lower costs, and by 1992 Samsung had already emerged as the world’s largest DRAM maker, a position it continues to hold today. Goldstar’s and Hyundai’s DRAM operations were eventually merged into SK Hynix.

Korea’s success inspired Taiwanese manufacturers to enter the DRAM industry. Among Taiwan’s early advantages in the sector were that it was already well-established as a leading high-tech manufacturer center and had its own homegrown market in the PC industry.

“DRAM got started in Taiwan because there was so much demand for DRAM here from the PC boom,” says C.W. Chin, Micron’s managing director for Asian public affairs.

Further, a surging economy in the 1980s and 90s had left local banks flush with cash, while Morris Chang had already demonstrated that Taiwan could create global players such as Taiwan Semiconductor (TSMC). Many reasoned

that if Taiwan could succeed in semiconductors, it could succeed in DRAM, by just copying Chang’s strategy.

A number of players then entered the market, including Powerchip, Nanya, Winbond, and ProMOS. Employing the same contract-manufacturing model as TSMC and leveraging Taiwan’s widely recognized production efficiency, Taiwan’s DRAM industry was soon a global powerhouse. Success fueled expansion, which Taiwan’s state-run banks were happy to support. “The risk appetite was high in financial markets at that time, so these companies could get financing pretty easily,” notes C.W. Chin.

But the business model the industry adopted was one that was “highly exposed to the ups and downs of the market,” says Inotera’s Meikle. The reason? The Taiwanese DRAM firms did not develop their own technology (as TSMC did), but instead licensed the technology from bigger players, including Qimonda, Elpida, and Micron. Technology is “a key part of the overall value chain,” giving DRAM makers the opportunity to “develop applications with end customers,” explains Meikle. “You are able to look for ways to add value to the memory in a way that a contract manufacturer isn’t.”

是典型的商品產業。不過他指出，2008到2009年 的經濟崩盤和隨之而來的需求下滑，導致價格暴跌 的幅度和持續時間都遠超出預期，「價格下滑20% 到30%，對大部分台灣D R A M業者來說可能還可以 接受，但2008年金融海嘯後，價格每年暴跌50%到 70%，而且持續三年之久，讓台灣DRAM產業難以存 活」。 DRAM是RAM（隨機存取記憶體）或PC、平板電 腦、手機和伺服器記憶體最常見的一種形式，是由 許多電容和電晶體所構成的儲存元（storage cell） 組成。D R A M具有易變的特質，每隔數毫秒就需要 電流進行更新，和靜態的R A M截然不同。D R A M是 由美國發明，英特爾（I n t e l）、德州儀器（T e x a s I n s t r u m e n t s）等美國業者在1970年代的市占率達 90%。1980年代，美國業者勢力沒落的同時，東芝 （Toshiba）、日立（Hitachi）和三菱（Mitsubishi） 等日本財團靠著尖端科技，以及來自國內龐大電子 業的巨大需求量，奪下主導地位。1987年全球前十 大DRAM製造商中，有七家是日本業者。 日本在1990年代初期陷入衰退，電子業隨之趨 緩，導致D R A M需求不振，此時剛好三星、金星

Inotera's Scott Meikle says the consolidation of the domestic DRAM sector has been “hugely to Taiwan’s benefit,” increasing the Taiwan industry’s competitiveness in world markets. photo : inotera

Magnified price distortions The Taiwanese DRAM makers did bring excellence in process engineering – know-how to refine the manufacturing process to wring out the greatest efficiencies. In a market where prices are falling

（Goldstar）和現代（Hyundai）等南韓財閥提高對 DRAM製造的投資。南韓業者拷貝日本以研發帶動製 造的模式，卻因為缺乏和日本一樣大的國內市場， 被迫投入全球性戰場。南韓人從國際競爭中學會降 低成本，1992年時三星已躍升為全球最大的DRAM製 造商，而且保持至今。金星和現代的DRAM業務最後 被海力士併購。 南韓的成功激勵台灣製造業者進軍DRAM產業。台 灣早期的優勢包括已具有世界公認的主要高科技製 造中心地位，並擁有PC業的國內市場。美光亞洲區 公共事務總經理金奇偉表示：「DRAM在台灣起飛， 是因為這裡的PC業繁榮，對DRAM需求殷切。」 此外，1980到90年代的經濟蓬勃發展讓現金不斷 湧入本土銀行，同時張忠謀已證明台灣能創造台積 電之類的世界級企業。許多人因而推論，台灣若能 成功發展半導體業，在DRAM也能成功，只要拷貝張 忠謀的策略即可。 後來包括力晶、南亞科、華邦與茂德在內的許多 業者進軍D R A M市場，採用和台積電相同的代工模 式，並善加利用台灣廣受肯定的生產效率。台灣的 DRAM業很快就成為全球重鎮。DRAM的成功刺激擴

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Cover story below the costs of even the most efficient fabs, however, “there’s nothing left for the contract manufacturer to get, whereas someone who owns their technology perhaps can still make money off of some high-end application,” says Meikle. In an industry as historically volatile as DRAM, adding value to generate cash during price slumps can be the difference between survival and failure.

Although DRAM accounts for only a small part of the total cost of a device, a computer cannot operate without it. That indispensability, notes Tang Ming-Je, translates into price distortions, with every 1% supply-demand imbalance multiplied many times in price variation. That phenomenon was seen recently when the fire at the SK Hynix fab in China temporarily removed about 5% of the world’s capacity but caused a 30% price hike. This magnification of even minor supply-demand distortions contributes to the industry’s tendency to experience alternating booms and busts.

DRAM making is also highly capital intensive. Setting up a fab costs around US$3 billion on average, and constant technological advances require upgrades every year to 18 months, at a cost each time of US$100 million to $300 million – or even more, depending on the depth

of the changes and how much new equipment is required. Maintaining a financial position that enables the company to exploit the booms while surviving the busts has proven tricky for most firms, causing many to fall by the wayside.

But as companies drop out because they lack the financial strength to sustain their business, “the world still needs the capacity, so their capacity gets absorbed,” notes Scott Meikle. “That’s why consolidation happens.”

Unlike the contract-manufacturing model in the semiconductor industry, in which the manufacturer makes the product for a customer for a fee, Taiwanese DRAM companies accepted terms in which they delivered around a third of their output to their customer, and sold the rest themselves, often on the spot market, says Professor Tang. The DRAM makers found these terms attractive because the volatility of the spot market often provided an opportunity to maximize profits, he notes. This business model had obvious advantages during boom times, but left manufacturers wide open to losses during downturns.

Surviving in the DRAM business boils down to a choice between two distinct approaches, says Tang: the Samsung strategy and the Micron strategy. He

張，台灣公營銀行樂於提供支援。金奇偉指出：「 當時金融市場的風險接受度高，因此業者能夠相當 輕鬆就獲得融資。」 不過華亞科的梅國勳表示，D R A M業採取的商業 模式是「高度暴露於起起伏伏的市場中」。原因何 在？台灣DRAM業者並未像台積電那樣發展自己的技 術，而是向奇夢達、爾必達和美光等更大型的業者 取得技術授權。梅國勳解釋，技術是「整體價值鏈 的關鍵」，讓DRAM製造商有機會「和終端客戶一起 開發應用」，「能以代工業者無法做到的方式，設 法尋求增加記憶體的附加價值」。

價格扭曲擴大 台灣DRAM製造商確實在製程工程上表現傑出―― 開發技術精進製程，求取最佳效率。不過梅國勳表 示，在一個連生產效率最高的晶圓廠產品價格都低 於成本的市場，「代工業者根本無利可圖，擁有技 術的業者或許還能從一些高端應用中獲利」。在一 個像DRAM這樣充滿波動歷史的產業，能夠在價格下 滑時帶來獲利的附加價值，可能就是存活或失敗的 20

describes the Samsung strategy as keeping R&D and production in the same facilities, so as to move research into production faster than its competitors and gain a key advantage in terms of price. “If I can put out advanced product six months before you do, I have six months’ time to drive the experience curve and lower costs,” Tang explains.

“When you come in, I just lower my price and beat you.”

Samsung, which remains the world frontrunner with a 40% market share, has already put industry-leading 20-nanometer technology into early production.

Inotera is still producing 30nm and above but Meikle reports that the company is ramping 25nm and will likely have 20nm technology running by year’s end.

Micron’s Taichung facility – the former Rexchip – produces 30nm DRAM technology. “Samsung is ahead of Micron in terms of technology deployment, so we need to catch up,” says Meikle.

The Micron strategy has historically been to wait for downturns in the market to buy distressed assets – such as Texas Instruments’ foundries in the 1980s and the Elpida acquisition in 2013 – to gain capacity and technology at lower prices. The Elpida merger, in addition, provided Micron with important access

差別。 在整台電腦的總成本中，DRAM只占一小部分，但 電腦少了它就無法運作。湯明哲指出，這個不可或 缺的地位轉化成價格扭曲，每發生1%的供需失衡， 就會出現許多倍的價格變動。不久前海力士的中國 晶圓廠發生火災時，就出現此一現象，全球暫時失 去約5%的產能，卻造成價格急漲30%。即使是輕微 供需扭曲也會造成的放大效果，導致DRAM產業往往 會經歷不斷循環的起起伏伏。 DRAM製造也是高度資金密集的產業。晶圓廠的設 立成本平均約需30億美元，持續不斷的技術提升需 要每12到18個月就進行升級，每次約需1億到3億美 元，或甚至更高的費用，視升級變化程度和須採購 多少新設備而定。事實證明，維持資金水位讓公司 能在繁榮時期趁機大賺或撐過衰退時期，對大部分 業者來說相當困難，造成許多業者鎩羽而歸。 不過梅國勳指出，就在業者因為資金實力不足 以維持公司而退出的同時，「全世界仍需要這些業 者的產能，這些公司就被併購」，「整合因此發 生」。 湯明哲表示，不同於半導體業者的代工模式是收

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to the production of DRAM for mobile devices, a market that Micron had only a toehold in before 2012. Micron is now the world’s number two manufacturer of mobile DRAM. C.W. Chin notes that the fruits of Micron’s strategy – including lower cost of capital – have allowed the company to “weather all of these cycles in a cutthroat industry,” so that after 35 years in the business, Micron is now the oldest remaining competitor in the DRAM industry.

Micron’s strategy of inorganic growth and holding global assets, however, “has created a much, much larger logistics problem than Samsung has,” admits Meikle. Most of Micron’s manufacturing is now centered in Japan, Taiwan, and Singapore, while its R&D centers are located in Boise and other places. Different languages and time zones can slow down communication, technology development, and time to market. Stephen Chen concedes that the former Rexchip employees are struggling to adjust to predawn conference calls and the use of English in meetings. But Meikle notes that such far-flung resources can also create valuable synergies. “Once you master the challenge, it becomes a core asset,” he says.

Back in 2008, President Ma Ying-jeou speaks to Powerchip Chairman Frank Huang while visiting the Powerchip booth at the SEMICON Taiwan trade exhibition. photo : cna

Government initiative failed In developing its DRAM industry, Taiwan had followed neither the Samsung nor Micron strategy, leading to its current state of affairs. The Taiwan government did make an attempt to consolidate the sector as market conditions worsened in

費替客戶製造產品，台灣DRAM業者接受的代工條件 是將約三分之一的生產產品出貨給客戶，剩下的由代 工業者自行銷售（通常是在現貨市場）。他指出， DRAM業者發現這樣的條件具有吸引力，因為現貨市 場的波動通常就是賺取最大利潤的機會。此一商業模 式在景氣時期顯然大有好處，但衰退時期就會讓製造 業者很容易蒙受虧損。 湯明哲表示，在DRAM業存活的方法，可以簡化為 兩個截然不同的路線――三星策略和美光策略。他指 出，三星策略就是讓研發和生產維持在同一地點，這 樣就能比競爭對手更快將研究成果轉化為生產，在價 格上取得關鍵優勢。湯明哲解釋：「如果能比對手早 六個月推出先進產品，就能有六個月時間操控經驗學 習曲線，並享有較低的成本。」「一旦對手投入競 爭，只要降價就能擊敗對手。」 擁有40%市占率、維持世界龍頭地位的三星，已領 先業界投入20奈米技術的初期製程。華亞科則停留在 30奈米或以上的技術，不過梅國勳透露，華亞科將跳 過25奈米製程，可能會在今年底導入20奈米技術。原 屬於瑞晶的美光台中廠目前採用30奈米製程。梅國勳 說：「就技術建置而言，三星領先美光，所以我們必

2009, promoting the idea of creating a state-run Taiwan Memory Co. (TMC) as an umbrella company for all of Taiwan’s DRAM makers. It was hoped that TMC, with advanced technology supplied by Japan’s Elpida, would have both the scale and technology to take on the global giants in Korea.

須趕上。」 美光策略以往都是等市場步入衰退時購買賤賣的資 產，以低價取得產能和技術，例如在1980年代購買德 州儀器的晶圓鑄造廠，2013年則是併購爾必達。此 外2012年之前，美光在手機DRAM市場僅有小小的立 足點，爾必達併購案提供美光進軍這個市場的重要管 道。如今美光成為全球第二大手機DRAM製造商。 金奇偉指出，美光策略的好處包括資金成本較低， 讓公司「在割喉產業中安然度過所有循環週期」，所 以屹立35年的美光如今成為DRAM產業歷史最悠久的 現存業者。 不過梅國勳承認，美光透過併購的無機成長和維 持全球資產的策略「已造成比三星嚴重許多許多的後 勤問題」。美光的製造業務如今大多集中在日本、台 灣和新加坡，不過研發中心位於波夕等地。不同的語 言和時區會導致溝通、技術開發和產品上市的時間拖 長。陳正坤承認，前瑞晶員工得努力調整適應在黎 明前參加電話會議，並且使用英語開會。不過梅國勳 指出，散布各地的資源也創造寶貴的合作經驗。他 說：「一旦克服挑戰，它就會是你的核心資產。」

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Inside the Inotera Memories fab in the Hwa-Ya Technology Park in Gueishan, Taoyuan County. photo : inotera

TMC never came to be, for a variety of reasons. Primarily, the government faced withering criticism in the press and then the legislature for its proposed NT$6 billion investment (US$200 million), later reduced to NT$1 billion.

The president of United Microelectronics Corp. (UMC) was chosen to lead the proposed entity, but insiders say that only Morris Chang had the credibility to bring all the would-be partners together, and he

政府計畫失敗 台灣發展D R A M產業時，遵循的既不是三星策 略，也不是美光策略，才導致業界發生目前的情 況。2009年市場條件惡化時，台灣政府確實曾試圖 整合這個產業，推動成立台灣創新記憶體公司作為 所有台灣DRAM業者傘形公司的構想，希望擁有日本 爾必達提供先進技術的台灣創新記憶體公司，能在 規模和技術上對抗南韓的世界級巨擘。 台灣創新記憶體的計畫因為種種理由而未實現。 主要是政府面臨媒體的尖銳抨擊，後來立法院將政 府投資新台幣60億元（相當於2億美元）的提案減 為10億台幣。聯電榮譽副董事長宣明智獲選出任 台灣創新記憶體的董座，但熟悉內情的人士表示， 只有張忠謀才具有凝聚所有未來夥伴的威望，但他 並未淌渾水。湯明哲表示，後來統合責任落到各家 本土業者的頭上，但他形容這些人只是「想從政府 那裡拿錢」，卻不願交出控制權。他套用一句耳熟 能詳的中文俗諺來形容，就是「寧為雞首，不為牛 後」。 集邦科技的吳雅婷指出，無法預料市場變化，也 22

did not enter the fray. Professor Tang says the responsibility then fell to the various local industrialists, whom he describes as just “wanting money from the government” without being willing to surrender control. “You want to be the head of the chicken, not the tail of the ox,” he says, citing a common Chinese idiom.

According to Trendforce’s Avril Wu, Taiwan’s failure to anticipate market changes also contributed to the difficulties the DRAM industry faced. “No Taiwanese brand company was aware of the power of either the cloud or smartphone and tablets,” she notes. “We weren’t leaders in those fields.”

The stagnation in the PC sector and the rise of mobile and cloud computing have been the core of the tech nology story for a number of years.

Whereas in the past DRAM meant memory for PCs, the market is now split into a number of segments for an ever increasing array of applications. Meikle observes that a decade ago 80-90% of the DRAM market was in PCs, but it is now largely divided into thirds among PCs, mobile, and infrastructure computing such as servers – with healthy niche markets in gaming and graphics DRAM. “That creates a much more diversified end market, which is healthy,” he says.

是台灣DRAM業者面臨的難題之一。她表示：「台灣 品牌業者都沒有意識到雲端、智慧型手機和平板電 腦的力量。」「我們不是這些方面的領袖。」 P C產業的停滯不前，以及手機和雲端運算的崛 起，多年來一直是科技新聞的核心。過去DRAM就 代表PC的記憶體，現在卻針對不斷增加的一連串應 用領域分割成許多區塊。梅國勳觀察發現，十年前 D R A M市場有80%到90%來自P C，現在則大致分為 PC、行動通訊和基礎設施運算三大塊。其中基礎設 施運算包含在電玩和繪圖用DRAM擁有健全利基市 場的伺服器。他表示：「這創造更多樣化的健全市 場。」「當DRAM只是一項商品時，得和其它廠商競 爭商品價格。當它擁有多樣化的應用時，情況就大 不相同。客戶會傾向於依賴某家製造商，必然會為 這家業者帶來更多價值。」 在這個嶄新的健全市場中，美光在台灣的併購逐 漸有了回報。華亞科最初是南亞科和英飛凌的合資 企業，英飛凌在2006年分拆出奇夢達時，也轉讓持 有的華亞科股份。奇夢達2009年破產，美光以4億 美元買下奇夢達持有的華亞科35.5%股份。後來美光 加碼1.5億美元，將持股提高至46%，南亞科的股份

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“When it’s just a commodity, you’re competing against other players for commodity pricing. That’s not so much the case when you’ve got a diverse set of applications. Customers then tend to depend on a certain manufacturer, which necessarily leads to more value for the manufacturer.”

In this newly healthy market, Micron’s

acquisitions in Taiwan are paying off.

Inotera started out as a joint venture between Nanya and Infineon, whose stake then was acquired by its spinoff Qimonda in 2006. Micron bought out Qimonda’s 35.5% share of the company for US$400 million after Qimonda went bankrupt in 2009. Micron later raised its stake to 46% with the injec-

tion of another US$150 million, bringing Nanya’s down to 25%, with the remaining shares owned by smaller investors.

Nanya brought the relationship back to parity with a US$200 million capital infusion in 2012. At the same time, though, Nanya began distancing itself from the actual operations at Inotera. Micron and Nanya had originally

Where are They Now?

T

he fates of the various DRAM players have diverged in recent years. While much of Taiwan’s DRAM output has gone firmly into the Micron camp, Taiwan still has a couple of independent DRAM makers – and some of those formerly in the industry have found success in other businesses.

The rise, fall, and re-rise of Hsinchu Science Park-based Powerchip Semiconductor, for example, is a story of hubris and resilience. The former leader in Taiwan’s DRAM sector once held a 12% global market share, but suffered such prolonged losses in the 2009 downturn that the company was finally delisted from the GreTai Stock Exchange in 2012. Founded in 1994 by physician Frank Huang, Powerchip borrowed heavily to greatly expand capacity in the good years of the 2000s, building four new fabs and leaving it highly vulnerable in the 2009 price collapse. By 2010 the company was flailing, changing top management and even its name to Powerchip Technology Corp.

In 2011, Powerchip announced that it would no longer sell own-brand DRAM to focus on making LCD drivers and flash memory, both under its own name and on a foundry basis. Powerchip’s foundry business rapidly took off, and within a year sales had risen 67% to US$625 million, comprising two-thirds of Powerchip’s total revenue. The company then moved 100% of its production into foundry sales, with business skyrocketing a further 88% in 2013 to US$1.175 billion. It is now the world’s sixth largest contract semiconductor foundry. Still, the fallout from Powerchip’s reckless expansion in DRAM has not been entirely forgiven. “Powerchip lost a lot of value for investors,” notes Trendforce’s Avril Wu. Winbond Electronics Corp., founded in 1987, was and remains a niche player in mobile, specialty, and graphics DRAM. As of Q1 2013, the TAIEX-listed company had experienced seven consecutive quarterly losses, as reported by Digitimes. The company, headquartered in the Central Taiwan Science Park in Taichung, lost NT$1.62 billion (US$53.37 million) in 2012, but returned to profitability the next year with net earnings of NT$287 million (US$9.45 million) on NT$33.14 billion (US$1.09 billion) in total sales. Trendforce’s Avril Wu notes that Winbond’s small capacity helped the company survive the downturn. “They were small, so they were more flexible and could diversify their product line,” she observes. In Q4 2013, specialty DRAM comprised 51% of

Nanya Technology is now emphasizing consumer and low-power value-added DRAM products instead of commodity production. photo : cna

Winbond’s total memory sales, followed by NOR flash with 38%, and mobile DRAM with 11%, according to Digitimes.

Nanya Technology Corp. was founded in 1994 as part of the Formosa Plastics Group and began producing DRAM products in 1995. Listed on the Taiwan Stock Exchange in 2000, the company went on to enter into the Inotera joint venture first with German tech giant Infineon, then Infineon-spinoff Qimonda, and finally Micron in 2008. Beginning last year, Nanya no longer takes any of Inotera’s output, citing a change of strategy “to emphasize consumer and low-power value-added DRAM product market segments,” according to the company website.

Nanya says that the move towards “specialty DRAM products with advanced 30nm technology” will improve competitiveness by reducing R&D costs and overall cost structures. It retains the right to obtain 20nm process technology from Micron.

Having survived the downturn, Nanya saw revenue improve to NT$47 billion in 2013, a 38% rise over 2012, although the increase was due mainly to higher prices on the same volume of shipments.

ProMOS, for its part, is now a semiconductor design house, after selling its fab to U.S. semiconductor firm Globalfoundries in 2012.

—By Timothy Ferry

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Cover story 因此降至25%，其餘股份則由規模較 小的投資人所有。 南亞科在2012年注資2億美元，持 股恢復到和美光並駕齊驅。不過在此 同時，南亞科開始和華亞科的實際營 運保持距離。美光和南亞科原本共享 華亞科的產能，不過2012年南亞科 退出標準型DRAM產業。結果在2103 年，華亞科96%的產能歸美光所有， 2014起將達到100%，南亞科進一步 結束和美光的合資發展協議。 對美光和台灣D R A M產業而言， 事實已證明華亞科極為成功。2013 年產量增加39%，達到134.3萬片 D R A M，銷售額590億台幣，淨獲 利212億台幣。美光首席財務長R o n Foster在2014年第一季獲利報告中， 讚揚華亞科擁有「高效率的資金結 構，包括產品銷售利潤，以及美光從 華亞科過去兩季權益法獲利中分得的 利益」。他接著說，合資企業「目前 的年化投資報酬率將近130%」。華 亞科是台股基效最佳的股票，2013 年創下驚人的468.48%漲幅，相較下 整體大盤只上漲11%。 原名瑞晶的台灣美光記憶體是30 奈米2G DDR3 DRAM的製造商，在 美光的管理下也表現良好。瑞晶是 力晶和爾必達在2007年成立的合資 企業。美光在2012年以97億台幣

split the output of the Inotera line, but in 2012 Nanya moved to exit the commodity DRAM industry. As a result, 96% of Inotera’s output went to Micron in 2013 and the figure will be 100% from 2014 onwards. Nanya further terminated the joint development agreement it had with Micron.

Inotera has proven to be a great success for both Micron and Taiwan’s DRAM industry. Production climbed 39% in 2013 to 1,343K bits and net earnings came to NT$21.2 billion from NT$59 billion in sales. In Micron’s Q1 2014 earnings call, CFO Ron Foster praised Inotera’s “highly efficient capital structure, including the margin on the sale of Inotera’s products and our share of their equity method earnings over the past two quarters.”

He added that the joint venture is “currently generating an annualized ROI close to 130%.” Inotera was the top performing stock on the Taiwan Stock Exchange, rising an astonishing 468.48% in 2013, compared to an overall market gain of 11%.

The former Rexchip, maker of 2G, 30nm DDR3 DRAM, is also doing well under Micron’s steward-

ship. Rexchip was formed as a joint venture between Powerchip and Elpida in 2007. Micron acquired the Hsinchu-based company in 2012 as part of the Elpida merger, paying NT$9.7 billion (US$325 million) for a 65% stake. This stake was gradually raised, and Micron now owns 98% of the company (the rest is owned by employees), giving the U.S. company “more flexibility from a technology and production standpoint,” notes Stephen Chen.

Going forward, almost everyone in the DRAM industry expects to see an extended period of calm in what was previously a volatile industry.

Consolidation has led to fewer players, who have little need or desire to expand their production lines. Micron doubled its capacity with the Elpida and Taiwan mergers and has no need for further expansion. With its Galaxy series of phones among the biggest consumers of DRAM, Samsung likewise has little incentive to increase manufacturing capacity that would lower the price of DRAM for competitors such as Apple.

“The situation is different from the

Going Beyond DRAM DRAM has been a big success in computing due mainly to its simplicity, which allows for greater memory density and therefore cheaper prices. Each DRAM cell consists of a small capacitor as a memory element, and a transistor to control it. This simple structure enables DRAM cells to be produced in incredibly small sizes, measured in nanometers (nm) – billionths of a meter. DRAM is already being produced at 25nm and Samsung is even offering production at 20nm, the same size as a ribosome in a living cell. Inotera says it is ramping up 20nm DRAM for production launch this year.

But DRAM is dynamic, meaning that its capacitors must be refreshed with electric current 20 times per second 24

to retain their information, whether the device is operating or not. This fact explains why completely draining your cellphone of power will permanently disable it, and why as DRAM becomes smaller and memory modules denser, power consumption increases.

Increased power consumption has consequences for both mobile devices that rely on batteries and for big data centers that already consume vast amounts of energy. “That’s why we’re looking for an alternative” to DRAM, says Kao Ming- Jer, Deputy General Director of the Electronics and Optoelectronics Research Laboratories at Taiwan’s Industrial Technology Research Institute (ITRI). Researchers there are focusing on developing Mag-

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Micron CEO Mark Durcan calls on President Ma during a February 2014 visit to Taiwan. The U.S. company is now one of the largest foreign investors in Taiwan. photo : cna

past,” says Inotera’s Meikle. “A more diverse set of applications and fewer players supplying into those applications absolutely should lead to more stable markets.”

Potential risks include a potentially worsening global economy and the sudden introduction of a new, game-

netoresistive RAM (MRAM) and Resistive RAM (RRAM).

Both MRAM and RRAM are nonvolatile memories like solid state drives (SSD) or hard disks, meaning that retaining data doesn’t require electricity. Instead, MRAM stores memory on magnetic storage elements that never need refreshing.

But equally important, MRAM has performance, access speed, and endurance that rivals or even surpasses DRAM, making it “possible as a working memory replacement for DRAM,” says Kao. MRAM technology is already being developed by various companies seeking the next big wave in memory products, including Freescale, a spinoff of U.S. tech giant Motorola, and Samsung. Dr. Kao says MRAM is already considered a post-DRAM technology, and ITRI hopes to spur innovation in MRAM. ITRI is also playing a major role in devel-

changing technology. Meikle therefore sees no room for complacency. “It’s a good situation, but that doesn’t mean you can sit back and put your feet up,” he says. “We have to be as aggressive as ever on technology, and we have to make sure we are producing high-quality devices for the markets.”

oping RRAM technology. RRAM are “memristors” – memory resistors – that is, passive, two-terminal electronic devices that when turned on, are capable of remembering the last resistance they had when shut off, thereby enabling them to retain their stored information. According to DigitalTrends.com, instead of using electrons to produce electrical charges, RRAM stores data using ions (charged atoms) to create different levels of resistance. Research indicates that RRAM consumes less energy while generating performance equal to or better than current technologies. U.S. tech startup Crossbar has created a postagestamp-sized memory device capable of storing a terabyte’s worth of data. ITRI holds a number of patents in RRAM. While both MRAM and RRAM are promising technologies, they are not quite ready for market. They require different materials than are typically used in semi-

（3.25億美元）取得65%股份，買下 總部位於新竹的瑞晶，是爾必達併 購案的一部分。陳正坤表示，後來 美光的持股不斷增加，如今已擁有 98%股份（其餘為員工持有），讓 美光「就技術和生產觀點而言更具 彈性」。 至於未來，幾乎所有DRAM業人士 都預測，這個過去波動不斷的產業 會步入持久的穩定期。這個產業的 業者因整合而減少，不需要也不想 要擴充生產線。美光透過爾必達和 台灣的併購案，讓產能增加一倍， 不需再進一步擴張。三星靠G a l a x y 系列手機成為排名數一數二的DRAM 客戶，同樣沒有提高製造產能的動 機，否則就會讓蘋果（Apple）等競 爭對手購買DRAM的成本降低。 華亞科的梅國勳說：「情況已不 同於過去。」「應用更多樣化，供 應的業者卻減少，絕對會讓市場更 穩定。」 “D R A M產業面臨的潛在風險， 包括全球經濟可能惡化、突然推出 改變市場遊戲規則的新技術等。因 此梅國勳認為業者不應自滿。他 說：「情勢不錯，但不代表業者可 以鬆懈。」「對於技術，我們必須 像以往一樣積極，必須確定我們為 市場生產的是高品質裝置。」

conductor fabrication, and work is still underway on developing the new materials that will function best, Kao observes.

As the leading R&D center in Taiwan, ITRI was at the forefront of the DRAM industry and had already spun off a DRAM maker as early as 1995. But instead of employing indigenous technology, the local DRAM industry relied chiefly on licensing its know-how from abroad.

Kao says he hopes that Taiwan can strengthen its role in high-tech manufacturing through next-generation technologies like MRAM and RRAM. Taiwan already has a “very efficient ecosystem in the semiconductor foundry model,” he says. If these very high-performance non-volatile memory technologies can be utilized, he continues, it will be “a very important step for all of Taiwan’s high-tech industry.”

— By Timothy Ferry

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AdvertoriAl

Medtronic Named One of “Best Workplaces in Greater China 2013”

M

edtronic, the world leader in medical device technologies and therapies, was one of three multinational companies selected by the Great Place to Work® Institute for inclusion on its list of the “Best Workplaces in Greater China 2013.”

“Medtronic Greater China has been working hard to improve our workplace over the past year, and the ranking is proof that our efforts have paid off,” said Chris Lee, the President of Medtronic Greater China. “Our people are proud of working with the company. Medtronic wants to be recognized as an excellent employer to help us attract and retain the best talent.”

With a total of about 3,000 employees working in 16 offices in mainland China, Hong Kong, and Taiwan, Medtronic Greater China has been enjoying strong growth in its specialty sectors of cardiovascular, orthopedic, diabetes, neural modulation, and surgical technologies. The company’s management has been striving to improve employees’ working environment and benefits, and to improve the well-being of employees, for example by introducing a more flexible remuneration system.

Medtronic (Taiwan) Ltd. 2F, 2 DunHua South Road, Section 1 Tel: +886-2-2183-6000 Fax: +886-2-2752-3668

The Great Place to Work® Institute, with headquarters in San Francisco, is a global research, consulting and training organization that helps businesses, non-profits, and government agencies identify, create and sustain great workplaces through the development of high-trust workplace cultures. The Greater China 2013 awards ceremony was held on December 19 and the list of award winners was published on December 23.

“Great workplaces are built through the day-to-day relationships that employees experience – not a checklist of programs and benefits,” the Institute notes. “The key factor in common in these relationships is TRUST. From the Employee’s perspective, a great workplace is one where they TRUST the people they work for, have pride in what they do, and enjoy the people they work with. Trust is the defining principle of great workplaces – created through management’s credibility, the respect with which employees feel they are treated, and the extent to which employees expect to be treated fairly.”

From the Managers’ perspective, the Institute adds, “a great workplace is one where they achieve organizational objectives with employees who give their personal best and work together as a team / family in an environment of trust.”

The Institute measures trust in two ways. It assesses the culture of the organization through answers provided on an employee survey known as the Trust Index © survey, which is modeled on the five dimensions of employee views of a great workplace. It also looks at the workplace through a Culture Audit© organized by the nine practice areas in the management definition of a great workplace.

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TAIWAN busINess

Compensation and Hiring Trends 2013-14 A Bó Lè Associates survey enables comparisons between Taiwan and overall trends in various sectors.

I

n line with the general trend across the region, most companies in Taiwan (69%) surveyed in the last quarter of 2013 as part of Bó Lè Associates’s Annual Regional Client Survey for 2013/14 said they were planning to offer employees one to three months’ s a l a r y a s y e a r- e n d b o n u s e s . B u t employers in Taiwan were more cautious than their counterparts around the region about the prospects for increasing their employees’ base salary this year, with the majority of companies saying they are looking to increase it by less than 5%.

The survey found exceptions to that finding, however, when it comes to prospective salary increases for midsenior level employees in Taiwan in the Electronics & Electronic Equipment industry, as well as senior-level personnel within the Architecture, Construction & Property category. Of the respondents from Taiwan’s Electronics & Electronic Equipment industry, for example, 57% said they plan to raise their mid-senior level executives’ base salary by 10-15% this year, whereas only 17% of respondents around the

28

3 HR.indd 28

region were expecting to make salary increases in that range. While only 3% of regional employers within the Architecture, Construction & Property sector reported plans to increase their seniorlevel executives’ base salary by more than 20%, half of Taiwanese employers within that sector said they plan to do the same.

Bó Lè, a leading executive search firm in Asia with a network of 16 offices throughout the region, surveyed more than 980 top-level decision makers from across industries and markets to better understand compensation and hiring trends as well as different companies’ usage of social media. According to Bó Lè, the respondents were all chosen because they take an active talent-management role in their respective companies, and 71% of them hold top management positions, including Heads of HR, HR Directors, CEOs, COOs, Country Managers, and Managing Directors. By size, 83% of the respondents are with companies with over 5,000 employees; 42% are MNCs and 41% are local conglomerates.

At the request of Taiwan Busi-

ness TOPICS, Bó Lè extracted the information provided by Taiwanese respondents to compare and contrast it with the responses from the Asia Pacific region as a whole. The data was broken by the following industry categories: Professional Services; Architecture, Construction & Property; Financial Services & Insurance; Natural Resources & Energy; Consumer; Electronics & Electronic Equipment; Food & Beverage; Healthcare; Industrial; IT&T; Manufacturing; and Others.

The survey showed that similar to the practice of most companies in the region, Taiwan corporations’ most frequent method of filling executive-level positions is by promoting internal candidates, followed by outsourcing the process to executive search firms. Region-wide, 9% of the surveyed respondents indicated that they will institute a hiring freeze this year, with that expectation highest within the Consumer Products sector (14%).

In Taiwan, the proportion of respondents saying their company expected to put a hiring freeze into effect in 2014 was 17%, almost double the overall

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TAIWAN busINes s

regional level. The sector in Taiwan with the largest number of respondents forecasting a hiring freeze was Architecture, Construction & Property with 67%.

Across all industries, both regional respondents and those from Taiwan said they regard mid-senior level positions as the most difficult to place, followed by C-suite positions (the top jobs, with a Chief or “C” in the titles).

In the Natural Resources & Energy industry, both regional and Taiwan survey-takers responded that placing C-suite positions is the most difficult.

Following is a rundown of the survey questions and the major findings:

EXPECTED BONUSES FOR 2013

1. How much are employers planning to compensate their employees in terms of bonuses for their overall performance across industries in 2013?

• The majority of respondents in the region (70%) and Taiwan (69%), across all industries, expect to give one to three months’ salary in terms of bonuses.

• At 58%, the largest concentration of Taiwanese employers who said they were most likely to give out three to six months’ salary as bonuses could be found in the Architecture, Construction

EXPECTED SALARY INCREMENT FOR ALL EMPLOYEES GOING INTO 2014

Asia Pacific

Asia Pacific

1% 4%

2%

7%

9%

16%

3%

16% 48% 70%

24%

Taiwan

Taiwan

6% 14%

11%

69%

3% 1% 3%

38%

55%

No Bonus

Pay Cut Expected

1-3 months' salary

No Increment

3-6 months' salary

Less than 5%

6-9 months' salary

5%-10%

9-12 months' salary

10%-15%

More than 12 month's salary

15%-20% More than 20%

& Property industry.

• At 50%, the largest concentration of Taiwanese employers who said they expect to give out six to nine months’ salary as bonuses was in the Electronics & Electronic Equipment industry.

2. How much are employers planning to adjust compensation in terms of base salary across industries for the beginning of 2014 (based on performance reviews for 2013 and inflationary adjustments)?

• 48% of overall respondents across all industries indicated that they are most likely to increase their employee’s base salary increments by 5-10%, while 55% of respondents in Taiwan said they are most likely to increase it by less than 5%.

• Relatively few (3%) of respondents from Taiwan expect to increase employees’ base salary by more than 10%, whereas 26% of respondents around the region said they had such an expectation.

3. How much are employers planning to adjust the compensation of their mid-senior level executives (Senior Managers – Directors) in terms of base salary for 2014?

• Across all industries, 45% of respondents around the region indicated that they are most likely to increase their mida n d s e n i o r- l e v e l ex e c u t i v e s ’ base salary by 5-10% this year, whereas the same percentage of respondents from Taiwan said they plan to increase it by less than 5%.

• 57% of respondents within the Electronics & Electronic Equipment industry in Taiwan said they plan to increase their midand senior-level executives’ base salary by 10-15%. Region-wide, only 17% of respondents in the sector were planning increases in that range.

• Even though 23% of regional

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2014/3/7 11:02:45 AM

TAIWAN busINes s

EXPECTED SALARY INCREMENT FOR MID-SENIOR EXECUTIVES GOING INTO 2014

EXPECTED SALARY INCREMENT FOR SENIOR EXECUTIVES

Asia Pacific

Asia Pacific 1%

2% 3% 6%

4% 4% 5%

20%

17% 38%

45%

24%

Taiwan

1%

31%

Taiwan 3%

2%

14%

14%

37%

43% 45%

Pay Cut Expected No Increment Less than 5% 5%-10% 10%-15% 15%-20% More than 20%

respondents in the Information Technology & Telecommunications (IT&T) industry plan to increase their mid- and seniorlevel executives’ base salary by 15-20% this year, none of the respondents from Taiwan in that sector said they plan to do the same.

4. How much are employers planning to adjust the compensation of their 30

3 HR.indd 30

4% 5%

32%

Pay Cut Expected No Increment Less than 5% 5%-10% 10%-15% 15%-20% More than 20%

top-level executives (CEOS, CFOs, GMs, MDs, etc.) in terms of base salary for 2014?

• 38% of regional respondents across all industries said they are most likely to increase their toplevel executives’ base salary by 5-10% this year, while 31% said they will increase it by less than 5%.

• 4 3 % o f r e s p o n d e n t s f r o m Taiwan across all industries indi-

cated that they are most likely to increase their top-level executives’ base salary by less than 5%, followed by 32% who indicated that they will increase it by 5-10%.

• While regionally only 3% of employers in the Architecture, Construction & Property industry are planning to increase their top-level executives’ base salary by more than 20% in 2014, 50% of employers in that sector in Taiwan plan to do so.

5. What channels did industries use most commonly for executive-level hiring in 2013?

• 20% of regional respondents said they rely on executive search firms to carry out their executive-level hiring, compared with 24% of respondents in Taiwan.

• Companies across all industries from around the region as well as Taiwan most often fill their executive-level positions by promoting internal candidates, followed by outsourcing the process to executive search firms.

• All industries both region-wide and in Taiwan rate social media as the least important channel for executive-level hiring.

6. What adjustments in headcount are being planned for 2014?

• 2 3 % o f s u r v e y e d r e g i o n a l respondents expect to increase their headcount by over 10% this year, with 17% of Taiwan respondents expecting to do the same.

• 9% of regional respondents said they expect to institute a hiring freeze; by sector, the highest percentage (14%) was in the Consumer Industry. The proportion of respondents in Taiwan saying they expect to implement a hiring freeze, at 17%, was almost double the regional level; by sector, the highest percentage (67%) was in the Architecture, Construction & Property industry.

taiwan business topics • march 2014

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TAIWAN busINes s

HIRING EXPECTATIONS IN 2014 BY INDUSTRIES - TAIWAN 80 70 60 50 40 30 20 10 0

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7. What level of positions do companies find most difficult to place?

• Both regional respondents and those from Taiwan, across all industries, said mid- and seniorlevel positions are the most difficult to place, followed by

C-suite positions.

• 32% of regional respondents from the Financial Services & Insurance, Industrial, and IT&T industries said they find seniorlevel positions the most difficult to place. 34% of Manufacturing

respondents regard senior-level positions as the hardest to fill.

• Respondents both regionally and in Taiwan from the Natural Resources & Energy sector say placing C-suite positions is the most difficult.

taiwan business topics • march 2014

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in government circles

New Ministry’s Role Combines Health and Welfare Given Taiwan’s rapidly aging population, MOHW will face a number of diverse challenges.

BY PHILIP LIU

I

n one of the latest rounds of the central government’s reorganization plan, the Ministry of Health and Welfare (MOHW) came into being last July – essentially upgrading the Cabinet-level Department of Health (DOH) and adding certain welfare responsibilities.

The new ministry has the mission of fostering a healthy population and erecting a complete social safety net – an increasingly important role given the aging of Taiwan’s population. In addition to the original duties of the DOH, MOHW takes on social welfare functions – mainly affairs relating to women, children, senior citizens, and the infirm – that previously came under the jurisdiction of the Ministry of Interior (MOI).

Following the expansion, the Ministry now has 12,000 employees and an annual budget of NT$111.6 billion (US$3.7 billion), an increase of 1,373 people and NT$36 billion (US$1.2 billion) from the operations of the DOH. It includes five first-tier agencies: the Social and Family Affairs Administration, Centers for Disease Control, Food and Drug Administration, Health Promotion Administration, and National Health Insurance Administration (the former Bureau of National Health Insurance).

Also under its auspices are 26 hospi32

3 gov.indd 32

tals originally run by the DOH and 13 social-welfare institutions that used to be under the MOI. It oversees the National Health Insurance program, which has an annual budget approaching NT$600 billion (US$20 billion), and the national pension program.

At the MOHW inauguration ceremony, President Ma Ying-jeou called on the Ministry to provide all-around physical and psychological care for the Taiwan population, eliminating the syndrome in which people “become poor due to sickness and get sick due to poverty.” Premier Jiang Yi-huah noted that the Ministry was set up to enhance health and social welfare in view of the ongoing demographic shift in Taiwan characterized by fewer children and more elderly. Chiu Wen-ta, the former DOH minister who now heads MOHW, said he will approach the job based on the “fundamental concept of justice and compassion.”

The Ministry will be confronted with multiple formidable challenges. One primary task is the establishment of a long-term care system, for which there is a dire need in Taiwan.

Of the 200,000-some aged persons suffering from dementia, 80% are cared for by their families, a burden that greatly disrupts their relatives’ daily life. There are also 710,000 inca-

pacitated persons – defined as those confined to their beds for six months or more – including 450,000 who are aged 65 or more. The number of bedridden people is expected to reach 1.18 million by 2031.

To meet these needs, Taiwan has only a little over 1,000 long-term care institutions, grossly insufficient to meet the demand. Long-term-care nursing personnel are also in serious shortage. Established institutions, especially the government-run facilities with a capacity for accommodating several thousand patients each, are greatly overstrained by the demand.

In response, DOH/MOHW opened 63 government-run nursing homes in 2013, bringing the total to 120 at year-end. In addition, it is setting up medium-term-care wards at hospitals under its management to provide a maximum of three months of care for senior citizens between their hospital treatment and their return home. Families will have to bear the hospitalization cost themselves, although the National Health Insurance program pays for the treatment and rehabilitation therapy.

The Ministry is also promoting the establishment of community service for dementia patients as part of a nationwide long-term-care service network for which it plans to seek additional budget

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in government circles

of NT$1 billion (US$33 million).

“We aim to increase the amount of long-term caretakers to 38,000 by 2016, up from the existing 19,000,” Minister Chiu said in an interview.

“We will raise the pay and improve the working environment, as well as the job dignity, for such workers, in order to enhance the people’s willingness to take these jobs. Over the past years, we have trained 90,000 persons for this role, but only 22% of them actually entered the profession.”

Long-term-care system Ultimately MOHW aims to put a national long-term-care system in place.

The Legislative Yuan’s Social Welfare and Environmental Hygiene Committee passed the necessary legislation on January 9, paving the way for implementation of the system in 2015. The new law calls for consolidating the existing nursing houses for aged citizens over a five-year period, after which uncertified institutions will be forced to shut down. Besides foreign caretakers employed by local people themselves, long-term-care institutions will also dispatch trained foreign caretakers to provide home care for payment on an hourly basis.

Another feature of the law is to cultivate long-term-care nursing manpower.

After receiving vocational training and passing a certification test following their entry into Taiwan, foreign caretakers will be able to be employed by long-term-care institutions. A support system, including home visits and psychological assistance, will also be created to help those caring for their relatives themselves.

In addition, MOHW has drafted a Long-Term-Care Insurance Law that Minister Chiu says he hopes the Legislative Yuan will enact this year to enable the program to be implemented in 2016. The bill calls for establishment of a compulsory insurance program, similar to the National Health Insurance program, whose premiums will be shared by the government, employers, and the insured. “The establishment of a comprehensive network for the care

INAUGURAL CEREMONY — Minister Without Portfiolio Simon Chang presides over the installation of Chiu Wen-ta as head of the new Ministry of Health and Welfare, as President Ma Ying-jeou and Premier Jiang Yi-huah look on. photo : cna

of senior citizens has the highest priority on my agenda,” says Chiu.

Under the proposed bill, the amount of payment to long-term-care patients will depend on the seriousness of their condition. The biggest challenge will be financing the program, which is estimated to require NT$70 billion-$130 billion (US$2.3 billion-$4.3 billion) in the first year, around one-fifth the scale of the National Health Insurance program. In the future, the National Health Insurance program would transfer around 15% of its total outlays to the long-term care insurance program.

Another primary task of MOHW is to maintain the viability of the National Health Insurance program, which has become Taiwan’s most important social safety network and the envy of many nations worldwide. The program appears to have obtained a respite from its once formidable financial problem, thanks to the implementation of the second-generation NHI program from January 1, 2013. That initiative introduced supplementary premiums levied on non-salary incomes at a 2% premium rate, which generated over NT$33 billion (US$1.1 billion) in income in 2013. Stock-market investors contributed the most (NT$4.2 billion), followed by high prize-money winners (NT$2.44 billion), and landlords

(NT$1.67 billion).

As a result, NHI ended up with a surplus of NT$83 billion (US$2.77 billion) in 2013, which has been placed in a reserve fund, and the government has been able to keep the premium rate unchanged at 4.91% in 2014.

Long-term, however, the existence of extensive wastage in the system is said to continue to pose a serious problem for NHI, and to be a major factor in the steady rise in expenditures.

Per capita medical outlays increased by 85% between 1996, the first full year of the NHI program’s operation, and 2011, when they reached the equivalent of US$1,332. Due to that rapid increase and the slower growth in the program’s budget, the insured have been forced to bear an ever larger share of their medical bills. That share came to 36.3% in 2011, up from 26.4% in 1996.

Minister Chiu, however, says he is optimistic about the outlook for NHI’s finances. “Given the reserve fund of NT$83 billion, the program can remain financially solvent until 2016, perhaps even 2017. In addition, we have set up a rate adjustment committee, which can adjust the premium rate in line with the financial state of the program,” he notes.

Another major task for the Ministry is to bolster the national pension

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in government circles

program, established in 2008. In the first nine months of 2013, the premium payment rate stood at only 47% (there is no penalty for non-payment), a far cry from the 70% in its first year of operation. Younger people seem less interested in participating. For those in the 30-34 age bracket, for example, the premium payment rate was only 35%, compared with 70-80% in the 60-64 age group. But Chiu says he is confident of the program’s viability, noting that the monthly income came to NT$6.6 billion (US$220 million) during the first 11 months of 2013, well above the outlay of NT$28 billion (US$933 million). The size of the national pension fund reached NT$168.2 billion (US$5.6 billion) as of the end of 2013, and is expected to hit NT$957 billion (US$31.9 billion) by 2050. Even if the premium rate remains unchanged at the existing 7.5%, the program can remain solvent for more than 30 years, according to Chiu.

Food safety issues As the guardian of the people’s health, MOHW also concerns itself with food safety, an issue of great public concern, especially following the outbreak of several major food safety incidents in recent years. The latest such storm occurred in October last year with the outbreak of the “edible oil scandal.” Chang Chi Foodstuff Factory, a leading edible-oil manufacturer, was found to be selling a mixture of low-cost sunflower seed oil and cottonseed oil, and passing it off as 100% pure premium olive oil. The company even added copper chlorophyll to the product to make the color resemble that of pure olive oil.

The seriousness of the incident expanded when it was found that Chang Chi for years had been supplying the fake olive oil to other companies, including the Ting Hsin Factory, which resold it to an affiliated foodstuff firm, Wei Chuan, a well-known manufacturer listed on the Taiwan Stock Exchange.

An extensive check carried out by MOHW then discovered that many other brands of high-end edible oil were 34

3 gov.indd 34

Chiu Wen-ta continues to lead the organization following the Department of Health's elevation to become the Ministry of Health and Welfare. photo : wikipedia

actually mixed to various extents with lower-grade oil.

Amid widespread public outrage, the Changhua County health bureau fined Chang Chi NT$28.6 million (US$983,000), a record high amount for a food-related offense in Taiwan, and ordered its factory to stop production.

In addition, the Changhua district court sentenced Chang Chi chairman Kao Chen-li to a 16-year prison term, plus a fine of NT$50 million (US$ 1.7 million).

In the wake of the controversy, MOHW launched an investigation of 13 food products most vulnerable to safety problems, including edible oil, soy sauce, milk, tea, honey, rice, and eggs, with the aim of removing problem products from the market within one year. In addition, the Legislative Yuan has amended the Food Sanitation Act to require producers of some food products to send their materials or additives to government laboratories or third-party laboratories for examination regularly. The revised law also increases the penalties for food-related offenses to a maximum fine of NT$15 million (US$500,000), up from the original NT$6 million (US$200,000), and adds a provision for up to three years’ imprisonment. “We are determined to root out food irregularities through these severe penalties, which are comparable to the penalties in the U.S. and Europe,” says Minister Chiu.

“Under the revised law, a food company engaging in irregularities could be forced to go bankrupt.”

Another aspect of MOHW’s work is the mandate of its Health Promotion Administration, which aims by 2020 to double the number of people who exercise regularly, while halving the rates for smoking and betel-nut chewing and cutting the number of cancer-caused deaths by 20%. To help achieve the goal, MOHW has announced a ban on smoking, except in specially designated zones, in national parks and other scenic areas, effective April 1 this year.

It will also intensify its anti-smoking campaign, especially among teenagers.

Currently, 8% of junior high school students and 14% of senior high students are smokers.

The Health Promotion Administration will also step up efforts to encourage people aged 50-74 to undergo free screening for colorectal cancer, the third most prevalent type of cancer in Taiwan, once every two years.

The screening rate for the cancer is now only 38%, compared with 60% for oral cancer, 57% for breast cancer, and 48% for cervical cancer.

In view of the increasingly serious obesity problem among children, the Ministry has also decided to ban TV commercials aimed at children for snack foods and fast foods featuring high contents of oil, sugar, and salt.

Provisions were included in the recently amended Food Sanitation Act. Assistance to the underprivileged, another role of the Ministry, is mainly undertaken mainly by the Social and F amily A ffair s A dmin i st rat i on. It helps provide community-based services needed by women, children, aged citizens, and the handicapped. In a continuation of what was DOH policy, MOHW will seek to narrow the gap between the level of medical services available in urban and rural areas, which has an impact on the difference in their life expectancies. Although nationally life expectancy stands at 79.15, the figure in Taipei is 82.7, eight and a half years more than the 74.3 in the eastern county of Taitung. Chiu says the Ministry will strengthen the practice of preventive medicine in remote areas by improving living habits and enhancing health awareness.

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in government circles

Restructuring the Executive Branch

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stablishment of the Ministry of Health and Welfare (MOHW) in July 2013 was only one of a series of steps being carried out to complete reorganization of the Executive Yuan before the end of this year. Under the plan, the number of Cabinet-level organizations is set to be cut from 37 to 29. The changes are occurring in stages as the Legislative Yuan passes each piece of enabling legislation.

The first major restructuring occurred in May 2012 when the Council of Cultural Affairs was upgraded to become the Ministry of Culture. The MOC incorporates most of the now-defunct Government Information Office (GIO), as well as various cultural institutions originally affiliated with the Ministry of Education, including the Sun Yat-sen Memorial Hall, Chiang Kai-shek Memorial Hall, National Chiang Kai-shek Cultural Center, National Museum of Prehistory, and National Museum of History.

With a workforce of 557, the MOC oversees seven departments, including general planning, cultural resources, cultural innovation and development, motion pictures, popular music, artistic development, and international exchanges. Minister Lung Ying-tai, a well-known author, likened the establishment of the Ministry to a thorough re-engineering, involving the overhaul of both hardware and software, revamping of regulations, recompilation and files and data, reinstallation of electrical machinery systems, and the replacement of logos.

In January 2014, the Ministry was relocated to a newly completed central-government building complex in the Xinzhuang district of New Taipei City that will house 13 different agencies. Many public functionaries have complained about the inconvenience of the new location, as service for the area by the airport MRT line and the ring line of greater Taipei’s MRT system won’t be ready for another two to three years. The situation is especially serious for the MOC, since it constantly has to convene meetings with members of local cultural circles.

Lung says that the primary task of the MOC is to lay a solid institutional foundation for the long-term development of the nation’s culture. She pledges to help local cultural businesses with their marketing efforts to help them maintain long-term viability.

Drawing on her former experience living in a small German town, she calls for extending cultural activities to rural areas and help grass-roots cultural businesses carry out international exchanges.

More recent steps in the government reorganization plan have included: • Creation of the National Development Council this January by combining the Council for Economic Planning and Development (CEPD), the Executive Yuan’s RDEC (Research, Development and Evaluation Commission), and a portion of the Public Construction Commission. CEPD Minister Kuan Chung-ming was retained in office as head of the new NDC. • Elevation of the Council of Labor Affairs in February to

become the Ministry of Labor (MOL), with Pan Shih-wei continuing as the Minister. The Ministry is responsible for labor force development policy and its implementation.

• Formation in early March of the Ministry of Science and Technology (MOST), combining the former National Science Council with related organizations. Minister without Portfolio Simon Chang, a onetime Google executive, was appointed Minister. Several years ago, when an earlier version of the reorganization plan lacked inclusion of a Ministry of Science and Technology, AmCham argued that such an organization was vital for a tech-oriented economy such as Taiwan’s.

Still to come are revamping of the Ministry of Economic Affairs into the Ministry of Economic and Energy Affairs, and the Ministry of Transportation and Communications into the Ministry of Transportation and Construction. In addition, the Council of Agriculture will be transformed into the Ministry of Agriculture, and the Environmental Protection Administration and other agencies dealing with environmental resources will be merged to form the Ministry of Environment and Natural Resources.

In addition, the Cabinet-level Atomic Energy Council will become the Nuclear Security Commission, rather than an administration under MOST, as was originally planned, in order to maintain its operational independence. But the Commission will be a third-tier agency under the Executive Yuan, since the organic law for restructuring the Executive Yuan has capped the number of Cabinet-level bodies. Also in the pipeline is establishment of the Commission of Oceanic Affairs, which will mainly take over the Cabinet-level Coast Guard Administration but will also encompass the Fisheries Agency, now part of the Council of Agriculture.

The restructuring calls for some Cabinet-level agencies to be dissolved, including the Sports Affairs Council, which has become the Sports Administration under the Ministry of Education; the National Youth Commission, most of which has become the Youth Development Administration, also under the Ministry of Education; the Public Construction Commission, which will mainly be incorporated into the Ministry of Transportation and Construction; the and Mongolian and Tibetan Affairs Commission, to be integrated into the Mainland Affairs Council.

— By Philip Liu and Don Shapiro

The building on Taipei's Ta C h e n g S t r e e t t h a t serves as the MOHW headquarters. photo : wikipedia

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Catering to the Shoppers

photo : courtesy of shinKonG mitsuKoshi

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Department Stores Focus on Renovation and Dining Options The strategy for responding to increased competition from other retail channels includes giving more space to restaurants and innovative products.

IN THIS SURVEY

BY PHILIP LIU

• Department Stores Focus on Renovation and Dining Options p38

• Convenience Stores Want Customers to Stay Awhile p42

• Rapid Growth in E-Commerce, Whether B2B, B2C, or O2O p45

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aced with major changes in their business environment – including the emergence of online shopping, growing competition from other retail outlets, and a tendency for consumers to look for lower-cost alternatives – department stores in Taiwan have been putting more investment into the renovation of their facilities in recent years. In particular, they have been expanding the space devoted to food-and-beverage outlets and seeking to develop distinct business features as means of sustaining growth.

Last fall, two major department stores prepared for their anniversary sales campaigns, the most important business season of the year, by undertaking renovations aimed largely at making way for well-known restaurants to set up operations.

Shinkong Mitsukoshi, the industry leader, invested several hundreds of millions of NT dollars last year in renovating seven of its 13 branches throughout Taiwan, with strengthening the appeal of its dining service as a focal point. Four premier res-

taurants, including the Sheraton Hotels and Resorts Group’s “Sukhothai” Thai restaurant, opened in October on the sixth floor of Hall A4, one of the four stores in the department store’s Xinyi Place complex in the Xinyi District. The dining area occupies the floor’s entire space of over 300 pings (10,800 square feet). The four new establishments joined several major restaurants already enjoying brisk business in the Shinkong Mitsukoshi complex, including American restaurant GB (Gordon Biersch) and Taiwanese-cuisine Shinyeh, both registering annual sales exceeding NT$100 million (US$3.3 million).

In addition to renowned restaurants, Shinkong Mitsukoshi also attracted such popular domestic snack operations as 8% Ice Cream and Melange Café, which is famous for its pancakes, to open shops at Xinyi Place.

Similarly, Pacific Sogo, the second largest department store group, last year also welcomed some famous F&B operations – such as the Tien

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Hsiang Lo restaurant of the Landis Taipei and steakhouse Café Onion – to its store on Taipei’s ZhongXiao Road.

For its part, Breeze Center last September brought Laduree, the renowned Paris retailer known for its macaron confections, into its main store on Taipei’s FuXing South Road. The shop has frequently been the site of long queues of customers ever since, despite the macarons’ expensive price of NT$98 (US$3.30) apiece.

In placing greater emphasis on dining opportunities, the moves have come in response to the tendency among many consumers of going to department stores primarily to enjoy tasty foods, with shopping becoming a subordinate activity.

“People don’t buy clothes every day, but they have to eat every day,” explains an industry insider. As a result, F&B has been accounting for a growing share of local department store sales. “Dining now contributes to 20% of our gross profits, up from less than 10% in the past,” notes Hsu Hsueh-fang, president of Far Eastern Department Stores.

Q Square, near the Taipei Railway Station, derives a full one-third of its revenue from dining.

At the same time, restaurants and other food outlets are increasingly interested in opening shop within department stores because of the business opportunities those locations represent. They have been encouraged by the successful precedents, notably the booming business of the Din Tai Fung Dumpling House branches at Pacific Sogo stores, although the department stores take a cut of 10 to 20% of their sales in exchange for the space.

In another recent trend, some of Taiwan’s department stores have been seeking to spotlight innovative local cultural products. When the Taoyuan branch of Far Eastern Department Stores last year invested NT$100 million (US$3.3 million) in the largest refurbishing of its floor space since its inauguration 14 years ago, for instance, the main objective was to install a special section for the display of clothes created by indigenous young designers.

Another example was Shinkong Mitsukoshi’s launch in December last year of

a branch on Ximen Road in the southern city of Tainan, positioning the establishment as a “culture-oriented store” in line with the city’s historic and cultural background. Aside from a large theater for cultural events and an ice-skating rink, the branch sets aside one-third of its space for dining and entertainment and offers a wide selection of Taiwan-made creative and cultural products. In addition, Shinkong Mitsukoshi maintains a total 5,000 pings (180,000 square feet) of floor

space at its stores islandwide dedicated to cultural exhibitions or performances.

Eslite Group, known for its bookstores, last year kicked off its first department store, Eslite Spectrum Songyan Store, in Taipei’s Songshan Cultural Park. Among its 100-some offerings are indigenous brands of customized bicycles, custom-made clothes, wooden products, organic oil products, handmade soaps, and glass products produced with an onsite kiln.

Food outlets, such as the the one at a Japanese restaurant in Xinyi Place of Shinkong Mitsukoshi, have become a major attraction of Taipei's department stores. photo : shinKonG mitsuKoshi

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Luxury goods still the mainstream Yet another objective of the department stores’ refurbishing has been reinvigorating their mainstream luxurygoods business. When it redecorated its first and second floors, as well as basement 1, Pacific Sogo’s Fuxing branch on Taipei’s ZhongXiao East Road increased the number of outlets of luxury-goods brands from 13 to 21. Last year the luxury-goods sales reached NT$2.7 billion (US$90 million), up from 2012’s NT$2.5 billion (US$83.3 million), and the amount is expected to hit NT$3.3 billion (US$110 million) in 2014.

Wu Hsin-yang, executive vice president of Shinkong Mitsukoshi, notes that in 2012 and 2013, the department store refurbished 40 floors as part of its effort to constantly repackage and renew its operation. The strategy is to satisfy consumers in ways that online shopping cannot – by providing a personal experience, cozy shopping space, and the chance to dine out. Wu Tung-hsing, the company chairman, says that “nowadays department stores have to provide a happy atmosphere, keeping customers with entertainment and dining.”

Thanks to the investment in renovation, the major department stores all managed to attain their sales goals for their anniversary sales last fall, making up for the decline in business in the first three quarters and enabling full-year sales to match 2012 levels. At Shinkong Mitsukoshi, for instance, sales tumbled 3% year-on-year in the first eight months. But customers returned in swarms for the anniversary sales campaign to take advantage of the various incentives, notably gift vouchers – often amounting to 10% of the purchase value – on spending exceeding a certain amount (typically NT$5,000) in a given day.

Attracted by additional deep discounts of as high as 60%, many women purchased enough cosmetics products to last the entire year. Wealthy persons engaged in a shopping spree, mainly for jewelry, gold, chinaware, and other luxury goods – in many cases for amounts exceeding NT$1 million.

Shinkong Mitsubishi reports that during the 15-day anniversary sales

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campaign last year the total sales at its 13 branches grew 3% year-on-year to NT$17.7 billion (US$590 million), equivalent to nearly one-quarter of annual sales. Although the number of customers increased only slightly, the value of purchases per customer rose by 11%. Sales of small home appliances such as electronic cookers jumped the most – by over 30%.

For 2013 as a whole, Shinkong Mitsukoshi’s sales remained flat at NT$74 billion (US$2.5 billion), but that was enough for it to remain the market leader.

The seven branches of Pacific Sogo took in NT$41.5 billion (US$1.4 billion), up 1.7%, and the 10 branches of Far Eastern Department Stores, an affiliate of Pacific Sogo, registered NT$39.7 billion (US$1.3 billion), up 1.4%. Breeze Group stood at fourth place with sales of NT$11.2 billion (US$373 million), up slightly over 2012.

The flat or minimal growth reflects the heightened competition department stores have been facing from other channels. Industry sources say the volume of customers at department stores has been declining at 3-5% annually in recent years, due to the increased popularity of online shopping [see the article on e-tailing in this section] and inroads made by other types of retail outlets.

To t a l s a l e s o f d o m e s t i c c o n v e nience stores rose 3.3% year-on-year to NT$253.6 billion (US$8.5 billion) in the first 11 months of 2013, for example, just slightly below the NT$262.3 billion (US$8.7 billion) for department stores. Convenience stores have started selling some simple clothing items, as well as such 3C products as TVs and tablet PCs. Hypermarkets registered sales of NT$157.2 billion (US$5.2 billion), and supermarkets NT$145.3 billion

(US$4.8 billion), up 4.6%, during the same period. Overall sales of the retail sector advanced 3% to NT$966.6 billion (US$32 billion).

Some hypermarkets, such as Carrefour, are foraying into the turf of department stores by making space to accommodate boutiques inside their stores. The craze of low-cost foreign clothing brands, such as Uniqlo and Muji of Japan and Zara of Spain, is also presenting a challenge to the major department stores. Those brands generally establish themselves in smaller department stores, since the larger ones are usually unwilling to meet their demand for several hundred pings of space and a lower-than-usual cut. Those conditions are unacceptable to large department stores, which have to consider the potential impact on their lines of fashion clothes.

Outlets add to the competition Outlet stores, which sell past-season quality products, often of well-known brands, are another emerging threat to the department stores. In contrast to the sluggish business of department stores, the sales of outlets rose 16% to NT$7 billion (US$233 million) in 2013, including NT$3 billion for the E-Da Outlet Mall in Kaohsiung, NT$2.4 billion (US$80 million) for Luna Plaza in Ilan County, NT$1.1 billion (US$36.7 million) for Leeco, which has two stores in Taipei, and NT$500 million (US$16.7 million) for Sunshine Plaza in Taichung.

Encouraged by the rosy outlook, Leeco plans to open two more stores, one in Taipei and the other in Taichung, in 2015 and 2016 respectively, and E-Da

Performance of Major Department Stores Company Shinkong Mitsukoshi Pacific Sogo Far Eastern Breeze

2013 sales

Growth from 2012

2014 goals

74 41.5 39.7 11.2

flat 1.7% 1.4% flat

76 43 40 12.5

unit: nt$ billion

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has started construction on its secondphase expansion project. Moreover, the Gloria Outlet, near the Taoyuan highspeed railway station and jointly invested in by the Gloria Hotel Group and Cathay Life Insurance, is scheduled for inauguration late this year. And a large-scale outlet is scheduled to be the centerpiece of a commercial complex to be built by Mitsui Fudosan Co. of Japan in Linkou in New Taipei City on a BOT (build-operate-transfer) basis for opening in 2017.

Both the Taoyuan and Linkou outlets will have floor space of more than 40,000 pings (1.44 million square feet). As a result, the total sales of local outlets are forecast to top NT$25 billion (US$833 million) by 2017. Industry insiders say that around 20% of those sales are likely to be achieved at the expense of department stores, especially in the categories of cosmetics and apparel.

For 2014, most department stores have set a growth target of 3%. To achieve the goal, they will continue to renovate their operations and some plan to open new stores.

Shinkong Mitsukoshi, for instance, aims for 3% growth to reach NT$76 billion (US$2.5 billion) in sales this year.

Wu Hsin-yang says the company will carry out additional renovations, as the strategy is considered to have been highly successful last year, when the number of customers at Xinyi Place jumped by 40%.

In addition, the four premier restaurants in A4 achieved per capita consumption of NT$1,500 (US$50) and helped boost the monthly dining sales of the complex by 60%. As a result, A4 expects to see its sales pass the NT$20 billion (US$666.7 million) mark this year to stay in first place among all department-store branches islandwide.

Wu further reports that the company will step up the introduction of new boutiques, as well as new sporting goods and fashion brands, replacing those with inferior performance. It will also continue to embrace the marketing strategy of featuring artistic and cultural events. The 260 such events planned for 2014 will cover a wide range, including online gaming. Over 20,000 tickets for a recent online game exhibition at Xinyi Place were sold out almost instantly

after their rollout.

In a continuation of its aggressive expansion in recent years, Far Eastern Department Stores will open the second wing of its Banqiao branch in June, adding 1,800 pings (64,800 square feet) of floor space to accommodate the expected influx of customers following the inauguration of the ring line of the Taipei MRT. Breeze Group is poised to enter Taipei’s top-class commercial district by opening a new branch in the Xinyi planned area in October. It will join the existing four branches, all in Taipei, including the flagship Breeze Center on FuXing South Road, the Taipei Main Station branch, ZhongXiao Road branch, and a branch on NanJing East Road acquired last year from the Momo Group, which gave up the physical store to focus on its TV sales channel.

Breeze projects sales of NT$12.5 billion (US$417 million) this year; more than NT$16 billion (US$533 million) in 2015 following the launch of another new store, also in the Xinyi planned area, in October that year; and NT$23 billion (US$766.7 million), after the latest store has been in operation for a full year.

Puppet master Chen Hsi-huang puts on a show at a department store. photo : shinKonG mitsuKoshi

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Convenience Stores Want Customers to Stay Awhile Among the recent innovations are seating areas, the launch of branded products, and greater emphasis on fresh foods.

BY CATHERINE SHU

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raditionally, convenience stores have aimed to get customers out the door as quickly as possible by making purchases fast and easy. But as competition among Taiwan’s convenience stores heats up, companies are thinking of ways to get shoppers to linger.

Taiwan has the highest concentration of convenience stores in the world.

According to statistics from Hi-Life, one of the main operators, this country has one convenience store for every 2,000 people, which means that companies must innovate quickly in order to keep the attention of consumers.

Four chains operate almost all of the convenience stores in the country. The biggest player in Taiwan is 7-Eleven, with 5,000 stores throughout the country.

Family Mart currently has about 3,000 locations, while Hi-Life (the only chain founded in Taiwan) operates about 1,300. OK Mart is the smallest, with fewer than 900 stores.

7-Eleven was first brought to Taiwan in 1980 by Uni-President Enterprises, which was also responsible for introducing such other retail chains as Starbucks, Carrefour, and Cold Stone ice cream. The conglomerate originally positioned 7-Eleven as a replacement for the gamadiam (柑仔店), or mom-and-pop stores selling snacks, toys, and everyday items that were once a staple of Tai-

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wanese neighborhoods.

Over the past 35 years, Uni-President has expanded 7-Eleven far beyond its original vision. Now the chain is so ubiquitous and plays such an important part in daily life that it has been referred to as Taiwan’s version of a community center.

It has been featured in books like 2009’s 7-Eleven City: Poetry, Architecture, New Communities by Shih Chien University’s department of architecture.

But 7-Eleven has not been content to rest on its throne. Three years ago, says spokesman Jonathan Chen, Uni-President saw that competition was escalating as other chains, including Japan-based Family Mart, began to expand further in Taiwan. So the company shifted its strategy and began remodeling stores to encourage customers to hang out, instead of merely shopping and leaving as quickly as possible. The first step was to build dining areas, ranging from bars with a few stools to café-like setups. More than 90% of 7-Eleven stores now have seating.

Family Mart, 7-Eleven’s main competitor, soon followed suit. The company says it plans to spend NT$10 billion (US$333 million) to build new stores and remodel existing ones. While most Family Mart stores are currently about 30 pings (1 ping equals 36 square feet) in size, its new stores will range from 40 to 50 pings, with open layouts and seating

areas. In 2013, Family Mart retrofitted 1,450 locations, about half the total number of its stores in Taiwan. Once the project is completed in 2016, Family Mart’s stores will offer a total of 60,000 seats. The chain hopes this change will allow its Taiwan revenue to grow by at least 5% per year over the next five years.

In 2010, Hi-Life also began to redesign its floor plans. The company lacks connections to the resources and distribution network of an international company like 7-Eleven, Family Mart, or OK Mart (which was originally owned by Texas-based Circle K but was spun-off in 2005), but it is proud of its local roots.

The chain’s first store opened in 1989 on Taipei’s Dihua St. Spokeswoman Chao Hsin-yi says each Hi-Life store is able to adapt to the needs of its neighborhood more quickly than its competitors. “Hi-Life’s fundamental philosophy and business strategy are different,” says Chao. “We see ourselves as a local brand and emphasize a ‘neighborhood-first’ management style.”

Each location’s services are tailored to its specific “district,” which Hi-Life defines by the people or institutions, like schools or hospitals, within it. Retrofitted stores have seating areas, public restrooms, and magazine displays, with the magazine racks placed in the middle of the store instead of against a wall. “We

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A Report on the Retail Sector want to create stores where people can come in after work or on the weekend, buy a magazine and a beverage, and stay for an afternoon,” says Chao.

“We moved from our original focus, which was purely on selling products, to how happy customers feel when they are in our stores,” she adds. “We’ve found that this approach helps shape customer behavior and can increase sales in a location by more than 25%.”

On-line services Another tactic used by convenience stores to increase return visits by customers, as well as the amount of time they spend in-store, is offering onlinerelated services, including the ability to pick up products in a brick-and-mortar location.

The biggest example of this practice is 7-Eleven’s online store, called 7-Net, which is an extension of its iBon services. iBon kiosks in all of its stores act as a “neighborhood office” for customers, who can use them to order event or travel tickets; print or copy documents; or pay utility, phone, and insurance bills, school tuition, and even property taxes. 7-Eleven says that each of its customers uses iBon an average of 22 times a year.

7-Net and iBon are supported by 7-Eleven’s extensive logistics network,

which is also used by other companies for deliveries. When online stores began gaining in popularity, the chain began offering package delivery and pickup services because it wanted to help shape consumer trends instead of just responding to them, it says. OK Mart’s OK Go payment system and OK-Net online store offer a similar combination of services, including ticket sales, bill payment, and instore pickup of goods purchased online, but on a much smaller scale.

In order to compete with other convenience store chains, Family Mart came up with several unique twists on the online-to-offline (O2O) business model.

Each of its locations has a rack with cards displaying in-demand products, including purses and tech gadgets. Customers can select a card, have it scanned, pay for it with their other purchases, and then pick the item up the next day in the same store.

While all the major convenience store chains offer purchase points that can be redeemed for discounts or collectible items, Family Mart differentiates by allowing customers to use their points in Japan and China, as well as Taiwan, a boon for frequent travelers. The company has also taken advantage of its international network to offer low-cost shipping for customers. Packages posted at Family Mart stores in Taiwan can be picked up

Through 7-Net, consumers can order products online and pick up the goods at their nearest 7-Eleven.

Packaged fresh vegetables are a popular new offering. photo : hi-life

at its stores in or around Shanghai. The company plans to expand the service to Hong Kong soon.

In order to compete with 7-Eleven and Family Mart’s online services, HiLife launched EZship in 2011, a website that holds flash sales of snacks and other household items at a steep discount. In October 2013, Hi-Life also announced a partnership with Yahoo!

Taiwan to sell items ranging from tissue paper to jewelry, all of which can be paid for and picked up at the chain’s physical locations.

One of the ways Hi-Life creates a welcoming atmosphere in its stores is by selling fresh bread and cakes, which have the added bonus of filling each location with their aroma, the company says.

One hundred of its locations currently have “mini-bakeries” that sell a total of 10 million baked goods a year. The company says this volume makes it the largest bakery chain in Taiwan.

In order to set itself apart from other convenience store chains, Hi-Life also launched its Jingcaijia (菁菜家) brand last year. Jingcaijia, which translates as

photo : 7-eleven

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“luxury vegetable seller,” consists of individually packaged pre-sliced produce and other ingredients.

Jingcaijia is presented as an alternative to other convenience store foods, which are usually high in sodium and preservatives. In order to carry the brand, Hi-Life had to develop packaging that would protect vegetables during shipping and install shelves that are always kept at 18 degrees Celsius. The company promotes Jingcaijia with promotional materials with easy recipes and nutritional information about vegetables that are currently in season.

7-Eleven has also begun adding more fresh vegetables and fruit to the more than 800 food items it carries, including ready-to-eat dishes, candy, frozen food, and beverages. About 1,000 of its stores now have a fresh produce section, and the company says it is positioning the chain as an alternative to supermarkets.

Jonathan Chen says 7-Eleven has signed contracts with more than 200 farmers who work a combined total of 600 hectares in 10 counties across Taiwan. Every year, the company also makes distribution deals with an additional 80 farmers. Each year 7-Eleven purchases almost 20,000 tons of rice, or

about 2% of Taiwan’s total harvest.

The chain also sells about 3,000 tons of fruit, or some 20 million pieces, per year. The amount is expected to increase by 10% this year. 7-Eleven charges slightly higher prices for its produce than supermarket chains and local markets, but Chen says that the company’s key markets include people living alone or in small households who don’t mind paying a premium to avoid food wastage.

7-Eleven also sells about 9,000 tons of meat products each year, much of which is certified by CAS (formerly called the Taiwan Premium Agricultural Products Development Institute). This certification is an important selling point due to consumer concerns about food safety, which were heightened in 2013 by a series of food contamination scandals.

The chain also leverages its international and domestic distribution network to offer specialty products. These include dried mangoes from the Philippines, king crabs from Hokkaido, and Lunar New Year dinners prepared by upscale hotels, which customers can order and pick up at their nearest store.

For its part, Family Mart has enjoyed a bestseller with its Hokkaido-style softserve ice cream, which it began offering

7-Eleven recently refreshed the product offerings for its popular City Café coffee. photo : 7-eleven

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in Taiwan in March 2013. So far, the chain has sold more than 10 million cones, and its success has prompted 7-Eleven to begin offering soft-serve ice cream as well.

Family Mart says it follows food trends closely in order to determine what to stock, and has recently started to test juice bars in some of its locations. According to the company, the goal is establish the chain as a place to enjoy gourmet treats. “Family Mart will continue to be an early adopter of food trends in order to meet consumer demand,” says Lan.

Launching private brands But Taiwan’s convenience stores are not content to be simply distribution outlets for food manufacturers. All four chains have launched their own lines of branded merchandise.

Chen says that 7-Eleven decided to offer private brands in 2009 when the global financial crisis resulted in a sharp downturn in spending among Taiwanese consumers. So far, it has partnered with 50 manufacturers to create 300 branded items, including beverages, paper products, snacks, and clothing basics like T-shirts.

The company places a strong emphasis on product and package design to combat the idea that store brands are cheap and poorly made. “The focus isn’t just on quality, but also about visual appeal, because we want to change negative impressions about private brands,” says Chen.

One of 7-Eleven’s most successful brands is City Café, its line of freshly brewed and bottled coffee. City Café was launched in 2004, and the company recently refreshed its product selection in order to compete with the three other convenience stores’ coffee offerings, such as OK Café and Family Mart’s Let’s Coffee, as well as chains like Starbucks.

7-Eleven says its coffee buyers travel to plantations in Guatemala, Colombia, Brazil, and other countries and pick beans based on 12 criteria, including freshness and aroma. In order to keep consumers from perceiving its beverages as a cheap and quick alternative to cafés,

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A Report on the Retail Sector

7-Eleven’s commercials for City Café present it as a lifestyle brand, with actress and spokeswoman Guey Lun-Mei shot leisurely sipping the coffee while sitting in parks and other bucolic locations.

Family Mart’s line of cookies, beverages, and household products made their debut at the end of 2013. In total, the brand encompasses 200 products, a number that Family Mart plans to increase by 20% this year. The company says its goal is to make Family Mart’s store brands account for 5% of its revenue.

For the smaller Hi-Life, the store brands are a chance to establish a repu-

tation for “quality and innovation” and raise its profile. The chain, which already carries branded snacks and paper products, plans to launch a line of 40 takeout meals intended for outdoor picnics and other leisure activities.

While store brands compete with products from its distributors, Chen says that 7-Eleven’s intention is not to push out other companies. “We work with OEMs to develop our own branded products, but that also gives manufacturers the resources to develop new products,” he says. “This in turn boosts Taiwan’s manufacturing sector.”

The convenience store chains have launched their own lines of branded products. photo : family mart

Rapid Growth in E-Commerce, Whether B2B, B2C, or O2O But a big share of the business is being captured by mainland Chinese companies.

BY JENS KASTNER

G

iven that the Taiwanese love English-language abbreviations, bargain buys, and convenience in general, it is no surprise that the terms “B2C,” “C2C,” and “O2O” have penetrated the local parlance as e-commerce reshapes the island’s retail landscape.

Facilitated by home delivery, convenience store pick-up service, and attractive group deals, Taiwan’s business-to-consumer (B2C) and consumer-to-consumer (C2C) online shopping markets registered revenue growth in 2013 of 18.2% and 12.3% respectively, bringing total revenue to NT$764.5 billion (US$25.5 billion), according to the Institute for Information Industry. The institute predicts growth in 2014 by another 15% to

reach NT$879.4 billion (US$29.3 billion) and forecasts revenue topping NT$1 trillion in 2015.

But it would be premature to pop corks to celebrate the performance of the local e-commerce platforms, as a large portion of the business is being captured by China-based operations.

“Taiwanese consumers last year bought 8 million items on mainland China’s Taobao, which has a whopping 900 million products on offer,” says Alvin Bor, secretary-general of the Non-store Retail Association of the ROC, referring to Taobao Marketplace (淘寶網), an online shopping website run by Alibaba, China’s largest e-commerce company. “Taobao calls itself C2C, but some of it is actually

B2C, while its offspring Tianmao (天貓) aims to provide higher quality products.”

Bor notes that since Beijing views Taiwan as one of its provinces, parcel postage rates from China to Taiwan are artificially low. In addition, Taiwan does not impose import duty on items valued below NT$3,000. Adding to Taobao’s attractiveness for Taiwan consumers is that payment on cross-Strait transactions is facilitated by China’s AliPay, which has established connections with numerous Taiwanese banks. As a result of all these factors, Bor says, AliPay has become the dominant force in Taiwan’s third-party payment market, for which a regulatory structure was officially finalized last year, 15 to 20 years after China. “Most mer-

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chandise sold in Taiwan’s night markets is now sourced via Taobao, causing a major headache for Taiwanese platforms, as well as for the tax collectors,” he notes.

In its 2013 ranking of sales by Taiwanese internet retailers, U.K-based market resear ch firm Euromonit or placed Yahoo! Kimo first with a market share of 11.4%, followed by PChome (8.4%), Fubon Group’s Momo (6%), PayEasy (4.8%), and Rakuten Taiwan Ichiba (3.5%). According to local market researcher EOLembrain, PChome’s site saw the most traffic in 2013, followed by Rakuten.

Other major players operating popular B2C platforms in Taiwan include the United Daily News (UDN) Group, President Chain Store Corp., Far Eastern Retail Group, and Dongsen TV’s ETmall, as well as Gomaji, whose primary focus is group buying, similar to the United States’ Groupon.

The business model of Japanese-originated Rakuten, which is aiming for 50% revenue growth in Taiwan this year, is labeled “B2B2C.” Under this approach, merchants open a virtual shop on Rakuten’s platform with an initial onetime payment of NT$27,000, followed by monthly rent of NT$1,000 and a 3% to 5% commission on each deal. Currently, Rakuten Taiwan has 2,500 of these shops

and educates their owners in e-commerce strategies through courses held in Taipei by its “Rakuten University.” Each shop is also coached by an “ECC” (e-commerce consultant), who provides guidance on such aspects of the operation as target setting, pricing strategies, and customer communication.

Grace Lo, Rakuten’s general manager for Marketing & Business Development, says the platform got a huge boost last year from its revolutionary “picture search” feature, which works similarly to face recognition software. “People no longer have to key in words to search a product, but instead take a picture of something they desire in the real world, upload it, and let the system find such a product in one of our shops for a good price,” she explains.

A key trend is mobility Another current major trend shaping the market is mobility. Lo notes that new apps have made it convenient to use a smartphone instead of a PC for many activities, with consequent changes in the time of day when transactions take place. “Increased use of mobile devices means that more purchases are made while commuting and before bedtime, which is a shift that demands our atten-

The UDN Shopping site follows a straight B2C model.

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tion,” she says.

UDN Shopping – a genuine B2C model where merchants pay a settlement of 10% to 15% per deal – confirms this strong trend toward mobility. General Manager Apollo Sun reports that while just 2% to 4% of clicks on the UDN shopping site were made with mobile devices in early 2013, the rate had reached 12% by the end of the year.

UDN Shopping’s total revenue doubled in 2013 to reach NT$1.5 billion (US$50 million), with a target of NT$3.5 billion set for this year, Sun says. One advantage over the B2B2C model is that the merchant incurs no costs if the merchandise doesn’t sell, he notes. “But more importantly, if you cooperate with us, you have the UDN group’s whole media range – with websites, TV news channel, and newspapers – as your partners.”

He does express concern about Chinese competition, however, noting that although Chinese products have an image problem in Taiwan, the fact is that most products sold by Taiwanese platforms also are made in China. Sun considers that Taobao was wise to set up Tianmao, which carefully selects its suppliers to increase its trustworthiness. “But Chinese consumers still cannot access the UDN shopping site due to its connection with the UDN news website, while other Taiwanese e-commerce platforms might be blocked for other reasons, including tax issues,” he notes.

The cross-Strait service trade agreement – signed last year but not yet approved by Taiwan’s legislature – will not provide much of a remedy, in Sun’s opinion. Under the agreement, Taiwanese online retailers can hold a 55% stake in joint ventures with Chinese firms as long as the operation is based in Fujian Province just across the Taiwan Strait from Taiwan. “But you would be competing with China’s top 10 online shopping websites in an environment where Taobao has 75% market share already,” Sun says.

Despite the challenges, some Taiwanese e-commerce firms have already taken up minority stakes in cross-Strait joint ventures, and ETmall and Momo plan to set up subsidiaries in China this year. Market observers believe that demand exists among wealthier

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A Report on the Retail Sector

Chinese consumers for Taiwan-made cosmetics, health foods, and other products. According to the Non-store Retail Association of the ROC, 2 million items were sold online from Taiwan to China in 2013.

In yet another market segment, online to offline (O2O) e-commerce, Groupon was initially the market leader in Taiwan, but was overtaken in mid-2012 by a local company, Gomaji, according to Rio Chen, Gomaji’s deputy general manager.

Gomaji operates in three main channels – travel, food and shopping – with different settlement commissions for each category. “The settlement average could be higher in the beauty segment, as satisfied customers of beauty parlors, spas, and the like tend to sign up for membership instead of again purchasing vouchers with us,” Chen explains.

According to Gomaji’s own surveys, 75% of its customers are female, with the overwhelming majority in the 25 to 45 age bracket. Accordingly, Gomaji’s home delivery focuses on local delicacies in packages suitable for small families.

“Housewives love it,” Chen says. “What costs NT$200 elsewhere might be purchased for NT$70 through us.”

Gomaji’s promotion channels include Yahoo! and Facebook, and it engages in cooperative campaigns with movie houses, local governments, and famous brands, most notably McDonald’s. It also publishes a magazine sold at 7-Elevens, is featured on 7-Eleven’s in-shop monitors, and sponsors a weekly TV show where local artists endorse the site.

Chen sees this strong local emphasis as the main reason why the company managed to squeeze Groupon’s share of the Taiwan market. “The O2O business model is inherently local,” she says. “We get the consumer online and bring them offline – to a local restaurant, a local fashion shop, and so forth. Only a local management team will truly understand the local customers’ preferences.” Chen adds that while Groupon does have a local team, “its senior management might be from Hong Kong or Malaysia.”

Acknowledging the strong standing that local players have with Taiwan consumers, eBay Taiwan joined forces with PChome in 2006 to form the joint ven-

The offices of O2O e-commerce company Gomaji. photo : Gomaji

ture Ruten, which now handles all local transactions. At that point, eBay Taiwan’s business model shifted to B2C exports, enabling Taiwanese suppliers to utilize eBay’s 40 websites across the world as retail platforms.

“Our sellers come from many corners – some are manufacturers, some trading companies, some online sellers,” says Clare Lin, head of eBay Taiwan Marketplace. “We provide open platforms for buyer and seller, and through PayPal we can support 26 currencies and also provide shipping solutions, as well as connecting the sellers to reliable warehouses in the U.S. and Australia.”

Lin adds that since shipping is usually a bottleneck in cross-border trade, eBay’s service includes working with premium shipping providers to obtain efficient and cost-saving packages for the sellers. “For these services, the seller pays us a low-cost insertion fee of US$0.30 or less per item and a final value fee on the transaction of between 9% and 12%,” she notes.

According to Lin, eBay has high hopes for retail exports from Greater China, because the area has very strong supply chains that eBay can help connect to mature consumer bases in the United States, Australia, and Europe. Transactions to emerging markets often go through eBay’s U.S. or U.K. sites.

“Owing to the impressive flexibility of our Taiwanese sellers, they managed

to sell to buyers in 200 countries over the past three years,” Lin says. “In June 2013, year-on-year growth in export value to Argentina, Russia, and Brazil reached 162%, 38% and 37% respectively.”

Further, from 2006 through last year, the sales volume of eBay’s Taiwan sellers every year has achieved double-digit growth, with a similar result expected for this year. Momentum was strengthened in 2013 by improved growth in the key corridors of Germany and the U.K., a significant achievement given the language barrier in Germany’s case and the high customs duty in the whole of the European Union. Looking ahead, Lin says, increased export business is likely in the popular categories of “home and garden” and “auto parts,” both of which have a very strong supply base in Taiwan for manufacturing and R&D. Recently eBay Taiwan has also been putting more emphasis on branding. “ Ta i w a n h a s m a n y i n t e r n a t i o n a l l y unknown but good-quality brands that eBay can help to step onto the global stage,” Lin says.

In the near future, however, eBay Taiwan may also be among those having to share more of the market with Chinese e-commerce players. Alibaba Taiwan in mid-February announced its intention to launch an e-commerce association on the island to help local small and medium-sized enterprises break into the global market.

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Gearing Up for a Glorious Spring

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i t h its splendid weather that brings out the island’s glorious butterflies and wildflowers, spring is invariably one of the best seasons for a visit to Taiwan. This year a slew of major cultural events to be held in March and April provide some additional reasons for the timing of such a trip. Many of these festivities build on ancient traditions carried to the island more than 300 years ago by settlers from the Chinese mainland, while others express the Austronesian heritage of Taiwan’s aboriginal minority. A few have a much shorter history, and reflect the passions and priorities of 21st-century Taiwanese.

Falling into the first category is the Kaohsiung Neimen Song Jiang Battle Array. Surprisingly, this multiday martial arts spectacular also marks the birthday of Guanyin, the Buddhist bodhisattva of compassion known in other parts of the world as Avalokiteśvara.

Like many other festivals in Taiwan, the timing of the event depends on the traditional lunar calendar. Guanyin’s

birthday falls on the 19th day of the second lunar month, which in 2014 is March 19, and this year’s Battle Array will run from March 8 to March 19.

As in previous years, the event – which draws tens of thousands of outsiders to a rural corner of Kaohsiung – will feature both traditional temple-affiliated groups and modern professional

performing troupes.

Today’s temple-affiliated groups evolved out of what were local militia-like defense units. Rather than use karate chops to smash bricks or headbutts to break roof tiles, they emphasize teamwork and coordination. Visitors can expect to see ritualized dueling with swords, staves, and pikes. Farm tools and even umbrellas make an appearance, as in olden times Neimen was a rough-and-tumble frontier district, and battle-array members had to be able to fight using whatever was at hand. Some recently formed college groups, by contrast, add tap dancing, hip-hop, and cheerleading moves to their drills, yet at the same time uphold the core principles of the Battle Array: community strength, loyalty, and derring-do.

English-language background information about this unique carnival can be found on the official website, www. who-ha.com.tw.

Compared with the Battle Array, the Spring Wave Music and Art Festival has a much shorter history. First held in 2006, it has become a must-attend event for local pop-music fans. Taking place early each April near Kending at the southern tip of the island, Taiwan’s most popular beach resort, Spring Wave boasts a lineup that includes the island’s hottest singers and bands.

The concert segment is followed by an overnight extravaganza of electronic,

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The main event in the Taichung City Mazu International Festival is a traditional pilgrimage that begins and ends at Zhenlan Temple in Taichung’s Dajia District. Each spring, just ahead of Mazu’s birthday (which in 2014 falls on April 22), the temple’s ancient and much-adored Mazu icon embarks on a nine-day tour to affiliated temples in central Taiwan.

trance, and dance music, led by DJs of international renown.

Both the Kaohsiung Neimen Song Jiang Battle Array and Spring Wave Music and Art Festival are among the 42 world-class activities that Taiwan’s Tourism Bureau is highlighting in 2014.

Besides showcasing the island’s culinary delights and cultural diversity, some of these events also highlight the island’s finest scenery and – in the case of April’s Daxueshan International Bird Watching Competition – some of its greatest ecological treasures.

To enable travelers to gather and store information about these activities, the Tourism Bureau has created free downloadable calendar pages and smartphone apps full of food, accommodation, transportation, and shopping links. There are featured events for each season and every region, including outlying islands, so whatever time of year you plan to visit Taiwan, and wherever business or family commitments may take you, you will find no shortage of things to do.

An event that always appeals to those eager to enjoy Taiwan’s traditional religious culture is Taichung City’s Mazu International Festival. Of the thousands of deities worshiped in Taiwan’s temples, none is more revered than the goddess Mazu (often spelled Matsu). The faithful believe she was born in a fishing community in Fujian, the coastal Chinese province nearest

Taiwan, on the 23rd day of the third lunar month in 960 A.D. By her teens, she had a reputation for rainmaking, healing the sick, and exorcising demons.

Mazu is also credited with saving her father and brothers when they were caught in a tremendous storm while on a fishing expedition.

Mazu's disciples believe that she did not die, but rather was lifted bodily

from a mountaintop to the heavens in 987 A.D. Over the following centuries, the creed of Mazu spread. Migrants sailing from the mainland to Taiwan often carried effigies of the goddess with them to ensure a safe crossing, but over time she has become much more than a protector of seafarers. Nowadays, many Taiwanese who venture nowhere near the ocean seek her blessings.

Over the course of the pilgrimage, more than a million devotees turn out to see the icon, show their loyalty, and receive Mazu’s blessings. Some diehards walk the entire distance, more than 300 kilometers. But many of those who line the route are there simply to enjoy the spectacle, which includes fireworks displays, Taiwanese opera, traditional puppet shows, and zhentou troupes who pe r for m lion dances, dragon dances, and stilt-walking stunts.

Similar e xpr essi ons of t he f ol k beliefs held dear by many Taiwanese can be seen at major temples in every season. Further, visitors are sure to find numerous exhibitions to interest them at Taiwan’s numerous museums and galleries, the most famous of which is the world-class National Palace Museum in Taipei.

For details of events, exhibitions, and pageants throughout the year, as well as general travel information about Taiwan, visit the website of Taiwan's Tourism Bureau (www.taiwan.net.tw) or call the 24-hour tourist information hotline 0800-011-765 (toll free within Taiwan). taiwan business topics • march 2014

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