Developing High-Tech Industry through Establishing ICT Cluster Kung Wang PhD. Prof., National Central University Advisor, Industrial Technology Research Institute Taiwan, R.O.C Sep. 1, 2004 ICT Seminar in Tokyo

Transition of Taiwan’s Economy and Industrial Structure As percentage of GDP (%) 1951 1964 1971 1981 1991 2002 Agriculture Manufacturing Service Labor-Intensive industry Technology-Intensive Industry Knowledge-Intensive Industry Capital-Intensive Industry GDP(USM$) 1,614(1952) 48,600(1982) 290,540(1999) 281,508(2002) GDP/Capita(US$) 196(1952) 2,819(1982) 13,114(1999) 12,572(2002) Manufacturing-Led Investment-Led Innovation-Led 67% 26% 2% 46% 15% 32% Source : Directorate-General of Budget, Accounting and Statistics, R.O.C., Monthly Bulletin of Earning and Productivity Statistics, Taiwan ICT Seminar in Tokyo

World Position of Taiwan’s IT Industry Exchange rate for 2003：US$1.00 = NT$35.00. Figures do not include overseas output (e.g. China) Source：MIC,IEK (2004/02) ICT Seminar in Tokyo

Taiwan Electronic Products Worldwide Market Share in 1990 Unit：thousand units 80 4,530 72% 10,500 70 66% 60 50 5,105 10,370 441 5,900 40 36.4% 35.5% 35.3% 3,129 34% 1,394 30 8,499 26.8% 23.6% 19.4% 20 2,295 9.7% 10 Terminal Mouse Scanner Color CRT Mainboard Mono CRT Keyboard Graphic Card Microcomputer Switch Power Supply ICT Seminar in Tokyo Data Source：IEK, ITRI (2001/10)

Taiwan Electronic Products Worldwide Market Share in 2002 Unit：thousand units market Share (%) ICT Seminar in Tokyo Data Source：IEK, ITRI (2003/08)

U.S. Patents Granted Remarks: Patents per capita, Taiwan ranks no.2 in 2001 Source:Indicators of science and technology Republic of China,NSC ICT Seminar in Tokyo

Government Development Strategies for the Hi-Tech Industry Human Resource Development • Provide on-the-job training • Promote cooperative work/ study education exchange programs • Recruit overseas talent Infrastructure • Develop industrial parks • Found incubation centers • Establish NII (National information Infrastructure) Support market and Technology forecast study Financial Means Tax incentives • Encourage venture capital investment • Invest government funds • Provide low-interest loans Technology Support • Strengthen R&D systems • Subsidize R&D,SBIR • Promote international cooperation and strategic alliances Industry ICT Seminar in Tokyo

Providing the Infrastructure Enhancing Technology Innovation Capacity Establish Science-based Industrial Parks • Provide the infrastructure for the development of hi-technology industries Establish Processing Zones • Attract Foreign direct investments Develop external trade. • Introduce state-of-art technology and increase employment opportunities Create Incubator Centers • Offer assistance to technology-oriented entrepreneurs and business Start-ups Develop Software Parks • develop the niche products for the world market Promote Research Parks • Provide innovative mechanisms through cooperation between R&D centers, universities and industries Initiating Industrial Cluster ICT Seminar in Tokyo

Sources:STIC(2003), this study. 3C Gorwth in Taiwan Sources:STIC(2003), this study. ICT Seminar in Tokyo

GROWTH OF SALES in HSIP US$ Million Taiwan’s “Silicon Valley” organized and administered by NSC Taiwanese home-grown firms ICT Seminar in Tokyo

Sales by Industry in Hsinchu Science Park 2003:$25.2 Billion 1993:$4.84 Billion 1988:$1.74 Billion Source: Science Park Administration(Feb,2004) ICT Seminar in Tokyo

3C Output Value in Taiwan (1991) Sources:STIC(2003) ICT Seminar in Tokyo

3C Output Value in Taiwan (2001) ICT Seminar in Tokyo Sources:STIC(2003)

Development of HSIP 1974 Deliberation Establishment Burgeoning 1980 1995 Established ITRI in 1973 ITRI established the EIRC Transfered technology from Texas Instruments, Philips, RCA, IMR,…etc.. Established the HSIP in The spin-off enterprises of ITRI got into HSIP The capital was guided to high-tech industries by policies Recruited the high-tech talents by policy The IT industries raise the finance through the stock market Venture capital was getting more important since 1990 Government stimulate high- tech industries by offering various concessions The area of SIP expanded to Chunan, Tungluo and Tainan The firms was stimulated to do independent R&D by a reward system 2003 ICT Seminar in Tokyo

Current Status of HSIP Features of HSIP Vertical disintergration in IC industry SME dominant Highly centralized information electronics industry Current Status of HSIP Industry Distribution in HSIP (by December 2002) Human resource distribution in HSIP (by July 2003) Fund sources of park enterprises (by July 2003) ICT Seminar in Tokyo

The Network---Talent and Technology Network HSIP Research Institutes Technology Transfer Spin-off Strategy Alliances Open Lab/Incubators Industrial Associations TSIA TEEMA AAISIP The Returnees ICT Seminar in Tokyo

Policy on HSIP Talent and Technology Capital Infrastructure 1950 Rules for Career Counseling for Returnees 1955 Returnees Career Program 1955 Rules for Job Application and Assignment for Returnees 1969 Rules for Career Counseling for 1971 Rules for Recruiting Oversea Talents 1973 Established ITRI 1980 Established HSIP 1983 Advanced Level Technical Talents Cultivation and Recruitment Reinforcement Program 1985 Rules for Encouragement and Guidance of Science and Industrial R&D Talent Cultivation and Internship in HSIP 2000 Rules for Tax Deduction with Investments in R&D and Personnel Cultivation Capital 1978 The tax of stock exchanged was cut to half 1980 The liberalization of interest rates 1983 The liberalization of capital market and full deregulation of control over foreign exchange 1983 Venture Capital Management Rules 1983 Investment Encouragement Statues 1985 The government appropriated a seed fund amounted to NT$800mn 1984 The liberalization of finance 1989 The tax of stock income was released 1991 The government appropriated a seed fund amounted to NT$1600mn Infrastructure 1980 Established the Park Administration 2001 Rules of Application for Admission to Science-based Industrial Park for Service Industry ICT Seminar in Tokyo

ITRI-Innovation Engine Mirle:盟立自動化 Chipbond:頎邦科技 Au:友達光電 Gigacomm:晶誼光電 Taiwan mask:台灣光罩 Epistar:晶元光電 Kingbond:華東半導體 IUT:國際聯合科技 ICT Seminar in Tokyo

ITRI: Key Factors in its Relationship to Taiwan’s High-Technology Development Major Government research funding An intensively interactive partner to local industry A mechanism for disseminating technology and information to industries, and speed up commercialization of technology The role of researchers and managers technology leaders / industrial leaders resource of talented people Encouraging entrepreneurship ICT Seminar in Tokyo

ITRI played a significant role to upgrade Taiwan as a powerful player establish the foundations of Taiwan’s semiconductor industry spin off the United Microelectronics Corporation (UMC) in 1979 spin off the Taiwan Semiconductor Manufacturing Company (TSMC) in 1987 make breakthroughs in Flat-panel Display technologies 7 local TFT LCD makers and 4 color film makers were established with investment of some US$ 3 billion has reached the world-class level support the Information Industry started development of a basic input-output system (BIOS) for IBM compatible PCs powers Taiwan to become the world’s fourth largest producer of information industry products in 2001 with a total output value of US$ 359.73 billion ICT Seminar in Tokyo

Importing → Own tech R&D→ International alliance Tech. Development stages of IC Industry in Taiwan Importing → Own tech R&D→ International alliance ERSO/ ITRI main tech source IC UMC 80→ ERSO(5-3.5um), RCA TSMC 87→ ERSO (1.5-1um) TI-Acer 87→ TI, IBM Winbond 87→ Toshiba Mosel 87→ Siemens MXIC 89→ Matsushita Vanguard 94→ ERSO (0.35um), Etron Powerchip 94→ Mitsubishi Nan Ya 95→ Oki, IBM ProMos 96→ Siemens WSMC 98→ Winbond, Toshiba Winbond 02→ Infineon(0.11um) Powerchip 03→ Elpida (0.1um) Foundry IDM 4 key milestones UMC→first IC firm established TSMC→foundry Vanguard→own-brand DRAM SoC Alliance→innovation oriented DRAM SoC Design Center ICT Seminar in Tokyo

K.S.F. for Taiwan IC industry Government policy R&D: ITRI HSIP Continuous investment in capital spending and R&D Long-term and reliable capital sources Skilled human resource Innovative Business model ICT Seminar in Tokyo

Challenge-industry transformation Taiwan($17.4B) 36% 47% Others 17% Mainland China 2002($48.3B) Worldwide Distribution of Manufacturing of Taiwan IT Industry-By Revenue 2003($57.1B) Worldwide Distribution of Manufacturing of Taiwan IT Industry-By Revenue Mainland China becomes Manufacturing Center Over 60% IT Production in China is contributed by Taiwan companies ICT Seminar in Tokyo Source：ITRI (2003/10)

Hsinchu Challenge Facing the transformation to China, instead of maintaining our manufacturing advantage, it is needed for Taiwan to keep upgrading itself and transform into a design and R&D center, to maintain design and technology R&D with high added value. To cultivate of high-tech talents and to create a good environment for investment, to attract high-tech talents return Taiwan are urgent tasks. ICT Seminar in Tokyo