Japan-Taiwan Corporate Alliances in China

ABSTRACT

Taiwanese businesses in China are enjoying great success, even as other countries of the world vie to claim a piece of the Chinese market and expand their investment into the country. Japanese companies, meanwhile, are playing an important role in Taiwan's enterprises in China. In order for Japan to achieve greater success in China, it is important that it utilize the cooperation of Taiwanese businesses.

The business alliances between Japanese and Taiwanese companies with respect to China have taken many forms. In terms of cooperative business, there have been many types including sales cooperation and technology licensing in addition to actual mergers and joint-enterprises. In the IT industry, for example, Japanese OEM procurements and technology transfers are the main forms of cooperation. The success of many Taiwanese companies in China has been due to the cooperative ties they have made with Japanese companies.

The complimentary strengths that Japanese and Taiwanese companies have when it comes to penetrating the Chinese market have been an important reason for their cooperative ties. Yet another reason can be found in the shift of Taiwan based Japanese companies toward China, moving their manufacturing processes to Chinese soil, and their resulting changes in corporate function as they focus instead on sales, procurement, and R&D. New business strategies within Japan, moreover - both the change in investment strategies (having Taiwanese companies invest in and produce Japanese products in return for Japan's procurements and technology transfers) and the establishment of a new capture strategy for the Chinese market - are also a driving force behind these alliances. Lastly, on the Taiwanese side, there is a strong interest in acquiring technologies through cooperation with Japanese companies.

Alliances between Japanese and Taiwanese companies will bring about great mutual benefits. For Taiwanese companies, it will not only bolster their business in China, but it will also develop Taiwan's domestic industry, particularly helping to cultivate their hi-tech sector, and thus contributing to the global competitiveness of Taiwanese businesses. The development of the LCD and semi-conductor industry, for example, considered Taiwan's industrial strengths, is connected to Japan's OEM procurements and technology transfers. As for Japanese companies, in addition to borrowing the strength of Taiwanese companies in China, the expansion of its OEM procurements from Taiwan will lead to cost reductions and the strengthening of it own competitiveness.

Through the alliance of Japanese and Taiwanese companies in the Chinese market, a business model straddling Japan, Taiwan, and China can be formed, and a production and management system that would maximize the respective strengths of each party can be constructed.