The Growth of the Taiwanese IT Industry in China: Investment, Local Production and the Global Impact

ABSTRACT

Information Technology is the largest and most competitive industry in Taiwan. The strongest sector is the PC domain, in which Taiwan continues to maintain a large world market share. In the past few years, however, Taiwan has also shown rapid growth in the semi-conductor and TFT-LCD businesses as well. One of the reasons for this growth is their active investment into China. Many Taiwanese companies have transferred their production bases to China and continue to actively invest in order to cut costs, sustain their competitiveness, and expand the scale of their OEM production. The fact that the production volume in China for PCs and peripheral devices has already surpassed the production levels in Taiwan indicates that these companies are taking in a great deal of revenue.

Driving the development of Taiwanese companies in China is their effective management strategies with respect to investment and production. They make use of the inexpensive labor force, the Chinese export mentality for OEM production, and business relationships based parts provision that they form amongst themselves.

The China based Taiwanese IT industry is mainly concentrated in Eastern China and Southern China. The manufacture of PC parts, peripheral devices, and desktop PCs is mainly focused in Southern China while the production of notebook PCs, semi-conductors, and LCD's rapidly grows in Eastern China. Both regions have their own advantages with respect to labor and human resources, R&D capabilities, domestic and overseas sales, industrial policies, and government support. Taiwanese companies choose between the two regions depending on their own production and management characteristics.

In recent years, a new development can be seen in the advancement of Taiwanese IT companies into China. There has been a general shift toward domestic sales, R&D, and the construction of large-scale production bases. Investments and local production have also shifted toward projects involving more sophisticated technology. For example, investment and production in notebook PCs, semi-conductors, and LCD's have been rising steeply.

As a result of Taiwanese investment, the territory straddling the FormosaStraight has become the production base for the world IT industry. Furthermore,its low cost OEM production has a great influence upon the world IT market. It is important that Japan engage the Taiwanese IT companies in China through the procurement of IT products, sales, and joint investment.