Like much of the industrialized world, Taiwan is moving toward
a knowledge-based economy. Industry's investment in research
and development is vital to the country's goal of leading the
way in a number of technologies. What is being done to nurture
progress in this field?
Alex Horng has staked the future of his company on research and development. His reward? About half of the world's notebook computers use his company's CPU fans and motors. "If you want to create new products and build your own brand, you need to be prepared to burn through a lot of money," the entrepreneur notes. About 6 percent of his Sunonwealth Electronic Machine Industry Co.'s revenues are reinvested in R&D, a much higher amount than for most Taiwanese companies.
In the past, because most of the island's private enterprises were small or medium-sized, research was an expense few businesses could afford, notes Chiou Sao-cheng, general director of the Industrial Technology Research Institute's (ITRI) Technology Transfer and Service Center. Typically even those companies that could afford to earmark funds for R&D were less enthusiastic than Horng about doing so. As a result, the government invested heavily in research with a view to transferring newly gained technology to the private sector. Institutions such as Academia Sinica and the National Science Council (NSC) have been at the forefront of the basic research that has helped pave the way for Taiwan to become one of the world's top suppliers of computer components.
Academia Sinica, under the jurisdiction of the Office of the President, has long been Taiwan's most prestigious research institute, while the cabinet-level NSC is responsible for supporting scientific and industrial research institutions and making mid- and long-term plans for technological development. Together with the Executive Yuan's Science and Technology Advisory Group (STAG), the NSC reviews government agency budgets relating to technological development. Those agencies--units of the Ministry of Transportation and Communications, the Department of Health, the Atomic Energy Council, the Council of Agriculture, the Ministry of National Defense, and others--are the "middlemen" of the R&D process. Also engaged in applied research are nonprofit corporate bodies backed by the government, such as the National Health Research Institute, the Institute for Information Industry, and ITRI.
Established in 1973, ITRI employs about 6,000 personnel, among which 4,600 are involved in R&D. The institute, located near the Hsinchu Science-based Industrial Park, develops technology from its research findings and transfers this knowledge to businesses in such diverse fields as electronics and biotechnology. It is also working on emerging fields such as nanotechnology.
"Compared with organizations doing basic scientific research, institutions like ITRI are more practical in their orientation," says Huang Jung-chiou, director-general of the Ministry of Economic Affairs' (MOEA) Department of Industrial Technology. "It studies industrial trends before investing the money and energy, and it focuses on technology that's commercially viable." This year the department has received a budget of NT$16.2 billion (US$470 million), most of which goes to nonprofit research institutions. ITRI receives about half of these funds, and it funnels most of it to research work in communication and opto-electronic technology (which accounted for 37 percent of the 2001 budget), and in precision machinery and micro-electromechanical systems technology (26 percent). An example of one of its successes involves the development and marketing of the multi-domain homeotropic alignment technology, used to improve TFT-LCD panel quality.
Government-backed research institutes have played a gradually diminishing role in R&D in recent years as private companies have developed their own R&D skills and facilities. According to the NSC, in 2000 a total of NT$197 billion (US$6.2 billion)--or 2 percent of Taiwan's GDP--was spent on R&D. Public expenditures accounted for 37.5 percent and private spending for 62.5 percent, compared with 56.6 percent and 43.4 percent in 1988 and 41.6 percent and 58.4 percent in 1996. The breakdown of research spending amounted to 10.4 percent on basic research, 30 percent on applied research, and 59.6 percent in the experimental development of technology. About three-quarters of the funding in this last category came from private enterprises.
"ITRI used to be called Taiwan industry's R&D department," the institute's Chiou Sao-cheng says, but the situation now is quite different. The government aims to boost R&D spending to 2.5 percent and eventually 3 percent of Taiwan's GDP, and most of the growth is expected to come from private companies, says Shih Chin-tay, president of ITRI. He notes that the goal is to achieve a 3:7 ratio of public to private sector spending.
In the meantime, the government continues to play a significant role in upgrading Taiwan industry's research capacity. Like other publicly funded institutes, ITRI has been offering an environment where its workers are well trained and nurtured. To date, more than 15,000 former ITRI workers have left the organization, entering the next stage of their careers. About 80 percent of these people now work in the business sector.
Private companies that have benefited from ITRI's technology transfers and assistance in soliciting financial backing include United Microelectronics Corp. and Taiwan Semiconductor Manufacturing Corp. (TSMC), two giants in the electronics industry. Many businesses continue to rely on government-backed research organizations to handle projects for them. "ITRI has a wealth of talent and facilities," Alex Horng notes. "So I signed a contract with them and they've gone on to make breakthroughs on the patented prototypes we developed on our own."
The institute's applied research can be divided into two types. One is to conduct projects on core technologies and transfer the results to interested businesses for a fee. The other is to help individual enterprises that contact the institute for assistance in a specific area of research. The research results then belong only to the enterprise involved. According to ITRI, in the last five years it has annually transferred around 350 technologies to more than 500 companies and signed research contracts with around 1,000 companies. "Foreign enterprises might license certain technology to local companies at a rather high price," says Chiou Sao-cheng. "ITRI would then try to create something new by using the concepts applied to those technologies that are not patented research, and then offer it at a much lower price to local companies."
To help start-up companies, the MOEA in 1996 approved measures encouraging government and private institutions to set up incubator centers for small and medium-sized enterprises. A total of sixty institutions, mostly colleges and universities, have established such centers offering facilities and consulting services to those who want to turn their entrepreneurial dreams into reality.
Similarly, for the last six years ITRI has invited businesses to take part in the R&D process by participating in the institute's Open Lab. "The government policy is to boost interaction between businesses and research organizations," Shih Chin-tay notes. "Working together, the two sides can develop products that are really useful." In encouraging businesses to engage in R&D work by opening the door to its laboratories and offering incentives such as tax credits of 30 percent under the current regulation, the government is hoping to create an opportunity for newcomers to compete with such giants as TSMC, says Shih.
The desire to foster cooperation between the two sides was one of the reasons Academia Sinica opened its Office of Public Affairs in 1998. The office is responsible for transferring technologies to private enterprises, thereby giving Taiwan a boost in the international race for knowledge in biotechnology, notes Liang Chi-ming, director of the office. "The belief that 'the sooner you're involved in R&D, the more competitive you are' is truer in this industry than any other," he adds. Since 1998, Academia Sinica has had about thirty patent applications approved in the United States, 80 percent of which relate to biotechnology, Liang says.
The results of dedicated research can be seen in the number of such Taiwanese patents approved in the United States. In 1996 nearly 1,900 applications were approved, ranking this country in seventh place. Taiwan climbed to fourth place in 2000 with 4,667 patents--well behind the United States (85,027), Japan (31,296), and Germany (10,234). These numbers, however, can be deceptive, Liang Chi-ming of Academia Sinica observes. Patents can generally be divided into two categories--the truly creative and the further development of technology that already exists. Most of Taiwan's patents belong in the latter category and are less profitable. The situation may very well change if the educational reforms Taiwan has implemented in recent years succeed in stimulating students' creativity.
Improving the quality and quantity of people involved in R&D is a pivotal issue in Taiwan. Alex Horng complains that the lack of talent in this area has led to fierce competition among companies seeking top-rated personnel. This situation has led to a high level of turnover, seriously affecting the R&D process. Similarly, Lu Po-yen, vice president of AU Optronics Corp.--the world's third-largest enterprise producing TFT-LCDs--notes that it is still difficult to find high-level professionals in the field despite Taiwan's reputation as a leader in semiconductor technology.
In Shih Chin-tay's opinion, the shortage of human resources is inevitable. Because Taiwan is quickly moving toward a knowledge-based economy, as is much of the industrialized world, the gap between supply and demand of high-tech talent is growing. "Taiwan should use every means available to attract high-tech professionals from around the world," he says. "Every other country in the world is trying to ease restrictions on importing foreign personnel to enhance their R&D."
In response to such demands, the government is drawing up measures to encourage the public and private sectors to employ talent in the area of technological R&D and management from abroad by subsidizing salaries and reimbursing workers for travel expenses. Regulations governing the employment of mainland Chinese professionals are also being liberalized. Additionally, the MOEA has seen some progress in its campaign to encourage foreign companies to set up regional R&D centers in Taiwan. IBM and Microsoft have both shown an interest in such a move.
The government is also continuing its efforts to cultivate and develop local personnel. The number of students and teachers in the fields of information technology, electronics, electrical engineering, and telecommunications has been increasing annually. And for the last three years, the Executive Yuan has allowed some talent from its military conscription pool to do alternative service in private industry. Candidates for these posts must hold master's degrees and be capable of conducting research work. Instead of serving a two-year hitch in the army, they must commit to work for four years for the private companies. The number of these researchers will be increased from 3,000 to 3,500 in 2003, which is expected to alleviate the private sector's personnel shortage.
Efforts are also being made to better coordinate the research results of academic and nonacademic institutions. Last year ITRI began working with such academic research organizations as the Academia Sinica and four national universities. They have since established joint research centers. In addition, the NSC and the Executive Yuan's STAG are attempting to integrate all relevant resources in the R&D process with their national science and technology programs. "We coordinate these programs and organize resources in every stage of R&D development to gain maximum efficiency," says Yen Chin-lien, executive secretary of STAG. At present, nine such programs are operating--three of which are connected to biotechnology.
Taiwanese businesses have long profited through the use of manpower rather than brainpower. But by implementing an integrated plan, the government aims to reverse this situation. Taiwan currently imports more technology than it exports, but Shih Chin-tay hopes that by 2010 the ratio will be 50:50, though he concedes that accomplishing this will be a challenge. In any case, the effects of the current plans to enhance the island's R&D will not be immediate. But many--like Alex Horng--are optimistic that the fruits of today's efforts will bring future rewards.