With more than 70% of Taiwan’s GDP coming from the service sector, one would expect a government department devoted entirely to addressing the challenges the sector faces – or at least strong lobbying groups geared toward helping the sector grow. That’s not the case in Taiwan, an economy that has traditionally focused more on the industrial sector, especially manufacturing.

One reason for the lack of organized attention to the sector, industry experts said, is that services is such a broad area of the economy that it’s like a smorgasbord – covering such disparate businesses as wholesale and retail, finance and insurance, transport and storage, communications, healthcare and social welfare, hotels and restaurants, education, recreation, real estate, professional and technical services, and much more.

On top of that, more than 95% of the companies in Taiwan’s service sector are small and medium sized companies, many of them even smaller than typical small and medium enterprises in other developed countries. Aside from technology and financial services companies, only a handful of the service providers here are large-scale operations. As a result, the group of players is extremely loose-knit.

But, stress government officials, think tanks, and industry players, that’s not to suggest that the sector should continue to play second fiddle to manufacturing. They emphasize that the service industry’s importance will only grow in the coming years.

Already it has jumped from accounting for around 50% of GDP in 1988 to 64.5% in 1996 and 71.1% last year. Meanwhile, the industrial sector has steadily declined in its share of GDP over the past two decades, making up only 27.5% of GDP in 2007, while agriculture represented a negligible 1.5%. As a job generator, Taiwan’s service sector is also significant, employing 57.9% of the island’s workers.

Although Taiwan’s service sector’s contribution to GDP is comparable to that of other developed countries, the structure of the sector is different and that could inhibit its future growth, says Yang Chia-yen, director of the research division of the private Taiwan Institute of Economic Research. “Our problem is not the size [of the sector]; it’s the structure,” he notes.

Most industrialized countries are increasingly moving towards B2B (business-to-business) types of services – with that segment making up 10% of GDP in most G7 countries, says Yang. But in Taiwan, the B2B proportion is only 3%.

This lag is partly due to the lackluster economic growth on the island of the past several years, which has lessened demand for such services, Yang says. But the lack of sufficient business services increasingly presents a problem as manufacturing operations move overseas; they need to utilize legal, consulting, financial, and other services in order to focus properly on their core business as they become internationalized.

Taiwan is also lacking in the development of high-value, high-skilled business-to-consumer (B2C) services such as business schools, retirement homes, and fitness trainers – services where demand depends on national income reaching a certain level. What is available here are mainly wholesale, retail, and financial services (including insurance), which together comprise around 50% of the service-sector production value.

“Usually when you have a large population, the retail and real estate service sectors are big,” says Yang. “For these, Taiwan has a very big share of GDP, just like the G7 countries. But Taiwan’s share of financial services is bigger than the G7’s, and nobody believes it’s more competitive, which means other parts of the service sector (in Taiwan) are not strong enough.”

Among the types of services that are considered under-represented here and could be expanded are medical and educational services, nursing home care, nutritional services, and design services, experts say. U.S. service companies already in the market include the legal, accounting, consulting, banking, insurance, and securities fields. Relatively few companies are present in the telecoms, media, medical, and educational sectors.

Restrictive regulations

The reason for the absence of such services is not necessarily lack of demand. In many cases it is regulations that hamper domestic and foreign investment in such industries, sector experts say – a point made in AmCham’s 2008 Taiwan White Paper.

Despite the large number of college students here, with many going overseas for advanced education, the government has set an extremely high threshold for foreign universities to qualify to set up campuses here, unlike Malaysia, Hong Kong, Singapore, and even China. Also, students wanting to attend joint-degree graduate programs taking place in Taiwan will have a problem receiving recognition for credits not earned physically at the foreign school’s main campus. Given such barriers, Taiwan has been unable to attract U.S.-based business schools or other professional schools to invest here, even though the presence of reputable U.S. institutions would help spur improvements in Taiwan’s education market and provide more choices for students.

In the healthcare field, chiropractors face a situation in which there is no official recognition of the profession – and frequently actual harassment – even though it is estimated that there is room in the market for at least 10,000 chiropractors in Taiwan. Chiropractic doctors practicing here have been trained and licensed in the United States.

In the retail sector, progress remains slow on the lifting of restrictions against certain imports from China, including potato chips and chocolate confectioneries, as well as kitchenware of porcelain or china. The restrictions reduce the ability of retail companies to invest, grow, and maintain or even expand employment levels, according to the White Paper.

Among the U.S. service companies that are having the most trouble here are aviation, logistics, and construction firms, says Bill Bryson, a partner in the law firm of Jones Day. Even with the launch of weekend cross-Strait charter flights this month, international air carriers are unlikely to benefit because the flights have been limited to Taiwanese and PRC airlines, Bryson says.

U.S. construction firms have found it difficult to compete in this market for public projects. Taiwan has yet to sign the Government Procurement Agreement under the World Trade Organization, which would level the playing field, imposing rules that everyone must abide by in bidding for government contracts. Although Taiwan has a government-procurement market of close to US$30 billion a year, the nature of the bidding process and other regulatory issues have discouraged many foreign companies from pursuing government contracts, the White Paper said. If Taiwan signs the GPA, Taiwan’s service and other companies could also gain access to government tenders in 29 countries, including the United States.

The government recognizes the importance of developing the service sector, said Jan Fang-guan, deputy director-general of the Council for Economic Planning and Development’s department of sectoral planning. “The service sector can absorb a lot of the job seekers, and with Taiwan’s continuing globalization, perhaps a lot more manufacturing firms will move overseas, so it will be important to figure out how the service sector can absorb the unemployed.”

In recent years, the government has eased rules on work permits and residence requirements for foreign expatriates, including the elimination of the requirement that applicants have at least two years of work experience. Starting this year, it has also provided tax deductions for certain expenditures by foreign professionals, such as their moving and travel expenses, in order to speed up Taiwan’s internationalization and encourage more talent from abroad to work on the island.

Newly elected President Ma Ying-jeou has stated that developing the service sector is an important element of boosting Taiwan’s economy. But Jan noted that in the past, nearly all of the tax exemptions and other investment incentives offered by Taiwan have been limited to the manufacturing sector.

“We’re looking into this,” Jan said, adding that the new administration will form a tax reform committee and examine ways to lower personal and corporate tax rates, which are considered relatively high compared with places like Hong Kong.

Taiwan-based U.S. service industry managers say that if Taiwan wants to develop its service industry, the government needs to accord higher priority to the sector, starting by changing current regulations that inhibit the sector’s growth.

“Regulators need to take a more proactive role in making sure that the industries they regulate are in a position to thrive,” says Bryson. “Rather than just taking the view that they merely enforce whatever statutes the legislature passes, they should play a role in drafting legislation needed for the industries they regulate to prosper. That often happens in the States, but generally does not seem to be the case here.”

Another thing Taiwan needs to do to attract quality service companies from abroad to help the sector grow is to make it easier for them to bring in foreign staff, industry players say. That means further loosening regulations on visas and work permits for foreign companies’ employees from all countries, but especially China. Frequently foreign and domestic firms are discouraged from holding regional conferences or meetings here because of the difficulties making arrangements for their personnel in China – and even in other countries such as India – to get permission to enter Taiwan. “The fact is work permits and visa requirements have always been modeled after the manufacturing sector, and the government has been slow to recognize that service makes up 70% of the economy,” Bryson said.

Changes in the way the government treats the service sector is especially needed as traditional industries are receding here, American executives say. “If you want the best law firms, insurance firms, and securities companies here, if you want the best you can get – and it’s going to be foreigners sometimes – then you want to make sure that they won’t be taxed excessively, that they won’t get immigration hassles, and that they can fly to China,” says an American expatriate who has lived here for several years and requested anonymity.

Unfortunately, the government in the past had not taken action to create a really robust service sector, says Bryson. “I think this [new] government is much more aware of it,” he adds.

The following stories in this section look at three examples of service industries that have attracted multinational participation.

Open and Green is the Trend in Interior Design

For both office and residential space, Taiwanese clients are now showing a preference for less confinement and more stress on the environment.

BY AMY CHEN

Since its emergence in Taiwan around 40 years ago, the interior-design service sector has followed new trends as they surface in the market. Many designers in Taiwan note that the industry recently has begun embracing environmental or “green” planning. Another trend is “open” planning. When the industry started up, many clients emphasized privacy in their offices and homes through the use of wall partitions and other boundaries. Now many see the benefits of an open environment in interior design.

Marc Gerritsen, a Taipei-based professional photographer who concentrates on interior-design work, notes that many people have the misconception that interior design in Taiwan is no more than interior decoration – the selection of color schemes and furnishings. In fact, he says, “interior design in Taipei or around Taiwan is often interior architecture, where designers construct whole walls or whole apartments in a particular way.” Interior designers in Taiwan combine aesthetics with function, comfort, flexibility, sustainability, and quality service when working with clients. Designers also strive to understand the culture and daily habits of their clients so they can provide customized services for each client.

While becoming more sophisticated in terms of construction techniques and creativity, the interior-design sector is also becoming more specialized. For example, M. Moser Associates is a global interior-design firm, based in Hong Kong, and concentrates on the niche business of creating office spaces, mostly for multinational corporations. In-tect Design Associates (IDA) and the DAZA Group of Companies are two Taipei-based interior-design firms that also belong to the office-space niche. S L +A Group is a Singapore-based global firm that also designs office space, but the S L + A office in each country tends to its own areas of specialization.

“When designing offices internationally we always endeavor to maintain the quality of our services regardless of individual locations,” says Norman Yang, director of M. Moser’s Taipei office. “When designing offices internationally we always endeavor to maintain the quality of our services regardless of individual locations,” says Norman Yang, director of M. Moser's Taipei office. He draws a contrast with some local interior designers who even when serving international clients hold temselves to Taiwanese standards.

At the SL+A Group, David Pipkin, the managing partner in Taiwan, notes that the Taipei office provides support to the company's operations in China. “With the exception of potential staff returning from overseas study, it is difficult to find mainland Chinese staff who are at the competency level of our Taiwan staff,” he says. “Additionally there is a significant difference in work ethics and loyalty. We therefore typically use Taiwan staff in senior key positions in China. In East Asia’s rapidly growing markets, many multinational corporate clients demand a one-stop, design-build service as opposed to the design-bid-build service that is the norm in the United States and Europe. Design-build service forgoes the bidding stage in which project managers decide among different designs presented to them. It streamlines the process by combining the design and construction phases of the project under one interior designer. “Design-build project delivery can be more cost-effective and time-effective,” says Evie Chang, marketing manager at IDA.

In the delivery of their designs, office-space interior designers are responding to their clients’ concerns about “green” planning. This environmental movement has gained steady momentum in the industry for about a year now. Some firms have established their own Sustainable Design teams to specifically assist clients to move towards environmental sustainability in their offices, especially towards LEED (Leadership in Energy and Environmental Design) certification by the U.S. Green Building Council, which verifies that a building is environmentally responsible. Designers are taking action to promote the trend for greater environmental awareness in their industry. “We have the responsibility to educate our clients, even if they don’t raise this [environmental] issue,” says Simon Wu, principal at IDA.

Many design firms are now promoting the use of glass partitions to filter natural light into offices, and installing sensor-activated power switches for lighting and air conditioning to save energy. Environmentally friendly thinking may even precede the implementation of design work inside the office. “When helping clients select new offices, we look for locations that are handy for public transport as this allows staff to contribute to their employers’ sustainability initiative by not driving to work,” says Yang.

Elaborating on SL + A Group’s commitment to environmental sustainability, Pipkin notes that “as one of our Sustainable Design actions, we are in the process of measuring our Carbon Footprint as a business, and from there we’ll finalize our action plans to reduce and mitigate our consumption and waste, monitor our success and adjust, and require our suppliers to do the same.”

Along with moving towards environmental sustainability, interior designers also aim to create space that encourages employees to collaborate productively. According to interior designers in Taipei, many clients now want open planning incorporated into their office designs. “We did our first open plan office with a shared-desk plan for IBM in Taiwan about 15 years ago, and it was a total failure because the local staff didn’t receive it very well,” says William Wu, managing director of the DAZA Group. “Then, seven or eight years ago, we did a similar concept with Hewlett-Packard and it was a hit.” Open planning has gained popularity over the past several years as many companies realize that private offices for the senior executives and cubicles with high partitions for the general staff physically obstruct employee interaction in the office.

Simon Wu explains that IDA’s experience with open planning office design in Taiwan has helped IDA expand its services across the Greater China region since 2001. “I thought [open planning] would only be acceptable in this [Taiwanese] market, but after we started selling this concept several years after we had presence in China, a lot of people have come to accept this concept,” he says.

Encouraging communication

Open planning has removed employees from their isolated private offices and cubicles, bringing them together in spaces where they can communicate effectively. It creates communal and transparent spaces where employees of all levels and of different departments can share ideas with each other, democratizing the work environment and ultimately changing the behaviors of employees in their offices. After IDA designed Nokia’s office in Taipei with open and environmental planning, “Nokia did a staff satisfaction survey every three months for one year, and the staff satisfaction rate was at an overall high,” says Wu. “Other favorable results of sustainable office planning include improved attendance and productivity rates,” says Frederic Nitschke, corporate communications manager at M. Moser Associates.

Some designers focus on equality by eliminating private offices along the perimeter of the workplace, resulting in open views through the windows for everyone. Designers also use cubicles that have lower partitions or are arranged in pods so the staff can easily speak with one another. Other open planning changes to the office include small “huddle” rooms where groups can work together, and even cafes, gyms, billiard rooms, and massage rooms where employees can enjoy themselves during a break. Designers understand the versatility of interior space and seek to enhance the space so their clients feel rewarded with convenient places where they can relax during the work day.

Local companies have been more resistant to open planning designs than their multinational counterparts. “Many local companies feature large, self-contained private office units that demonstrate they value social status above anything else,” says Yang. That said, he predicts that local companies will become more receptive to open planning as the next generation of managers start rising to more senior levels. “Many younger Taiwanese executives have had experience with multinational corporations. As a result, they are more likely to embrace new concepts when setting up their own businesses. Change is ultimately inevitable, but it is unlikely to occur overnight,” Yang adds.

The design of residential space is moving in a similar direction of incorporating environmental and open planning. Due to Taiwan’s socio-economic development, many people have been able to afford the move from their old five-story walk-ups into the larger, more lavish apartment complexes that have been sprouting up across Taipei. With the increased demand for upgraded luxury, style, and comfort, the interior-design business in Taiwan has been flourishing.

“Green” planning includes health considerations for clients. The Taiwanese are becoming increasingly aware of the invisible but harmful chemicals in their environment. “My clients are paying more and more attention to the avoidance of harmful chemicals in their paints and in their furniture,” says Lu Shi-chieh of CJ Studio, a local interior-design firm. Aspiring interior designers are being trained in how to meet that demand. According to Assistant Professor Chiao Lin-hao of the Graduate Institute of Innovation Design at National Taipei University of Technology, interior design students at NTUT learn to control temperatures, humidity, air flow, solar radiation, levels of formaldehyde, CO2, UV light, indoor noises, and electromagnetic waves to ensure healthy indoor climates in their interior spaces.

A major problem in promoting environmentally sustainable design, says Peter Fitzgerald, the International Project Manager at Masterpiece Design in Taipei, is that clients are often more concerned about the cost of investing in environmental design than they are about improving the environment. They are more easily persuaded when it can be shown that the suggested steps will actually save them money. “People are changing their ideas on lighting and getting more into Light Emitting Diodes (LED) and compact fluorescent bulbs. These are replacing the normal bulbs that were incandescent,” he notes. “The reasons for this are that power consumption goes down, and the heat that the lights give off in the office goes down, so air conditioning costs can go down as well.” Eventually, Fitzgerald believes, Taiwanese clients will also become convinced of the broader social benefits of incorporating environmental design in their interior spaces.

With regard to residential design, Fitzgerald describes an ideal open apartment plan in Taipei: “There’s no need for an enclosed kitchen, no need for a maze-like apartment with many rooms. Just have the bathroom and bedrooms in the back. Have the living and dining area open next to the kitchen. The kitchen and living space should be combined – then you have double the space.” With fewer walls and more shared spaced between rooms, the apartment will feel larger and more welcoming.

Many interior designers in Taiwan believe the industry is heading in a favorable, positive direction that will let designers provide improved services in the future. The eased cross-Strait passenger flights are expected to make a difference. “With the time and stress of travel reduced, we can much better support our China-based Taiwan staff, as well as our local China staff, which means we can respond to client needs much more easily, efficiently, and cost effectively,” says SL+A’s Pipkin.

Moving Companies Taking on More Duties

The business increasingly involves relocation services such as house-finding. Environmental sustainability is also a high priority.

BY AMY CHEN

First stop after relocating to Taiwan? Costco. “We had one client who wanted to know what Costco looks like in Taiwan,” says James Hill, general manager of Santa Fe Relocations in Taiwan. “So, we brought her to Costco in Neihu and she was happy. Every customer has different needs.” Hill explains that many clients need some hand-holding when settling into Taiwan, and he is happy to help familiarize clients with their new surroundings.

Personal tours to Western superstores are only one of the countless services that the moving and storage service industry in Taiwan can offer to clients, whether they are international or local and whether they are moving internationally or domestically. Since the industry emerged in Taiwan about 45 years ago, it has experienced numerous changes that have come with Taiwan’s political and economic development.

Industry professionals at four international moving and storage companies in Taiwan – Asian Tigers K. C. Dat, Crown Van Lines, Crown Worldwide, and Santa Fe Relocations Services – say that in recent years the number of clients moving into Taiwan has been decreasing, while the number of outward moves has been increasing, mostly because of greater business opportunities in China. But they appear optimistic that eased cross-Strait relations, as well as recent Taiwan government efforts to liberalize rules on residence and work permits for foreign professionals, will bring about an improvement in the situation in the near future.

Hill cites another recent change in the moving and storage industry. “Human resource departments [at multinational companies] are doing more and more outsourcing of relocation services,” he says. “They are asking us to take on house-finding, immigration services, and other needs. A lot of these HR departments don’t have time to focus on these things, so they subcontract to us.”

Many families see the summer school recess as the best time to relocate internationally. According to several international moving companies in Taiwan, the peak season for clients leaving the country is at the beginning of the summer, whereas most of the new arrivals come toward the end of the summer. Increasingly, for multinational companies with corporate accounts, contracts involve not just the physical moving of household goods but also a complete range of relocation services for expatriate employees and their families.

These relocation services can begin well before the move to the destination country. International moving and storage companies often arrange preview trips to introduce clients to their relocation destination. According to Queenie Huang, general manager of Crown Worldwide’s Taiwan office, such visits give clients the chance to check out prime residential neighborhoods and educational options for their children so that key decisions can be made well in advance. Getting an early look at the major attractions in the city also makes it possible for the family to feel at home more quickly after the move is completed.

Some other relocation services include packing, boxing, shipping, in-transit protection of items, unpacking, and removal of debris. “We provide door-to-door service through our Crown network of over 200 offices worldwide,” explains Huang. “Most of our corporate executive clients who relocate from country to country are very busy and don’t have spare time to do all the moving by themselves.” The services may continue after the relocation with property management and language training assistance. Crown Worldwide has over 10 years of experience with relocation services in Taiwan and offers welcoming happy hours, Global Passport programs that include intercultural training, and other social networking opportunities where expatriates frequently gather – for example at Taipei’s American Club.

Asian Tigers K. C. Dat, part of the Asian Tigers Group in Asia, also mainly serves an expatriate clientele. The group belongs to the Federation of International Furniture Movers (FIDI) and the Overseas Moving Network International (OMNI), both of which represent over 500 international moving companies around the world. If a client is moving to a location not covered directly by the Asian Tigers Group, the company will arrange for an FIDI or OMNI member to handle the move at destination.

Asian Tigers focuses on moving services, and works with relocation agents for relocation services and offers a full array of storage services, but mainly concentrates on household goods for both short and long term storage. “I think what sets Asian Tigers apart from our competition is our sole focus on moving household goods and personal effects, and doing it at the highest level,” says Scott McMullin, sales and marketing manager for Asian Tigers K. C. Dat in Taiwan. He says the company’s expertise as a mover allows it to meticulously handle personal items that may hold not only market value but also sentimental value for the clients.

As the oldest international moving and storage company in Taiwan, Crown Van Lines can also vouch for its expert packing services, says Vice President James Chiou. Also a member of the FIDI and OMNI networks, Crown Van Lines has been involved in the industry in Taiwan for around 30 years. “We make up about 50% of the market share in Taiwan,” says Chiou. Crown Van Lines offers relocation services through Santa Fe Relocation Services, while providing the packing, trucking, and delivery for Santa Fe’s clients leaving Taiwan.

Warehousing for exhibitions

Crown Van Lines also offers storage services with its own warehouses. Chiou notes that the company established its first warehouse storage services in Taiwan about 20 years ago when U.S. exhibitors started coming to Taiwan for trade shows. The exhibition business requires highly dependable packaging, moving, and storage services, and Crown Van Lines filled the niche for this demand, says Chiou.

Among the other businesses that have used Crown Van Lines’ storage services are international museums with traveling exhibits. As rental costs for desirable office space around Taipei are steadily climbing, “many companies seek storage space for their business information outside of the office,” says Chiou. Businesses need secure storage services, as well as quick retrieval services for important documents that require immediate attention. Chiou explains that many banking and insurance firms take advantage of warehouse storage to keep their important records and documents in temperature-controlled warehouses in Taiwan. Crown Van Lines’ warehouses in Keelung, Neihu, and Taichung “use advanced security, alarm, and fire-protection systems,” says Chiou. “Built to withstand typhoons, earthquakes, and other natural disasters that can plague Taiwan, the warehouses are high off the ground to prevent flooding.”

Offering records storage services similar to those that Crown Van Lines provides, Recall Taiwan specifically serves the niche business of data records management. This business in Taiwan has met favorable market conditions because “the total market of Records Management Services (RMS) is growing at 8.5% annually,” says Astrand Salazar, Recall Taiwan’s general manager. Recall Taiwan operates as a member of the Brambles international family of worldwide business support services, which is headquartered in Atlanta, Georgia.

Along with offering data storage, retrieval, and destruction, Recall Taiwan also addresses the need for outsourcing the management and scanning of physical files, as well as the secure conversion of documents into digital images and digital reports. “Technology has not eliminated paper – it has created more,” says Salazar. “The average worker maintains 20,000 paper documents each year and 50% of office workers' time is spent on document management, which may be costing time and money. What's more, many laws and regulations require you to keep your company's information secure and private yet accessible.” By outsourcing information management to Recall Taiwan, Salazar explains, many businesses in Taiwan can minimize risk, streamline operations, enhance customer service, and improve their return on investment.

The industry has also been increasingly concerned with issues of environmental sustainability. For example, one of Asian Tigers’ mission statements is to be an environmentally friendly company. “In all of our [domestic] moves, we use recycled boxes,” McMullin says. “These come in from inbound shipments and are perfectly fine cardboard boxes.” Chiou notes that once clients’ records and documents no longer need warehouse storage, Crown Van Lines recycles the paper rather than burning it. Salazar also explained Recall Taiwan’s efforts in the environmental movement. “It is part of our internal audit to prepare a Site Environmental Management Plan (SEMP) for each operating facility to specify site-level management controls that are being used to minimize the potential for environmental releases, impacts, damages, or other liabilities that could occur as a result of Recall operations,” Salazar says.

The different companies also all participate in various corporate social responsibility activities, including providing free moving services and making financial contributions to certain charities. Crown Worldwide, for example, assists the annual fundraising auction held by the Community Services Center in Taipei. Asian Tigers donates more than US$60,000 each year to the International Fund for Animal Welfare, notes McMullin.

Local Taiwanese moving and storage companies tend to operate as part of informal networks. For example, Steven Chiang, proprietor of a company called “Steven the Mover,” regularly cooperates with other local moving companies if they are known to be reputable – borrowing or lending out trucks and personnel for big jobs as needed. He keeps an eye out for moving firms that may have a record of cheating customers but who hide their identity through a frequent change of company name.

Around five years ago, Chiang realized he can serve as a middleman for donations in kind. “When people move somewhere and leave furniture behind, we take the good pieces into storage and later donate them to charities. It’s good to give these things to people who really need it.”

Upholding Quality Standards

A handful of specialized companies provide manufacturers with help in testing, inspection, and certification.

BY AMY CHEN

Quality-control organizations in Taiwan provide a broad array of testing, inspection, and certification services for consumer products and services. When manufacturers are preparing to introduce and sell new products or services to the general public, many will work with a quality-control services company to gain a product approval. By confirming through an independent analysis that the product or service conforms to certain standards or specifications, the approval may enable the manufacturer to satisfy customers that they can deal with the company with confidence. It may also assure that the product meets relevant government regulations.

For the past several years, quality-control service companies – worldwide as well as in Taiwan – have been paying increased attention to environmental concerns. They have engaged in research to strengthen their expertise on such issues as climate change and to improve their ability to apply environmental quality standards to the products they approve and certify.

Underwriters Laboratories (UL) Taiwan, part of the global UL network headquartered in the United States, has recently partnered with local Taiwanese universities such as National Taiwan University and National Cheng Kung University for its research efforts, says Chen Tsung-hung, managing director of UL Taiwan. In addition, with support from the Ministry of Economic Affairs' Department of Industrial Technology, UL has invested NT$200 million (US$6.6 million) to establish a Material & Environment Technology Center (METC) in Taipei. UL has described METC as the “first UL certification technology research center in the world dedicated to environmentally friendly electronics materials and energy components, and will have a major impact on Taiwan industry development.”

METC’s mission includes training approximately 40 testing engineers, transferring specialized technology to Taiwan from overseas, and developing domestic testing and certification technologies in cooperation with Taiwan’s Industrial Technology Research Institute (ITRI).

TÜV Rheinland Taiwan belongs to a global testing and certification services group based in Germany. Currently working together with ITRI, TÜV is seeking improved methods for producing and testing photovoltaic (solar) cells in laboratories to support local manufacturers’ ambitions to serve the international market, says Wolfram Wagner, director of TÜV Rheinland Taiwan’s Mobility Division. “Taiwan is a leading area in photovoltaic development and production,” notes Wagner.

SGS Taiwan is another global quality control services provider, headquartered in Geneva, Switzerland, that actively participates in the environmental movement. C.K. Chu, executive director at SGS Taiwan, says there are popular market trends in Taiwan for organic, toxic-free Taiwanese food exports such as mango, tea, and eel and other fish. SGS Taiwan’s laboratories regularly examine these food exports to ensure their quality and safety.

Since the emergence of the quality-control service sector in Taiwan around 50 years ago, the sector has enjoyed positive growth, often related to the development of new industries in Taiwan, such as semiconductors and flat panel displays. When UL, TÜV Rheinland, and SGS first established their operations in Taiwan, their operations were quite primitive – in fact, they even lacked their own testing laboratories in Taiwan. Now all three manage their own local laboratories in various locations across Taiwan, providing testing services to ensure that consumer products meet international standards of quality and excellence.

Starting from commodities

The history of Taiwan’s quality-control service sector has been one of steady evolution – from rudimentary beginnings using methods of visual inspection and minimal sampling to today’s high degree of sophistication. “When the industry emerged in the 1950s, products undergoing quality inspections were commodities such as wheat, banana, tea, and soybeans,” notes J. C. Ho, director of the Consumer Testing Services Inspection Division as well as the Governments and Institutions Services & Textile Laboratory at SGS Taiwan. “When Taiwan’s export textile industry grew up in the 1960s, there also developed a demand for random sampling methods, but still with visual inspection.”

By the 1980s, visual inspection was no longer sufficient, however. “Taiwan saw the establishment of new quality-control testing facilities including textile laboratories, toy laboratories, electrical laboratories, and chemical laboratories. The growth of each sector came with the demand for new services. Then there was an extension to certification services, such ISO 9000, ISO 14000, and the CE mark, and to assessments of factories and manufacturers and their management systems, their corporate social responsibility initiatives, and other activities.”

The ISO 9000 and ISO 14000 standards developed by the International Organization for Standardization cover quality-control management and environmental management respectively. The CE mark, required under European Community regulations for certain product groups, indicates conformity with the essential public health, safety, and other consumer protection requirements.

The sector recently has also been striving to offer customers “one-stop-shop” service to provide enhanced efficiency and time-saving for today’s fast-paced business environment. Since testing and certification service companies play a role in various stages of a commercial good’s path from manufacture to market, the one-stop-shop concept seeks to integrate clients’ multiple demands. It can be customized, for example, to cover inspections during production, factory audits, pre-shipment inspections, and follow-up services. It also provides a solution for completing a number of different government mandates, international certifications, and local inspections with a minimum of time and effort.

UL’s specialty in this regard focuses on safety standards covering both the Taiwan domestic market and the international community. “As an independent third-party product safety certification organization, UL cannot issue the certification marks of individual governments,” says Chen Tsung-hung, “However, we can issue UL marks of certification of conformity assessment, which are well-known around the world.” As Chen explains, “We test a product to see how it affects the environment in which it will be used, and how it will affect the people that use it. For example, we test household items, such as personal electronics, and their flammability.” After the items have passed the UL standards of approval, clients can obtain easier, faster certification from their own governments than would otherwise be possible, he notes.

SGS Taiwan also performs third-party conformity assessment testing to local and international standards. “In addition to other businesses, SGS Taiwan’s main function is quality-control testing for consumer products,” says C.K. Chu. He adds that testing of consumer products in Taiwan includes items ranging from hand-held electronics to water-resistant textiles to organic foods. SGS logos of quality service approval (Qualicert) are also commonly found around Taiwan, for example on the Capital buses serving many Taipei city routes, at Family Mart convenience stores, and at FarEasTone mobile phone service stores. SGS has extended its outreach in Taiwan beyond businesses and institutions that are required to have third-party quality service certification, so as to communicate with the general public and build its brand image as a source of quality assurance.

TÜV Rheinland Taiwan also intends to expand its services to a wider client base and build its brand awareness with Taiwanese consumers, says Wagner. Certification for pre-owned cars is an example of one of the company’s new services in Taiwan for the general public. Another service being marketed in Taiwan by TÜV Rheinland is food testing at restaurants to provide detailed certification of the food’s origins and methods of production. “We have found that Taiwan is an attractive market for providing third-party services and consultancies, so we are testing products from Taiwan, which are designed for use abroad, as well as products from abroad that are imported to Taiwan,” says Wagner. “In that way, we help Taiwanese manufacturers enter the global market and foreign exporters enter the Taiwanese market.”

A different type of company that also gets involved in the quality-control process is Titoma (a word coined from the phrase Time-to-Market), a Taiwan- and China-based company that offers product development and manufacturing management services to the electronics industry. Titoma prefers to maintain its own team of inspectors, says Robert F. Brown, managing director of the Taiwan office, to give it more control over the process and to ensure that the inspections are carried thoroughly to avoid the risk of having a misleading report based on the examination of only a limited number of pieces in a given shipment.