In Government Circle: Creating a Strong Base in R&D
The Department of Industrial Technology is responsible for promoting Taiwan's capability in research and development to support high-tech manufacturing.
For the sake of Taiwan's long-term industrial development, the government started more than two decades ago to implement projects aimed at promoting high-tech industry, facilitating industrial upgrading, and enhancing industrial research and development (R&D).
As the bulk of the country's industrial companies were small and medium enterprises (SMEs) with only limited resources, Taiwan was particularly deficient in R&D capability. For that reason, the Ministry of Economic affairs (MOEA) in 1979 began to set aside budget for a Technology Development Program (TDP), commissioning research institutions to take part in industrial-technology research projects as a means of providing technological support for the private sector. An Office for Science and Technology Advisors was founded to take charge of the TDP, and in 1993 the office was transformed into the MOEA's Department of Industrial Technology (DoIT). Whereas another technology-related government organization, the Science and Technology Advisory Group under the Executive Yuan, is responsible for mapping out the strategies for pursuing technology-development policy, DoIT is charged with devising measures for the policy's implementation.
The department's primary missions are to track industrial trends and requirements, to ensure the timely introduction of needed technology, and to assure the effective transfer to domestic companies of technology developed through the R&D programs it sponsors. "Thorough policy planning is always the first step in industrial development," says Hwang Jung-chiou, director general of the department. "DoIT holds the government funding and determines how it should be allocated in view of the direction of development of domestic industry."
Between1998 and 2004, the TDP annual budget increased from NT$13.7 billion to $18.2 billion (US$415 million to $552 million). Some 80% of the funding is usually distributed to major national research institutions such as the Industrial Technology Research Institute (ITRI) and Chung Shan Institute of Science and Technology. Other recipients include well-equipped private industrial companies and large domestic universities. By field of industry, communications and optoelectronics takes the highest share, with a total of 23%. In line with the government's resolve to nurture the biotechnology and pharmaceutical industries, the amount of subsidy to those fields has received the highest growth this year.
Taking on a new mission
As part of the campaign to turn Taiwan into a "global high-value-added manufacturing center" and an "industrial innovation and R&D center," DoIT three years ago was also given the task of encouraging -- through technical and financial assistance -- both domestic and overseas companies to establish R&D centers in Taiwan. The hope is that besides manufacturing, Taiwan's industrial development can be extended to encompass product innovation, R&D, and services involving a high level of knowledge content. These corporate R&D centers are expected to serve as the main engines driving Taiwan's future industrial innovation. Among the applications they cover are technologies for information/communication, opto-electronics, machinery, materials, and chemical engineering.
A key purpose of encouraging local companies to establish such R&D centers is to help accelerate the companies' transformation into highly innovative businesses so as to better assure their long-term viability. Another goal is to ensure that core R&D activities stay in Taiwan at a time when most manufacturing businesses have moved operations to China. Domestic companies that have joined the program include many of Taiwan's foremost semiconductor, computer product, textile, and automobile manufacturers. For example, Quanta Computer Inc., the world's largest OEM manufacturer of notebook computers, has established a technology innovation center designed to shift the company's basic orientation from product assembly to a technology focus. Among the others that have set up R&D centers, earmarking 2-4% of their sales revenue to R&D, are Hon Hai Precision Industry Co., the world's top manufacturer of connectors and cable assemblies, and the Far Eastern Textile Co.
A total of 66 such R&D centers have already been established through DoIT's efforts, far more than the department's initial goal of 40 centers by the year 2006. These centers currently employ more than 4,000 R&D engineers, including some 250 quality high-tech professionals attracted from overseas to work in Taiwan. "The department wishes to raise companies' awareness of the significance of R&D," says Emily Hsu, a researcher at the department. "We act as a motivator of this movement in hope that more companies will follow suit, even after the department shifts its focus to other tasks."
As for the R&D centers set up by multinationals, their presence in Taiwan is seen as having a positive influence on domestic companies as a result of the many cooperative projects being undertaken, and also as raising the overall level of quality in the nation's R&D activity. "The department acts as a communication channel between Taiwan and foreign companies," says director Hwang. "We must find the right companies for cooperation to develop the right products." These partnerships have proved to be mutually beneficial.
So far, 22 leading foreign companies, including Dell, IBM, Microsoft, and Sony, have been approved to establish R&D centers in Taiwan, with an anticipated total investment of NT$19 billion (US$576 million). Within three years, an estimated 550 foreign R&D professionals will be working in those centers. Tom Mitchell, vice president of HP's product development center, which was set up in September 2001 through DoIT's assistance, praises Taiwan's well-established R&D infrastructure -- particularly for high-tech manufacturing -- as well as its mature, professional work force. But the main reason for locating the center in Taiwan was to be close to HP's ODM suppliers' R&D teams and production facilities so as to help improve their products' quality and reliability. The HP center has some 140 employees from 16 different countries, around 100 of them R&D engineers and project managers.
During the planning and preparation stage, DoIT provided assistance with funding, analytical data regarding Taiwan's IT industry, and help in recruiting technical professionals, especially entry-level engineers contacted through the universities. Calling DoIT a "great window" into all Taiwan agencies and organizations, Mitchell says the department's assistance was "invaluable" and has greatly improved R&D efficiency.
Taking TDP to the campuses
In 2001, MOEA created a "TDP for Academia" to encourage universities to play a more active role in promoting R&D to help spur industrial development. One aspect of the program is for universities to cultivate more industrial-technology R&D talent with the assurance jobs will be waiting for them in industry after graduation. Another purpose is to facilitate the transfer of technologies from university labs to non-profit research organizations and to industry. And through the incubator programs being run at various universities, TDP for Academia can also assist SMEs to gain more advanced technology. Director Hwang says the impact of such efforts is much greater than that of the usually more academically oriented projects organized by individual professors under the sponsorship of the National Science Council. The TDP projects tend to run over a longer period of time in the hope that they will have a strong impact on industry, he notes.
The 2003 budget provided funding for this program of NT$372 million (US$11.3 million), and a total of 21 projects had been signed and put into execution by June last year. Under the program, ITRI has been cooperating with such major universities as National Taiwan University, National Chiao Tung University, and National Tsinghua University to set up joint research centers. The Institute for Information Industry and National Chengchi University have worked together to establish an intellectual property research center.
The need for alliances
Also in 2001, MOEA launched an initiative to encourage industrial companies to form R&D alliances. "In Taiwan, the up-, mid-, and downstream manufacturing facilities are usually owned by different small and medium enterprises," explains Hwang. "Various types of R&D alliances can be formed by companies that are not directly competing with one another, so as to integrate and upgrade domestic industrial-technology R&D systems and thus boost the SMEs' competitiveness." As of the end of last September, 32 preliminary research plans had been drawn up with the participation of some 140 companies, half of them SMEs, in such fields as telecommunications, opto-electronics, machinery, semiconductors, flat panel displays, biotech, and herbal Chinese medicine.
In line with global trends, the department has also actively promoted international cooperation. The department has encouraged Taiwan's research institutes to set up cooperative centers at overseas universities to help organize technology transfers and to search for opportunities for joint R&D projects. Such offices have been opened at the Massachusetts Institute of Technology and Stanford University in the United States, and at universities in Moscow, Tokyo, and Berlin. "In the past, Taiwan could only obtain technology from abroad by buying it," says Emily Hsu. "The fact that we are able to participate in the R&D process with other countries is proof of the R&D strength that Taiwan has now developed."
Another major responsibility for DoIT relates to e-business. Considering that many foreign governments have been actively promoting the use of e-business for supply-chain management, the Executive Yuan started a similar push in 1999, choosing the IT industry as the first model for implementation. DoIT was put in charge of the project.
In the "alphabet soup" adopted by the department, Plan A is to facilitate international procurement through an e-business supply chain, with the aim of accommodating US$18 billion in international purchases of IT products. The main participants are the Taiwan subsidiaries of IBM, Compaq, and HP, plus 42 of their domestic suppliers. Plan B is to form an e-commerce supply chain by major manufacturers of IT systems, components, and parts. Together, Plans A and B lay the foundation of the promotion of Plans C (cash), D(delivery) and E(engineering) -- cross-country management of financing, logistics, and engineering design to enable Taiwan to become an operations center that receives orders in Taiwan for production all over the world.
In 2001, Rosetta Net, a consortium of major IT, electronic component, semiconductor, telecom, and logistics companies, presented an award to the Taiwan government for successfully accelerating e-business operations in the Taiwan IT industry. DoIT hopes to use the IT industry as a benchmark for solving problems and establishing a promotion model, so that the initiative can be applied to other industries in the future.
