Monthly Archives: February 2013

After years in the red, ScinoPharm hits home run with cancer drug

When Syntex, an American pharmaceutical company with annual revenues in excess of a couple of billions, was acquired by Roche in 1995, massive layoffs followed. Among the 12,000 workers laid off was the deputy general manager, 47-year old Jo Shen. However, as many know, the Chinese word for “crisis” is comprised of two character, representing “danger” and “opportunity” and it is the latter that Dr. Shen focused on.

According to Global Views monthly, at that time, European Union regulations did not allow European pharmaceutical companies to develop generic drugs and Active Pharmaceutical Ingredients (API) until the patent rights of the brand name expired. This was bad news for European and American API manufacturers, but good news for those in Asia. API involves employing highly sophisticated technology in the manufacturing process, including the use of rigid temperature controls to create the correct reaction paths required to create chemical synthesis and crystal structures. Generic drug makers could not violate the patents of original brands and other manufacturers’ related patents, so there were not too many companies capable of manufacturing under these guidelines.

However, API was the specialty of Shen and she knew that this was a rare opportunity she could not pass up, so she founded ScinoPharm in Taiwan.

Steep start-up costs

After hearing Shen’s presentation, Kao Ching-yuen, founder of UNI-President Enterprises Corp., immediately agreed to be the largest investor in ScinoPharm, believing that as “everyone has to eat either food or medicine” this would be a profitable investment.

Meanwhile, Taiwan’s government was promoting the biotech industry and listed API as a priority for support. Several state-run companies and banks came on board as investors and the company was formally established in November 1997 as the first maker of API for the treatment of cancer.

Three quarters of the initial invested capital was used to build facilities and buy equipment in order to set up a top-notch production plant. However, Global Views reported that the construction costs at the Tainan Science Park in southern Taiwan were a quarter of the funds required to build an equivalent plant in the US.

Despite these savings, ScinoPharm’s revenues did not grow in the first couple of years and at the same time, its debt started to grow. The total investment reached NT$5.4 billion (US$183 million) in 2001 and Shen continued to take the bus to work to save money.

Becoming a leader in the biotech industry

After UNI-President Enterprises and Watson pharmaceutical (now known as Actavis) agreed to pump in more capital; ScinoPharm invested this in more R&D, and finally turned a profit in 2006. Now, the company is the leader in Taiwan’s biotech industry.

ScinoPharm accounted for 66 percent of Taiwan’s total exports of API in 2011, and has solidified its reputation in the international pharmaceutical arena as well. The company currently supplies 50 percent of global API for Galantamine, used for the treatment of mild to moderate Alzheimer’s disease. Additionally, it has 40 percent global market share for Docetaxel, used to treat breast, ovarian and non-small cell lung cancers, and that of Irinotecan for treating colon cancer. Among its competitors, ScinoPharm is also capable of making the widest range of API injectable products used in the treatment of highly active cancer.

Normally generic drugs can only be available for public sale after the patent rights of the original brand expires. But generics drug makers must look for reliable API suppliers well in advance in order to prepare for when this happens.

However, it takes 5 to 8 years for generic drug producers to develop the API and they can get revenues only after the generics are on the market. There are no short cuts. So it is an industry with high barriers for entry and intensive technology and capital investment required. Many industry insiders were initially skeptical about ScinoPharm’s survival, but Shen was very confident of its chances, reported Global Views.

ScinoPharm has now been turning a profit since 2006. Orders have poured in, so much in fact that the firm now has to outsource to other Taiwanese companies. In 2011, ScinoPharm had a turnover of NT$3.948 billion (US$132 million) with over 50 percent in gross profits.

Focusing on a niche market

According to the Global Views analysis, the reason for Scino’s success lies in its ability to select a profitable niche market in cancer treatment drugs, its international reputation and cooperation with its customers to select the right products to develop to lower their risks. Besides, ScinoPharm also has a wealth of R&D talent, with many employees holding PhDs and master’s degrees. Moreover, Scino has budgeted on average 7.5 percent of total revenues on R&D over the last five years, higher than the average 5 percent of other pharmaceutical companies in Taiwan.

Today, Scino leads others in the same market by 15 years in API development, with 17 items on the market, plus over 50 in the pipeline. For those just entering the market, they will need five years just to catch up. Their customers include the largest ten generic drug makers in the world, such as Teva of Israel, Sandoz of Switzerland, Hospira, Watson and Actavis of the US.

And from the global perspective, ScinoPharm has found another money making engine in China, where the government’s 12th five-year national plan clearly stipulated that all Chinese pharmaceuticals must be in compliance with the good manufacturing practice requirements, according to Global Views. This is a challenge for Chinese manufacturers, but a big opportunity for the company, which enjoys the advantage of international pharmaceutical capabilities.

With its second largest market for Scino’s cancer drugs in China, the company has since 2009 expanded its manufacturing facilities from it facility in Kunshan, Jiangsu Province. Currently there are 20 cancer treatment drugs popular in China, nine of them being made by Scino, and the market is only expected to grow for ScinoPharm.

Taiwan promotes tourism at Orchid Expo

The 61st Pacific Orchid Exposition, the largest orchid show in the United States, kicked off this year with a Gala Benefit Preview on February 21. The exclusive preview gave orchid collectors and enthusiasts an opportunity to see this year’s winning orchids, bid in silent auctions, sip wine from over 20 top Northern Californian wineries and, more importantly, allow them first pick of the orchids on sale. Organized by the San Francisco Orchid Society, Taiwan was mentioned often throughout the evening.

Since the island is the world’s largest orchid exporter, the opportunity allowed Taiwan to promote its tourism campaign, designed to entice visitors to visit Taiwan and see its renowned orchids. Plenty of tourist information about Taiwan was available at the booth centrally located close to the competing orchids.

In 2003, Taiwan established the Taiwan Orchid Plantation (TOP), a research and orchid breeding center. Since then, Taiwan’s orchids have gained a reputation for their first class quality and beauty internationally. Today, the island’s orchid exports generate more than US$110 million annually.

As guests previewed the displays and enjoyed the delicious hors d’oeuvres at the gala, Liam Mayclem, the Emmy award-winning host of CBS-5’s “Eye on the Bay”, welcomed them.  He shared with the audience the exciting news that he was getting on a plane for Taiwan that night, and encouraged the audience to visit the island as well.

Mayclem then introduced Bruce Fuh, the director- general of of the Taipei Economic and Cultural Office in San Francisco. Fuh told the audience that since Taiwan is famous for its orchids, his office was glad to be a part of the expo. He also explained how easy it is to visit the island given Taiwan’s entry into the United States’ Visa Waiver Program. The program allows visa-free entry for Americans visiting Taiwan and for Republic of China passport holders to enter the US for a stay of less than 90 days without requiring a visa. Moreover, United Airlines will open daily flights from San Francisco to Taipei soon, making a trip to Taiwan even more convenient.

Among the other honored guests present was the first lady of San Francisco, Anita Lee, who wished the crowd peace and prosperity on behalf of Mayor Lee and herself. The mayor’s wife then spoke of San Francisco’s special Sister City relations with Taipei. California State Senator Leland Yee also attended the gala and took a moment to tell the audience about Taiwan’s beautiful scenery. He particularly mentioned Tainan in southern Taiwan, where many of the orchids are grown.

The gala raised money to further promote the San Francisco Orchid Society’s mission of educating its members and the public about orchids. The expo continued from February 21 to the 24 with over 155,000 stunning orchids on display at Fort Mason Center’s Pavilion in San Francisco.

Taiwan’s major IT companies face uphill struggle

As a result of reduced shipments of the iPhone 5, Hon Hai Precision Industry Co. (trading as Foxconn), suffered an 8.19 percent drop in its combined annual revenues in 2012. The company is the world’s largest electronics contract manufacturer, when measured in terms of revenue. HTC is another leading manufacturer in Taiwan, but in the last few years it has focused on branding its own line of products. Despite their successes, both companies are facing difficult times ahead.

In 2012, South Korea’s Samsung accounted for over 30 percent of the global smartphone market, well ahead of Apple’s 18.4 percent and HTC’s 4.8 percent. Samsung’s net profits also surpassed those of HTC for the first time (by 1.6 times). As two of Taiwan’s most successful hi-tech companies, Hon Hai and HTC’s success or failure will have a profound impact on the future of high-tech industries in Taiwan.

HTC seeks to upgrade

For Peter Chou, HTC’s CEO and president, 2013 will be a pivotal year, since it will determine whether the company can emerge from the depths of an extremely difficult 2012. Last year, total revenue fell an estimated 37 percent and its global market share fell from 10.7 percent to 4.8 percent. The company’s share price plummeted to a 7.5-year low, and its earnings per share of NT$20.14 (US$0.68) were barely a quarter of the NT$73 (US$2.47) in EPS posted by HTC in 2011, Commonwealth reported.

HTC has refused to succumb to the gloom, instead launching a series of new phones. The company’s “Butterfly” model represents the first weapon in the company’s arsenal to reverse its fortunes. HTC J smart phones, jointly introduced by HTC and KDDI, one of Japan’s largest telecom operators, have sold briskly in Japan. The two firms partnered again to introduce the five-inch screen HTC J Butterfly, which is also doing well in the market. According to KDDI’s hot sales list, the Butterfly even beat Apple’s iPhone 5 in Japan. The Butterfly J has enabled HTC to emerge from a dark valley and into the sunlight again. Additionally, HTC is reviewing its product and marketing strategies in order to remain competitive.

Fighting a David and Goliath battle

Although successful in Japan, another problem facing HTC is that its success in Japan cannot be easily replicated elsewhere. “Japan is an extremely closed market controlled by the major telecom vendors. Even Nokia and the iPhone have been unable to break into Japan,” said Lee Ji-ren, who lectures on business strategy and management at National Taiwan University (NTU). He explained that Japanese-brand smart phones hold a 70-percent share of the market, meaning HTC does not have to directly butt heads with Apple and Samsung, reported Commonwealth.

“Actually, HTC is still a profitable company. It’s just that it has run into the world’s two strongest adversaries,” said Victor Tsan, the vice president and general director of the Market Intelligence & Consulting Institute (MIC).

According to Commonwealth, these two adversaries are the largest competitors for HTC in the global smart phone market. Samsung’s revenue is nine times that of HTC. It has a market value 28 times that of HTC, and R&D spending 15 times that of HTC. Apple’s revenue is seven times greater than that of HTC, with a market value measuring 60 times that of HTC, and it spends four times as much on R&D.

How can HTC compete given such overwhelming odds? In facing Samsung which has 31 percent of the global market share, and Apple, which takes 60 percent of all profits in the smart phone business, HTC clearly understands that it has to fight to protect the company’s turf. HTC realizes it has to be financially fit to take on this monumental challenge. The company will have to find its own niche in defeating the Goliaths of the industry and overcome its inherent limitations.

Taking advantage of markets ignored by Apple  

There are still opportunities and one of them is to cater to China’s middle- and lower-end smart phone market, which has long been ignored by Apple and under-served by Samsung, said Commonwealth. In the third quarter of 2012, HTC sold 2.8 million smart phones in China, giving them a 5.8 percent market share and surpassing Apple’s tally.

“The iPhone’s average selling price is US$600, and that won’t come down. HTC already has strong product development and time-to-market capabilities. It now has to learn how to segment the market at price points below US$600 and take advantage of a market Apple ignores,” Lee suggested. And only time will tell if this market strategy will pay off for HTC.

HTC is determined to continue its focus on R&D and innovation to stay strong in Taiwan. “At least one company is still willing to keep its production line in Taiwan and to make the best products. I am proud to say that I stay in HTC to fight,” a senior HTC R&D official told Commonwealth.

Hon Hai is too big to fall

On January 10, Hon Hai Precision Industry Co. announced its 2012 non-combined revenues had reached NT3.2 trillion (US$107 billion). This broke its own record in monthly, quarterly and annual reports, an unprecedented high among all the private manufacturing businesses among the Chinese communities, Business Weekly reported. A month before this announcement, 62-year-old Terry Gou, chairman and president of Hon Hai, was included – for the first time – in Forbes’ World Most Powerful People list. Hon Hai was also listed as the tenth largest employer in the world by the UK’s BBC with 1.2 million employees in March, 2012. Nine months later, Hon Hai has almost 1.5 million employees.

At present, Hon Hai is a conglomerate “too big to fall,” said Business Weekly. Why? Because Hon Hai controls the supply of over half of the world’s desktop computers, as well as Apple’s iPhones, iPads, Sony’s liquid crystal display television sets, the PlayStation 3, and Nintendo’s Wii gaming machines. The company supports the livelihood of over 10,000 related companies. Not so long ago, Hon Hai contributed 20 percent of total revenues to the integrated industrial cluster of precision machine manufacturing in central Taiwan.

According to a study by the Topology Research Institute, without Hon Hai, the popularity of Apple’s iPhone, iPod, and iPad would have been delayed by two to three years, and the price of entry level desktop computers would be double, reported Business Weekly.

What does Apple’s decline mean for Hon Hai

After Hon Hai’s announcement of record high revenues came a string of bad news from Apple. News quickly spread that Apple intended to introduce a low cost iPhone to grab a share of emerging markets and break its own one-phone-per-year rule. This caused a sharp drop in iPhone 5 sales, the fastest depreciation and with the shortest life span in the history of the iPhone. Then Apple announced its intention to half its order of the iPhone 5. All these measures seriously hurt the company’s stock price. This means that Apple’s supremacy in commanding the highest market value in the world now faces a new challenge. It also casts a shadow over Hon Hai’s future.

Due to declining demand for the iPhone 5, Macquarie Securities believes iPhone 5 shipments will drop 32 percent from 44 million sets in the previous quarter down to below 30 million in the first quarter of 2013. Before the introduction of the iPhone 5 S in June, there will be two quarters of non-active operation, which will definitely affect Hon Hai’s revenue in the first half of 2013.

Gou has betted heavily on Apple in terms of capital and human resources. Almost 40 percent of Hon Hai’s 1.5 million-strong work force in China is reserved for making Apple products. Now the only breakthrough the world is expecting from Apple is iTV.

In 2012, Gou became a shareholder of Sharp’s Sakai Plant, a subsidiary of Sharp, and is planning to join Sharp too. Beside taking over the rights of management of Innolux Corp. (formerly Chimei Innolux Corp.), he has even used a large amount of his Hon Hai stock to borrow NT$20 billion (US$677 million) to bet on the success of Apple’s iTV.

Business Weekly noted that if Apple is not red hot any longer, Hon Hai, a conglomerate with revenues of almost NT$4 trillion (US$135.6 billion), is also bound to lose its luster.

Size a blessing and a curse

The flexible, innovative and fast developing IT industry has helped Taiwan earn the title of “Silicon Island,” playing an important role in the global supply chain over the last two decades. But after a paradigm shift bolstered by Apple and Samsung in recent years, Taiwan’s IT industry (OEM, ODM or key brands), is facing a crucial challenge and transformation.

HTC and Hon Hai definitely face significant challenges ahead. HTC is the world’s third-largest mobile phone brand, after Apple and Samsung, but in a much smaller company. The key for HTC’s survival will depend on its market development and marketing strategy.

Currently Hon Hai is expanding in central and western China by building a factory in Zhengzhou, Henan Province, and enlarging its facilities in Chengdu, Sichuan Province. However, Business Weekly reported, Hon Hai’s huge size is an advantage, but also a burden. Without transforming to increase its added value, will Hon Hai lose its advantage when China ceases to be a source of cheap labor?

And, because of its size, Hon Hai also has huge advantages, with its revenue accounting for 28 percent of Taiwan’s nominal GDP in 2012. The challenges faced by operating such a large operation can be illustrated by considering the company’s ability to feed its workforce at its sprawling factory in Shenzhen, Guangdong Province. On a daily basis the plant’s central kitchen faces the challenge of feeding up to 60,000 people per meal. Similarly, to sustain the firm into the future, Business Weekly asked, “Without Apple’s immense global brand value, who can satisfy Hon Hai’s appetite?”

Declining birth rate in face of rapidly aging population

According to the latest population projection by the cabinet-level Council for Economic Planning and Development (CEPD), Taiwan faces an accelerated aging population and declining fertility. In more than four years, the elderly population will outnumber the juvenile population, the United Daily News reported.

Taiwan’s postwar baby boomers will turn 65 in 2016, leading to a wave of retirement, with seniors exceeding more than three million. And in fifteen years, namely by 2027, Taiwan will run out of its “demographic dividend”, because every two young adults will be responsible for the care of either someone elderly or a child, further burdening the younger generation.

Losing demographic dividend

The “demographic dividend” exists when the dependent population accounts for less than 50 percent of the total labor force, that is, “two people raising one”. Currently Taiwan enjoys the dividend with the working population accounting for 70 percent, meaning about 3.5 people raise one. The “demographic dividend” was previously the island’s major impetus behind its rapid industrial development from the 1960s to 1990s when high economic growth enabled Taiwan to become one of the so-called Asian tigers.

The Taipei-based China Times reported that Taiwan’s aging population index climbed to 76.2 percent at the end of 2012, according to the Interior Ministry. Though still lower than the serious aging population index in Japan, the ratio is higher than that of the US, South Korea, Singapore and other countries, and is gradually inching up to European countries like the United Kingdom and France. This trend is really worrisome. According to CEPD estimates, as Taiwan’s aging population will outnumber its juvenile population by 2016, resulting in its aging index topping 100 percent. In 2060, Taiwan’s aging index will go up to 401.5 percent, meaning the population over the age of 65 will be about four times the population under the age of 14.

The paper pointed out in an editorial that with an increasingly aged population combined with declining fertility rates, Taiwan’s government must ensure the financial soundness of its social systems to provide for the elderly in terms of healthcare services and long-term care.

Low birthrate is the reason

The Central News Agency reported that it will only take Taiwan 32 years to move from an aging society to a super-aged society. In comparison, it took France 156 years, the US 92 years and Japan 35 years. This means that the increase in the aging population has sped up, and Taiwan’s government has even less time to prepare for it.

The culprit behind Taiwan’s aging population is its low birthrate. The number of newborns in Taiwan is one-third less than that of 15 years ago. At this pace, by 2016, one-third of the current universities will be forced to close.

Last year, the birth rate increased slightly since it was the Year of the Dragon, long considered to be the strongest and luckiest of the zodiac animals. And since the dragon has long been an emblem of the imperial families of ancient China, ethnic Chinese have always believed that people born in a dragon year will have a smoother life. During the most recent dragon year, approximately 230,000 newborns arrived, the highest in a decade. While the number of newborns in 2010 reached a historical low, about 170,000. This year’s birth rate is expected to be around 180,000, the United Daily News reported.

Considering newborns as public assets

Although an obvious solution to there being too few babies is to encourage people to have more babies, it is easier said than done. In a letter to the China Times, Wu Pin-wei, who gave birth to a baby in the Year of Dragon, attributed the low birth rate to the economic downturn in Taiwan, since married couples are wary about starting a family during times of economic uncertainty. There are also other causes, such as people getting married much later.

The best policies to encourage couples to start a family in Taiwan are the length of parental leave and the child-care allowance in the first six months of a child’s life. But many parents dare not ask for leave due to pressures at work. If the local government could set up high quality, inexpensive public childcare centers, Wu believes that young couples’ fertility rate would improve.

Wu noted that Taiwanese people must reach a consensus to counter its low birth rate by seeing children as a public asset, thereby providing adequate parental support. It should be done for those parents who are willing to have children, while those who do not want to bear children can make a contribution towards improveing the child-rearing environment by paying more taxes, said Wu.

Coffee king brews to appeal to local culture

Most Taiwanese people have heard of Starbucks Coffee, Dante Coffee, Mr. Brown Coffee and Ikari Coffee, but few have heard of Hong Ming-bao, even though most of them drink his coffee daily. Now the largest coffee importer in Taiwan, Hong, who has only an elementary school education, established Ping Huang Coffee in 1989.

Formerly a wholesale fruit vendor, Hong now imports about 20,000 metric tons of coffee beans yearly, supplying coffee to more than half of Taiwan’s breakfast stands from his factory in Taibao, Chiayi County in southern Taiwan. Additionally, Ping Huang has 120 franchised stores in Taiwan. They are Hong’s business outposts, spanning breakfast stands to stores selling lunch boxes, Business Weekly reported.

Prior to getting into the coffee business, Hong’s wholesale fruit business controlled 90 percent of fruit sales to local eateries and Japanese food restaurants in Chiayi. One day, as he was talking to a bartender, he discovered that a cup of coffee sold for NT60 (US$2.00), but has a profit of NT40 (US$1.35), a much better margin than the wholesale fruit business. At that time, there were very few suppliers of coffee materials, so he believed it was a business with potential. However, his friends warned him against entering the coffee business given the lack of coffee drinkers in Taiwan.

Despite their advice, Hong built a factory to roast fresh coffee beans, but he did not have the skills, or even know where to look to acquire the knowledge about how to correctly roast beans. Learning by trial and error, he established the factory with only three staff members and the smallest 10-kilogram machine on the market.

Today, Ping Huang sells large quantities of 3-in-1 coffee bags (including instant coffee, cream and sugar) to breakfast stores, to accompany customers’ fried eggs and toast. He also sells his coffee at beauty salons, telling the owners that by treating their customers to coffee, it will bring more cachet to their establishments then merely serving oolong tea.

Business Weekly reported that 80 percent of the hot coffee sold at private stores by freeway service stations is supplied by Ping Huang. This is a niche market not accessible to Starbucks or 7-Eleven.

Hong has even developed a special paper cup for his 3-in-1 coffee, just like that for instant noodles. In fact, he has even said that his coffee is a better tool than cash for swaying votes during an election. “It is better and cheaper to give supporters a cup of coffee than offer tea or cash. Most people do not understand my way of doing business. If they did, I would be out of business,” said Hong.

And just last year, Hong Ren-chen, general manager of Ping Huang and Hong’s eldest son, passed the exam to be a certified instructor of the Specialty Coffee Association of America (SCAA). There are currently only 70 Taiwanese people with this certification.

He cited Italian brand coffee maker Lavazza as a good example to follow, saying Lavazza also started out as a small grocery store offering roasted coffee, but now they are a brand recognized worldwide. Ten years ago, Ping Huang entered the China market opening in Shanghai. The company has ambitions to expand further by offering Taiwanese country style coffee further afield, Business Weekly reported.

Innovation keeps Taiwanese businesses competing in China

In the first half of 2012, Chinese business enterprises acquired U.S. companies in the fields of energy, aviation and entertainment, to the tune of over US$8 billion. Yet, they bought even more Japanese firms, according to Global Views monthly.

With more restrictions in place, Taiwan has not yet opened its doors to Chinese businesses, so Taiwanese firms are not as aware of this new phenomenon as their Japanese and American counterparts. However, Taiwanese firms operating overseas are all too aware of the threat posed by Chinese acquisitions.

Only large firms can survive

Global Views reported the advantage held by Taiwanese OEMs was overtaken by Chinese firms back in 2000. In the past, it was easy for Chinese workers at Taiwanese companies in China to learn from their Taiwanese bosses and then go on to start a competing business. The Chinese would then lower the price to undercut the competition. Small Taiwanese firms could not survive and only large-sized enterprises with intensive technology were able to stay afloat in the face of Chinese competition.

Then in 2008 new Chinese labor laws were introduced, which caused labor costs to increase along with rising land prices. Coupled with shortages of electricity, water and labor, smaller Taiwanese exporters were forced to relocate further inland or to move to a neighboring country in order to maintain a profit.

“Those who decided to move to Southeast Asian countries such as Vietnam, Cambodia, or the Philippines were surprised to find Chinese firms already there,” said Lin Den-feng, secretary general of a Taiwanese business association in the Philippines.

Competition is also keen in SE Asia

The 168 Shopping Mall, a wholesale market in Manila’s Chinatown, is the largest commodity distribution center in the Philippines. In recent years, the accents heard at the mall have changed. Now, 70 percent of the vendors are from China, said Lin.

Ko Chao-chih, president of a Taiwanese businessmen association in Indonesia was surprised to find that several dozen buildings at the wholesale market in Jakarta, Indonesia, were also taken by Chinese businesses.

Chinese businesses are even in evidence at the newly opened market in Burma. The Gem Ocean Seafood Corp., which entered the Burmese market from Taiwan in 1998 and has a solid foothold there, still feels the pressure exerted by the Chinese seafood businesses there.

A Taiwanese entrepreneur in the business of manufacturing screws in Vietnam used to buy a lot of tooling machines. He said a thermo heating processor machine made by a Taiwanese firm cost around US$500,000 while a Chinese-made machine was on the market for a third of the cost of the Taiwanese one at about US$166,700. As for quality, the Chinese machine was about 80 percent as good as the Taiwanese machine, so he decided to buy the Chinese machine, reported Global Views.

More competition than cooperation

Due to the magnetism of China in recent years, Taiwan’s technology has been increasingly exported to the mainland. Chinese companies that have made real progress in flat panel display manufacture and in the solar energy sector are those that have fully utilized talent from Taiwan.

Wang Jiann-chyun, vice president of the Chung Hua Institution for Economic Research in Taipei, noted that Taiwan and China will be more competitive than cooperative by 2016. According to the Foreign Trade Bureau, Taiwan’s exports to China (including Hong Kong) fell by 8.8 percent in the first half of 2012. Taiwan’s export reliance on the Chinese market also dipped to 38.8 percent, compared with 40.2 percent in 2011 and 41.19 percent in 2010. Taiwan’s share in the Chinese import market fell to 6.6 percent, reaching a record low, almost half of that a decade ago. All this indicates that after China’s industrial upgrade and transformation, Taiwan is likely to lose its competitiveness.

A cut-price war is coming

In the field of manufacturing, China has overtaken Taiwan in low-technology standardized production such as processing, assembly, and component manufacturing. Even Taiwanese businesses predicted that in the near future, Taiwan’s high tech companies like HTC will face stiff Chinese competition.

Li Yon-chian, a researcher at the Topology Research Institute in Taipei, noted that China will replace Japan as the world’s third largest supplier of flat panel displays in 2013, but will still lag behind Taiwan. Li suggests Taiwanese companies should enter deeply into the domestic consumer markets of China, to lead the development of marketing with the advantage of technology at a time when China has not fully developed, in order to prevent Chinese firms from launching a cut-price war. He warned, “Otherwise, once China catches up with Taiwan in terms of technology, the Chinese will launch a cut-price war with the support of the Chinese government. Taiwan will not stand a chance then.”

However, Global Views pointed out that there are still some areas where Chinese and Taiwanese firms can cooperate with mutual benefits. Taking advantage of the Chinese market, Taiwanese businesses can expand the scale of their operations. The relationship can be a complimentary one, with each side taking advantage of the other’s strengths to cover any shortcomings. They can even partner in exploring international markets.

Survival of the fittest

Taiwan still enjoys an advantage in terms of personnel talent, high technology, innovation and services, while China is capital-rich. While it is easy to go international, it is not easy to develop talent with an international perspective.

Taiwan is good at talent development, which is China’s weakness. Taiwan is also capable of a fast response in R&D and better at customer service. Taiwan has adopted international standards a lot earlier and has forged stronger international connections. Taiwanese firms respect intellectual property rights and have gained a better reputation in this regard. All these factors are not easily overtaken by Chinese firms.

Taiwanese companies are not blissfully ignorant of the forthcoming competition between Taiwan and China, and have also started to explore the niche innovation market. What Taiwan badly needs is a truly global brand presence. Although this is very hard to achieve, some Taiwanese firms have been able to succeed internationally.

Ultimately, it is inevitable that China will become a competitor of Taiwan. This is part and parcel of natural selection and the “survival of the fittest.” Whether it is South Korea or China, healthy competition provides a good impetus for pushing Taiwan forward, noted Global Views.

New premier confronts challenges, draws inspiration from JFK

In the early morning hours of February 1, Jiang Yi-huah woke up from a restless night of sleep. As the newly appointed premier of Taiwan, he felt the heavy responsibility of overseeing the welfare of the country’s 23 million people. In a recent Commonwealth profile, the monthly noted his rapid political rise, from professor to premier, in five short years.

After graduating from Yale University in 1993, Jiang returned to Taiwan to become a professor of politics at National Taiwan University (NTU). Jiang entered public service in May 2008, when he joined the cabinet as the minister of the Research, Development and Evaluation Commission. In September 2009, he became the youngest Minister of the Interior at the age of 49. As an academic, he had not worked in government administration before, but he quickly received four promotions in the space of just five years. Now at 53, he is Taiwan’s youngest premier in 50 years.

Born in the countryside of Keelung (northern Taiwan), Jiang studied the political thoughts of German-American political theorist Hannah Arendt and is considered a liberal scholar. In 2012, he gave up his NTU professorship to become Taiwan’s vice premier. Although he entered the political arena late in life, he did have some political aspirations earlier on. According to Commonwealth, he wrote a high school essay saying his dream career was “to become the president of Taiwan.”

Jiang’s rapid rise to power is attributed to his communication style, his willingness to listen, and the fact that he is not a bureaucrat. He understands strategy and applies numbers to clearly illustrate his point. As an avid practitioner of Tai Chi, he presents a gentle demeanor, but is a tough negotiator.

Critics of Jiang have pointed to his lack of experience with grassroot political operations, and his lack of familiarity with legislators, despite previously being the Interior Minister. He needs to overcome these weaknesses since his new role will require him to have a national perspective and not just to be an advocate for Taipei City.

Upon returning from the Lunar New Year break, Jiang met with his new cabinet and talked to each one of them. He told them, “You have to treat every day as the last day of your appointment, regardless of how long you are going to serve.” Jiang even rewrote a quote from former US President John  F. Kennedy, urging them to “ask not how long the term you will serve, but ask what meaningful things you will do during your tenure.” He urged them to make the right policy in order to leave a lasting behind.

For this coming session beginning March, the cabinet has assigned the top priority to 50 bills in the Legislative Yuan. They include pension reform, nuclear power, and free trade zones. Foremost for the new administration is restarting negotiations on the US-Taiwan Trade and Investment Framework Agreement (TIFA), which will resume in March. Among one of the topics that will surely be contentious is the rising pressure to allow American pork to be imported into Taiwan. There are strong differences between the ruling and opposition parties regarding these issues, and there are also diverse voices reflecting the different special interests in Taiwan’s society.

Jiang says he will try to build consensus by visiting the parties concerned with a sincere attitude. He sees this as one of the most important steps to democracy, reported the Economic Daily News.

Taiwanese stress love, family above career: survey

Finally, the Year of the Dragon has come to an end, and the Year of Snake is here. Frankly speaking, Taiwanese people did not fare so well in 2012. Taiwan’s economy continued to decline, with its GDP growth rate at only 1.25 percent. But if the spotlight was taken off economic issues, then 2012 was not totally hopeless. There were a few high points.

Jeremy Lin was a big factor. Taiwanese people took great pride in the NBA player’s meteoric rise to fame since his parents moved from Taiwan. Taiwan’s democratic society remained vibrant, with another presidential election completed peacefully. And more international visitors are discovering Taiwan. According to the Tourism Bureau, there were 7.31 million international visitors traveling to the island in 2012, 20 percent more than the previous year.

In a joint survey by Business Weekly and EOLembrain, 1,068 persons were given a satisfaction survey on their life in 2012. Although those who were not satisfied more than doubled from those who were satisfied in 2012 (31.9 percent versus 15.1 percent), 50.7 percent said they were satisfied with 2012.

The Business Weekly survey found the top reason for the respondents’ satisfaction was “family love or romantic intimacy” (28.4 percent), followed by “career achievement” (21.2 percent) and “learning new stuff” (12.2 percent).

Hsu Wen-yau, chairman of the Psychology Department, National Chengchi University, pointed out that the survey results show that Taiwanese people have diverse values, and are not solely focused on career advancement or wealth accumulation. Instead, they give equal weight to seeking fulfillment and nurturing relationships.

From another perspective, if “career achievement”, which is heavily dependent on outside environment is removed, the other seven responses to the survey questions are more within the respondents’ control. Meaning, at least 78.8 percent among those respondents who felt satisfied in 2012 can find happy reasons from things under their control.

The survey also counters old stereotypes, that the man is responsible for financially supporting the family, while the woman remains at home. The majority of the respondents, regardless of gender, who found satisfaction in “family love and romantic love”, preferred a caring, kind, affectionate and dedicated relationship (26.7 percent of men, 30 percent of women).

Agewise, young adults in their 20s derived more satisfaction from working, while people in their 30s felt they could very well work harder, but 40 percent derived more satisfaction from “family love and romantic love”, higher than any other age group. The trend reversed again for people in their 40s, since more turned back to their careers to find satisfaction.

Even though 15.1 percent of respondents were satisfied in 2012, 75.3 percent believe 2013 will be better, five times the ratio of those who were satisfied in 2012. Overall, this shows that Taiwanese people are optimistic, according to Business Weekly.

Eva Air to set up flight school in Sacramento

In early February, EVA Air announced its intention to invest US$20 million to set up a flight school at the Sacramento Executive Airport in Northern California. The school will open in 2014, reported the Economic Daily News.

In recent years, many airlines have set up their own aviation schools. Among the Asian airlines, Japan’s All Nippon Airways and Singapore Airlines have already set up flight schools in the United States and Australia, respectively. EVA is the first airline from Taiwan to set up its own flight school, demonstrating the importance the company places on pilot training.

Last year, EVA Air’s chairman Chang Kuo-wei indicated that they might invest in opening a flight school in the US in order to safeguard against a shortage of qualified pilots in the future. EVA expects to train 16 student pilots in the first year, and expand to 100 students in 2017. Initial priority will be given to EVA Airway’s internal pilot training, but they do not rule out expanding to accommodate a larger market in future.

With China’s aviation industry undergoing such rapid growth, the need for pilots is outpacing the supply for the country’s 1,000-plane fleet. Even though there are flight schools in China, most of their pilots are still sent to American schools for training. American flight schools are overwhelmed and unable to meet the demand. After careful assessment, EVA Air decided to invest in this new opportunity.

According to the Economic Daily News, before EVA can provide flight training, it will need to apply for certification with the US Federal Aviation Administration (FAA) and Taiwan’s Civil Aviation Authority (CAA) under the Ministry of Communications. After being granted certification from Taiwan’s regulatory body, EVA can be commissioned by the CAA to administer aviation tests, allowing student pilots to take their licensing exams at the school immediately following their training. 

Representative King: US-Taiwan trade talks to resume in March

On February 15, King Pu-tsung, Taiwan’s chief representative to the United States, said that Taipei and Washington are expected to restart the Trade and Investment Framework Agreement (TIFA) negotiations on March 11. Speaking to Chinese-language reporters in Cupertino, California, he said that Deputy US Trade Representative Demetrios Marantis will lead a delegation to Taipei to restart the negotiations.

King pointed out that the TIFA negotiations between Taiwan and the US have been suspended since 2006 due to the US beef issue. Now that Taiwan’s Legislative Yuan has passed the law to lift the ban on US beef imports last July, the two sides will resume their talks. With positive expectations for the TIFA, Taiwan hopes the talks will cover more business cooperation issues, such as a bilateral investment agreement (BIA), strengthening economic and trade relations between Taiwan and the US.

As an indication that US-Taiwan relations are at a thirty-year high along with the level of mutual trust, Rep. King mentioned Taiwan’s admission to the US Visa Waiver Program (VWP). Taiwan is one of just 37 countries included in the VWP, which translates into visa-free entry into the US for Republic of China on Taiwan passport holders. Taiwan’s entry into the program is meaningful since it is the only member without formal diplomatic ties with the US. Moreover, the US government has recently announced further improvement to the privileges, exemptions and immunities enjoyed by Taiwanese diplomats.

Rep. King assumed his new post in Washington, DC less than three months ago. Since arriving in the US, he has met extensively with US officials in the executive branch, with Congress, think tanks, scholars, diplomats, and has actively pursued relationships which is vital to Taiwan’s national interests. While studying President Obama’s new national security team, he noticed that the new Secretary of State John Kelly and Secretary of Defense nominee Chuck Hagel emphasized the importance of the Taiwan Relations Act and Taiwan’s security at their nomination hearings, King said.

While meeting with the press, Rep. King also spoke about President Ma Ying-jeou’s East China Sea Peace Initiatives. King said that the peace proposal to shelve sovereignty disputes and jointly develop the resources around the Tiaoyutai Islets is highly endorsed by local think tanks. King reiterated that Taipei will never compromise on the sovereignty of the islets, and also will defend fishing rights and the safety of Taiwanese fishermen.

That evening, Rep. King and his wife Chou Huei-ting attended a welcome party in their honor hosted by Taiwanese-American associations in the South Bay. At the event, King expressed his appreciation to Taiwanese Americans for their hearty support of Taiwan. After a whirlwind four-day visit around the Bay Area, Rep. King and his wife returned to Washington on February 17.