Although recent economic fluctuations once weakened people's
faith in further developing the nation's science parks, time has
proven that the parks are reinvigorating Taiwan's economy.
Two decades ago, the words "high tech" became common lingo in northern Taiwan. Today, various technology-based industries are forming clusters of R&D and production facilities along the western coast of Taiwan, making the island one of the most vibrant high-tech production centers around the world. The information-technology and electronics industries have grown quickly and have contributed to nearly half of the country's exports since 1997.
In its first major high-tech effort, the National Science Council (NSC) established the Hsinchu Science-based Industrial Park, just south of Taipei, at the end of 1980. Unlike science parks in other developed economies, which serve as the research vanguard guiding their industries, the park started out as a manufacturing center for OEM (Original Equipment Manufacturing) and ODM (Original Design Manufacturing) contracts for the world's leading high-tech companies. Entering high-tech production chains at the lower ends may not have been the best strategy in the long run, but the model proved to be a success, and Taiwan gained a competitive edge as the park's cluster effect streamlined production and cut costs.
The 605-hectare park is composed of several major sectors including semiconductors, computers and peripherals, telecommunications, optoelectronics, precision machinery, and biotechnology. The park administration provides one-stop services to eliminate red tape and provides resident companies with labor dispute arbitration, land development initiatives, medical facilities, computer networks, environmental protection, water and electricity supplies, and public-welfare programs. Many companies operating in the park are eligible for low-interest bank loans, R&D grants, standard factory building permits and land leases, and a five-year income-tax exemption.
By the end of last year, the park had approved 434 companies with a total paid-in capital of NT$992.5 billion (US$29 billion). In 2000, the park accommodated more than 300 production companies and more than 100,000 employees, and its production value peaked at NT$929.3 billion (US$27.3 billion). The Hsinchu park became so successful that it not only assured Taiwan's niche in the market, but also began to generate a spillover effect around the island. Neighboring Taoyuan County has benefited from the spillover as technology-based industries moved into the area, some of which set up separate industrial villages.
In a bid to upgrade Taiwan's innovative capabilities, the Taipei City government is grouping company headquarters, software-design houses, R&D centers, and trade zones to its eastern districts of Nankang and Neihu. High-tech offshoots are spreading farther southward. In 1996, the NSC founded the Southern Taiwan Science Park in Tainan County as demand for more production bases increased because the park in Hsinchu had little room left to grow. The park in Tainan, which covers 1,038 hectares, was slated for two stages of development, one of which is about to be completed. The park has also recently taken over the management of the nearby 571-hectare Lujhu Science Park. The development of the park in Tainan was modeled on the development and maintenance of the Hsinchu park, says Tai Chein, director-general of the administration of the park in Tainan.
One reason Hsinchu County was chosen as the location for the first park was the strong academic support of two outstanding universities in the neighborhood and enthusiasm from the government-funded Industrial Technology Research Institute. High-tech industries fared so well there that the park could no longer meet demand, thus prompting the government to find accommodations in the nearby towns of Chunan and Tungluo. The expansion of the science parks, however, caused locals some unease.
As the project took off, for example, the highways linking the park to the international airport and neighboring cities were plagued with traffic jams. To reduce traffic, the park in Tainan is located on an expanse of land originally used for sugar-cane plantations, which provides open expanses for growth and nearby roads that are generally not busy. In addition, the park is surrounded by a reserve area of 3,299 hectares, which will eventually feature residential areas, restaurants and markets, and recreation facilities. The park is easy to get to because of several adjoining highways and four expressway interchanges leading to Tainan's downtown area, airport, railway station, neighboring towns, and in the future, to the metro system and the high-speed railway station.
The driveways of all the buildings will be diverted from the main streets to ensure a smoother traffic flow. The park should be a pleasant place to work as well. The site includes several reservoirs for industrial, ecological, and recreational uses and a museum that houses historical relics recovered on the site during construction. The antiques date back as far as 5,000 years ago. Still another strength that the Tainan park may claim over its northern competitor is a secured water and power supply, which is crucial to keeping production lines operating smoothly.
Moreover, to guarantee the supply of human resources, the NSC is working with manufacturers and more than 20 southern universities. To ensure that the park is well staffed by qualified professionals, park officials are working toward offering high-quality education to the children of its employees. The park in Hsinchu, for example, is known for its successful bilingual school system. The park in Tainan plans to take that model one step further by establishing an international school system, one that will be open to anyone in the community who is interested in providing their children with an international education. "What constitutes the park's competitive edge is its overall high-quality environment," Tai says. "The park is taking shape as a mixture of culture and technology."
The southern park is also home to the Chi Mei Corp., one of Taiwan's leading TFT-LCD manufacturers, and three 12-inch wafer fabs, two of which are run by the Taiwan Semiconductor Manufacturing Co. (TSMC) and the other by the United Microelectronics Corp. (UMC). The Chi Mei Corp. has brought in more than 30 optoelectronics companies, such as the Hanstar Display Corp. and six Japanese companies, to form a complete production cluster, and UMC plans to set up an R&D center in the park this year. By the end of last year, the administration had approved more than 100 applicants. These companies will take up about 85 percent of the park's first-phase development scheme.
The road to success for the science parks, however, was not without obstacles. The park in Tainan, for example, teetered in the fluctuations of the economic cycle. When the world economy slumped, demand for Taiwan's high-tech products slowed, and the parks appeared to be an expensive enterprise. During the recent recession, many objected to the development of the park saying that its construction would be redundant, says Tai.
Once it was determined that the high-speed railway, now in construction, would pass through the park, disputes over the park increased. Nevertheless, investment continued, and the parks forged ahead with their own infrastructure and provided services to aid the production and innovation of high-tech products and technologies. TSMC, at the time, decided it would continue its investment plans. They believed that proper engineering and construction techniques could effectively shield the plants from vibrations caused by passing trains. Some worried that they would disrupt sensitive production lines. Now more than 20 biotech companies are forming a corridor along the planned railway route.
One benefit of the setbacks and the reviewing of plans during hard economic times was the solidifying of the economic essentials that would allow the science parks to prosper when the economy turned around. Last year, the park's production lines made NT$130 billion (US$3.8 billion) in revenue and employed more than 20,000 people. Indications of the global economic recovery and a recent surge in demand for microchips and other high-tech products have spurred more optimism.
While the park in Tainan continues to take shape, the NSC opened a preparatory office for the development of the Central Taiwan Science Park in Taichung last October. "The government's 'Green Silicon Island' project wouldn't be complete, nor would the western high-tech corridor function without the Taichung park as a node," says James J. Lee, director-general of the park in Hsinchu and of the Taichung park's preparatory office.
The park will be located on 304 hectares sprawling across Taichung City and County, and applications for a place in the park have been flooding in. Lee says the park's popularity stems from its proximity to the Taichung Harbor, two airports, and a number of universities, as well as the good road and rail systems in the area. Unlike the two "older brothers," the park will incorporate city life into the park's daily operations. Lee believes that the park will be the most beautiful production base on the island with its many plazas, parks, and spacious avenues. Taiwan's largest TFT-LCD manufacturer, AU Optronics Corp., has chosen to construct its new plants in the park.
The park in Taichung will focus on attracting the optoelectronics, biotech, and precision-machinery industries, Lee says. Naturally, the three parks will overlap in some areas, stimulating competition. Other competitors, meanwhile, are growing across the Taiwan Strait. China has been copying the Hsinchu model and drawing many high-tech manufacturers from various parts of the world, including Taiwan, with more incentives than the administrations of Taiwan's parks are able to provide. "We can only offer what we can do best within the current legal environment," Tai says. "The companies intending to invest in China must be aware that a reliable, stable management system is more important than the lure of fabulous promises. Once you settle in with huge investment, you are at the mercy of their administrations and there's no turning back."
One major concern of the high-tech industries at home has been workforce shortages. On the one hand, the prosperity of the industry produces a downside, namely, keeping many young professionals from gaining international experience and upgrading their knowledge by studying or working overseas. On the other hand, many engineers have chosen early retirement once they feel financially secure.
Lee says the government must look ahead and make the island a more open environment to attract high-tech know-how from the international community. "It's crucial that we introduce more people from different cultures into our country to expand our innovative capabilities," he says. "Only then will Taiwan be able to highlight its strength and presence in the world." He says that Taiwan needs to improve its legal system and investment environment. The problem is more evident in the south, where traditional industries provided few opportunities for career high-tech professionals until the park in Tainan got started. But Tai is optimistic. "As long as we offer a sound environment, more of our highly trained locals will return home."
Both Lee and Tai have faith in the future development of the parks. "There's no such thing as a surplus of supply," Lee says. "What matters the most is the location and management of the parks. In fact, these parks accomplish something very meaningful, that is, they have effectively stabilized the outpouring of funds and human resources westward to China." Both Taichung and Tainan are core bases for Taiwan's many energetic, resourceful small and medium-sized enterprises. According to Tai, these forces can readily be transformed to support production lines in the parks, which constitutes another advantage over competitors in China.
To reach a more effective distribution of resources, Tai proposes that the government help direct industries toward the park that would best suit their needs. Citing findings by the Stanford Research Institute, he says that taking into account related research support and the technological environment, Taiwan still leads Singapore and China as a source for contract research outsourcing. And the park in Hsinchu is going international as well. It has established mutually favorable treatment for investors with Spain's science parks, which will help local industries to enter the European market more easily.
The clamorous din of complaint on the costs incurred by the government's high-tech programs has faded now that the economy is picking up, and Taiwan is again finding its footing among the world's high-tech nations.