Taiwan's Economic Future

Taiwan Living in Taiwan
1

Is Taiwan on a permanent downhill economic slide? That’s all I can see at this point. I think it’s currently living in the afterglow of its economic golden age and eventually it will become clear that Taiwan is caught in the same permanent economic downdraft as Japan.

If this happens, how far will the slide be? Will Taiwan end up being just another poor Pacific island nation? What will happen to the foreign community in such a future?

Taiwan’s leaders all have their heads in the sand at this point. ‘Clueless in Taipei’ is an apt slogan for their lack of meaningful and consistent economic policies.

I think there is a small window of opportunity for Taiwan to pass through though towards another, positive future but it will be difficult and require vision and courage.

I’d be interested in hearing other perspectives on this issue.

2

From my dealings with the IT industry here, I think most companies will fail in the next five years. The cheap cheap cheap (also known as ‘chabuduo’) quality won’t hack it soon. If people want cheap parts/computers/whatever with poor quality, they will soon have mainland China to choose from, where the quality is just as crappy the the prices even cheaper.
I think a few larger companies might help save Taiwan, as they have vision beyond next month’s profits; Acer, ViewSonic, Trend Micro, etc. They seem to realize by raising your quality (what a novel concept…) and garnering a reputation, you can even raise your price a little, and people will still buy!! Unfortunately, most companies here are unwilling to pay the upfront cost for improving quality, as they can’t see that far ahead. We’ll see.

I’m also interested to see where the gov’ts promotion of other future-industries, such as biotech, will lead…

3

Littleiron:

I think Acer has quite a reputation in Europe (at least in Germany) where they belong to the more expensive brands. Which can’t be said of all those cheap Taiwanese no-names. Obviously, Acer and a couple of other ones are on the right way.

But for them to sell higher quality products for higher prices, there must be people buying higher quality products for higher prices. Do you think people here are ready to spend more money on better quality? With a down-sliding economy, people will probably try to get even cheaper stuff instead of thinking ahead and buying better quality. I don’t really see that this is going to change.

Iris

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4

Taiwan’s economy will go through the drain, at least the traditional industry.

There is no way that an IT/hightech/biotech industry alone can support Taiwan.

Taiwan has to be cleaned up and become the #1 tourist destination in Asia.(yeah right!)

In the end … we all have to move to China or become a tour guide in Taiwan.

5

heh. people love forcasting doom. remember how many people thought the us economy was doomed in the 80’s?

anyway, there are it companies that make crappy products here, but taiwanese companies also make some of the highest quality computer equipment in the world. how many people out there would even consider a motherboard that wasn’t made in taiwan? cd/dvd drives? how many of the top rated ones are actually taiwanese made with another company’s name slapped on them? the list goes on.

the “china will suck up all of taiwan’s business” argument sounds an awful lot like the “nafta will ship all american jobs to mexico” argument.

6

Taiwan, being an export driven Country is highly dependent on the U.S. So if the US economy is in the crapper, so will be Taiwan’s. Until the US market improves, I see very little chance in a turnaround for Taiwan.

Taiwan is infamous for costing down on electronics. They are quite effective with a very strong talented work force that is paid crap. A PHD will get $45K USD, MBA $35K USD to start (Conspiracy of the TW RICH). Their problem is they don’t INNOVATE!!! Seems like they are afraid to, since they are so use to copying. So, they take mainstream technologies with eroded margins from the US and Japan to mass produce here. Note every technology brought over will soon be manufactured by tens of new TW companies. Sure they cost down. To the point were none of the companies are profitable. Take a look at DRAM and LCDs… Dumb f**Ks… The high end tech, the US and Japan will keep for themselves until it is not competitive for them to produce anymore. Then to TW, this tech will go.

Where China is concerned, you will notice only the low tech manual intensive manufacturing stuff moving over there. Lens polishing, LCD, and ASSEMBLY!!! It will be some time before China’s talent pool catches up to TW’s. But this will only be in a couple of years.

So, what will you do in TW if you’re a foreigner? If you have an expat salary, kiss it good bye after your contract term ends. The talent here do not require foreign expats anymore, unless you are transfering some innovative tech (fluidic self assembly) or new financial knowhow (NPL securitazation). Something TW has not seen before. But then again, one year and your out again. Though there are still alot of language teaching jobs available. Go figure… Point 1 first paragraph…

Just getting started… But too sad to continue…

7

Some food for thought below. This is from October’s Injection Molding Magazine:

The lure of cheap labor hurts Mexico

By: Clare Goldsberry
Cheap and plentiful labor, along with the ability to ship components into Mexico duty-free as long as the finished goods were exported, was the carrot for many U.S. and Asian manufacturers to move operations south of the border over the past three decades.

Now, Mexico is hearing a giant sucking sound from the Far East. China, with its plentiful and even cheaper labor, is luring manufacturing away from Mexico. With it goes the promise of good jobs and a better life for thousands of Mexican people. The maquiladora legacy has taken an ironic twist: higher wages but fewer jobs.

One report noted that more than 500 foreign-owned factories have closed over the past two years, in large part because an entry-level worker in Mexico makes nearly four times what a Chinese entry-level worker earns

8

Hard to say what’s going to happen to this place.

China is taking over most of the low-end manufacturing. this is labor intensive, meaning that unemployment is probably here to stay.

High end? China has 2-3 low-end IC foundries up and running now. US export restrictions will keep the most advanced technilogy out of their hands near and mid term. That industry will stay in Taiwan for the next 5-10 years.

Taiwan struggling up the value chain, building brands and slowly eroding western brands?

Acer might have triedwith limited success, but they aren’t a real competitor in the US or China. Europe is merely a consolation price.

D-Link tried building a brand within their networking equipment business. They fell flat on their face.

Chip design etc? The brains is here, not in the mainland. Taiwanese chip designers, engineers etc demand expat benefits for postings on the Mainland. The mainland engineers aren’t there yet.

PC/NB assembly etc has largely migrated, followed by PCB manufacturers etc. More unemployment here.

Traditional industries? Moving. some may stay, but most of them will be gone, if they haven’t left already.

In other words, pockets of mid to high end industry tech industry will stay mid term, but most of the lower end is migrating.

We will have pockets of prosperity and risingunemployment. Moderate economic growth mid term, shring to non looking out longer term. Therte might be one cycle left, but that will most likely be it.

What does that mean to the foreign community?

Foreigners on expat packages are getting moved to Shanghai or are getting replaced with locals. Too bad for them.

English teachers? Business will be good, no need to worry. Locals will compete for the increasingly scarce jobs and will upgrade their skills as much as they can.

Young career-minded (IE non-teaching professionals) foreigners like me? I personally will hang on here for as long as possible, but I must admit that I see and treat Taiwan as a good training ground before relocating to the Mainland at some point in the future.

However, the Mainland is not a very stable place and plenty can go wrong. In case we have another Tiananmen, Taiwan might get a reprieve.

9

I agree. My interpretation of what you’ve said is that it is a detailed analysis of how Taiwan will inevitably slide downhill.

I’ve developed loyalties to Taiwan though during the time I’ve lived here. Taiwan stands for something good to me and Taiwan society has treated me well and fairly.

So I’m not completely ready to say to myself that when Taiwan’s troubles really get serious in the future I’ll just leave and go to China.

One thing I’m trying to figure out in my conversations with Taiwanese people though is if they themselves feel the same loyalty to Taiwan or if their own solution will just be to go to China in the future.

10

I work with a lot of OEM/ODM manfs like Ambit,Askey,Delta…
When I asked them a similer question about 3-4 months ago they said all the design will take place in Taiwan, manf will be done in China under Taiwanese manager since mainland does not grasp the concept of quality. So the bottom layer will be mainland guys but the brains will still be from Taiwan.

11

A bit on TW and China…

As much as there are foreign educated TW MBA and PhDs coming back to TW, there are tons more from the PRC that have and will continue to move back to the mainland to start their own business or take the lead at foreign companies with their western tech and management knowhow. The difference is saturation. TW with only 24Mn people don’t require much to permeate, hence the vast opportunity in the PRC for foreign talent now.

But how many foreign companies are successful in the PRC? You will find the failure rate high. Even Taiwan companies with the best overall performance relative to other countries are still failing on average. Why? Because business and politics must go hand in hand (good guanxi). Domestic companies within the circle of trust (guanxi that allows the easy and safe reciprication of bribes) will always come first before foreign companies. The Asian way of doing business. Not rocket science… The old boys network in full effect. Taiwan may have the language barrier in their advantage, but they will always struggle in the political spectrum wrt China.

12

Within 5 years the unemployment in Taiwan will reach 8% if not higher.

The domestic industry at the moment is still supported by local demand but thanks to the WTO this will be eroded and more cheap imports from China will find the way onto the Taiwan market, with high unemployment as a result.

Not everybody is design engineer or even highly educated.

Financial hub? forget it!

Hightech/service/tourisme industry that’s the way it’ll go.

13

[quote=“nox”]
Hightech/service/tourisme industry that’s the way it’ll go.[/quote]

Right… because service is something Taiwanese are famous for… :stuck_out_tongue:

Hightech/tourism maybe…

14

There’s an outside chance Taiwan could become a tourist destination. Imagine Taiwan island ringed by one continuous beachside bike path with hostels/B&B’s every hundred kilometers or so. The individual hostels would specialize in, say, scuba centers, sailing centers, aboriginal culture centers, high-class health spa centers. Each night when you stopped for the day, the next day would offer an entirely different ‘Taiwan’ experience.

15

why would taiwan want to be a tourist center? how many countries have become successful and rich based on tourism? look at hawaii, an economy that’s based on tourism and stagnant. most of the young hawaiians i’ve met had to move to the mainland because of lack of jobs working in anything but hotels and resorts.

tourism can get you from a dirt poor economy to a pretty good economy. it can’t turn your economy from pretty good to great. taiwan is already an ok economy so i can’t really see how a majot emphasis on the tourism industry can carry the economy forward.

16

Yeah … but it helps to keep jobs and fuel the economy, it’ll bring in foreign valuta.

It can never support Taiwan on it’s own, that’s why I wrote a combination of hightech/service and tourism.
Probably tourism belongs under the service industry so the hightech and service industry has to carry the load.

There is no other way.

And there will be still a lot of unemployed people.

17

Tourism alone isn’t enough. It would be one component of a new Taiwan economy.

Taiwan is located near large populations with growing incomes but limited recreational opportunities. Hawaii is expensive, isolated and over-commercialized.

If Taiwan made itself a clean ‘Green Island’ destination with unique outdoor experiences like a bikeway ringing the entire island and new industries based on applying high-technology to improving health and self the people would come.

Taiwan could be Asia’s health-care, extreme fitness and general self-improvement mecca.

18

Tourism is a pretty major part of the Danish economy. We’ve done ok. :mrgreen: While Taiwan already has lots of world class tourist attractions, such as Taroko gorge and the national palace museum, the framework simply isn’t in place. Getting a visa is a hassle and the population doesn’t really have the mindset yet.

Taiwanese businesses might have an edge on the mainland, however the regulatory environment favors mainland companies. Chip design is a brain intesive industry. It moved to Taiwan during the 1990’s. It can and eventually will migrate again.

My personal view on Taiwans economy was very bullish when I started working here 2 years ago. Presently, that view has changed somewhat, I must admit.

I would believe that Taiwans chance is to hang on to as much of the High tech industry as it can. The development of a viable service industry and an ok tourist industry should help absorb surplus labor. The regulatory enviroment does not support any notions of Taiwan as a gateway to China. The legal system and the quality of public services here is not up to scratch. Not to mention the lack of direct transport links.

I feel a bit sad about it as I am very emotionally attached to this place. My wife is Taiwanese, I spent 2 very exciting years here studying Mandarin in the mid 1990s and in many ways my two stays here have matured and changed me.

19

I think Holger that there is a lot of thruth in your post and I know how it feels to be here for a while. You get somehow attached to a place, good or bad.

My wife too is Taiwanese and I experience the whole economic drain frist hand.

My wife used to work in a traditional industry company in Taiwan but quit 2 years ago because of the bleek future for her company (Taiwan tea company) and went to work to China for another Taiwanes traditional industry manufacturer. She makes more money allright but she works a lot more hours over there.

I’ve been there (in the factory) many times now and really I’m not planning to move there (Guangdong, close to Shenzhen). It’s not my thing yet, Shanghai maybe would suit me but it’s a big maybe.

I too work for a tradional industry company and I can tell you it’s hard work to get enough customers who want something produced in Taiwan. Therefore, we too have shifted part of our production (75%) to China.

I really can speak of first hand experience. I’m on the frontline.

20

The reason Taiwan does not so much copying is that it previously hasn’t had the resources to build new products and industries compared to the Japanese and Americans. Plus there is a lot less risk in continuing with a proven product and tweaking it a little than inventing a whole new market.

Definitely it is a worrying state of affairs. I believe anyone who works with Taiwanese people (especially in local companies) can tune into the gloomy outlook. Working in one of Taiwan’s much vaunted ‘new’ industries, biotechnology, gives an interesting insight.

Biotech will always be a niche industry except for regions or very small countries. The Taiwan govt has been promoting biotech for 20 years now but the sad fact is the most talented scientists skip off to the US and don’t come back on the whole. Things are getting better and I work with some good people but we know we have an uphill struggle.

The problem is that the investment sector and the insecurity of the island help to reduce long term investments in industry here, the investors want to see a cash return in 3-5 years and profits in 1 or 2, practically impossible in biotech. There are about 100 new biotech companies in Taiwan, of which about 10 are decent and none of which are an international brand name in the industry. The govt funds are given to venture capitalists who proceed to invest in some crap semi-state govt ventures governed by Taiwan Salt or Taiwan Sugar. The vast majority of the venture funds for biotech from Taiwanese corporations such as UniPresident and Formosa Plastics (amounts to many billions of USD) is invested in US and European countries. In short there is no patriotism when it comes to investing! (which is natural I suppose, but sad all the same)
Most of the local companies are capitalized on 200 million NT (a pittance) and due to the IPO climate right now are facing major hurdles over the next year or two.

We are selling some stuff in China but I believe the focus on selling goods in China is an admittance that they think our products are not good enough for 1st world countries. It’s the wrong attitude. Our people are good and capable but our management is looking to ‘cost down’ what can’t be costed down (nobody ever got anywhere costing down in biotech, maybe PCs and LCDs but not biotech) and investors don’t care if we make toilet paper as long as we break even next year. THe CEO is from the engineering sector, need I say more.

With the emergence of China some countries will be on a permanent downhill economic slope.
Look at the Phillipines, the Phillipines was the powerhouse of the Asian region in the 60’s , now look at it. Focus on high end stuff and chuck ChaBuDuo out the window. Is Taiwan’s only hope to throw itself to the Chinese juggernaut?Looking at Hong Kong that is not much of a hope. Yes the only way I can see to move ahead is to do what they’re doing already. Invest in China but keep some parts of their company here… It has to be noted that Taiwan is still doing rather well in electronics–look at mobile phones, LCDs,optoelectronics etc they are doing pretty well and will continue to do so.

Tourism from China, maybe. Tourism from anywhere else. Forget it. You’d have to remove an awful lot of concrete. Look at HoshiHuan Mtn and see for yourself. Still will be a niche industry.

Taiwan now reminds me of Ireland in the 80s, stagnation, gloom and doom, emigration. Yet the country strapped itself up, cutbacks abounded and with European funds and a low tax regime turned around and believe me NOBODY ever believed that was going to happen in the 80s. These things are difficult to predict.
Taiwan doesn’t have the EU and an American boom to
move things now but when you have a high education, an international outlook, young population and work as hard as people here do I would say they will get through the bad times. Some people predict with direct links Taiwan will be a weekend retreat where families stay and the father comes back on the Friday evening flight from ShangHai, ShenZhen etc…