Auto Service World
Feature   July 1, 2006   by Andrew Ross

The Other China

There is not one China. There are two.

There is the China of Mao, and of the recent tyrannical zeal for economic growth. And there is Taiwan.

Taiwan has a very different history and culture from the People’s Republic; it is the land of Chiang Kai-Shek, the island sort-of nation of the Republic of China that has never severed its ties to the West.

In Taipei, where the AutoTronics Taipei International Automobile Electronics Show was held — the reason for my visit — the architecture is a curious mix of Far Eastern form with some distinctly Western contents. You want to buy Versace? No problem, but you’ll find it at Shin Kong Mitsukoshi in the Xinyi New Life Square.

The currency is in dollars (okay, New Taiwanese ones), and current is Western too. The realization that Taiwan runs on 110 volt, 60 Hz power, and that my plugs fit the outlets, means it’s just about like any road trip in more familiar surroundings. And English was easier to find than in Paris. In my experience it is often the small things such as these that either grease the wheels of business, or throw a spanner into the works.

In many ways, Taiwan has a lot in common with Canada. Like Canada, it is incredibly close to a huge entity that is both a tremendously important trading partner and a tremendous competitor.

In the news was indignation that a towel tariff imposed on Chinese imports was insufficient to protect the important Taiwanese towel industry. If you think that sounds a bit quibbling, substitute the words “softwood lumber” for towels, and you start to get an inkling of the kind of relationship that the Taiwanese have with China.

Of course, China has never acknowledged the de facto independence of Taiwan. The Chinese still regularly warn Western powers not to get too cozy in dealing with Taiwan independently, but it seems to be really no more than sabre rattling (although, on occasion, with the modern equivalent of sabres in the form of ships and military exercises in the Taiwan Strait, just to make the point.)

Despite its uneasy relationship with the Mainland Chinese, like Canada, Taiwan sees itself as an ideal jumping-off point for contact with its much larger neighbour. It was a point that was made definitively in preliminary meetings with Taiwan’s representative in Canada, and on the show floor.

“Our relationship with the West goes way back,” says Michael Wang, director of marketing and sales for Lite-ON Automotive Corp. “We understand the culture. For China, because they have been so isolated, it will take time. We cannot ignore the developments in places like Shanghai, but we are many years ahead.”

They are also well on their way to taking advantage of Mainland China’s low-cost production capabilities. “Some 70% of our production is in China. We understand the West, but we also understand China, because we are Chinese. That is why Taiwan is a very good bridge. We know the culture.”

It has all combined to provide Taiwan with significant opportunities. However, the country does have a limited set of resources, and this fact has caused it to focus very strongly on a few markets, with electronics being key.

In fact, nearly half of Taiwan’s $190 billion U.S. in exports in 2005, consisted of electrical and electronic components, and the figure continues to grow. “We have exported $18.9 billion U.S. in the first quarter. That is already a 21% increase over last year,” says Rock Hsu, chairman of the Taiwan Electrical & Electronic Manufacturers Association (TEEMA). “So, as you can see, we are looking at a very prosperous electronics export market.”

In turning its attention to vehicle electronics, Taiwan expects to go head-to-head with global players in a market where it is expected that the value of electronics in a vehicle will only increase.

Economics minister Ing-San Hwang likens the goal to that of a noted computer chip maker: to have people see the intelligent cars of tomorrow having “Taiwan Inside” as if it were a brand.

“The technology of Taiwan is very competitive. True, much is in terms of consumer electronics; the mobile entertainment market fits well as a target for the existing infrastructure of suppliers. But we’re getting Taiwanese know-how into the automotive industry.”

Doing that has required a collective effort.

“Many of the Taiwanese industries are SMEs, so they need to combine their efforts,” William Shih, a representative with the Taiwan External Trade Develop-ment Council, shouted over a blaring recording of Bon Jovi on the show floor. Those small to medium enterprises lack the resources and clout to develop systems quickly and correctly, he explained. So, with some government assistance, they banded together to form the 130-enterprise strong Taiwan Automotive Research Consortium.

That consortium is developing a whole host of technologies at virtually every stage of development. One of the most telling examples of the pace of development is the LED forward lighting system. With a prototype headlight unit populated with what looked like small yellow Chiclets–a prototype that generated 2000 lumens (watch your eyes) yet consumed only 50 watts–it was expected to be ready for in-vehicle testing by July. When pressed as to when one of the promised applications for the technology–the ability to adjust for conditions by varying the wavelengths of the light output (shorter for rain and fog), and adjusting the beam pattern for speed (further for highway, closer for in-town), the researcher shook his head, and said that was a long-term project. Long-term, I pressed, so five years or three? “No, no, one year,” came the reply. “It’s not a difficult technology. We just need time to develop it.”

Many of the technologies are intended for the OEM market, but there are significant offerings for the aftermarket too.

One of the most predominant at the event was tire pressure monitoring systems; there were likely a dozen systems and suppliers there.

“We predict that within two years, it will be very hot,” said one enthusiastic salesperson in the Vision Corp. booth, whose owner incidentally lives in Canada. “It has very good potential. The price is key.”

As an example, one supplier, Cowealth, had on display a trio of offerings, from low pressure activated LEDs that screw onto the valve stem, to a simple system that alerts a key fob, to a full function system with a dash-mounted readout. They were pegged at the $30, $60, and $90 retail price points respectively. And all were ready to go, complete with retail packaging.

In fact, that was the case with many of the products. While Taiwanese associations and government officials are proud of their nation’s capabilities in the research and development sectors, many of the companies are now, and have been for some time, ready to hit the market running.

A Yen for the Yuan

One of the key sticking points in terms of international trade has been the value of the currency of Mainland China, the Yuan. While Taiwan has the New Taiwan (NT) dollar, the call has been going on for some time to have the currency of its neighbour more accurately reflect the impact of its booming economy.

This past spring, U.S. agencies estimated that this would, and should, involve an increase of some 40%.

The currency has actually increased its relative value to world currency markets, but only marginally.

“It is still undervalued, but not by 40%,” offers Don Hsu, CEO of the Ham Shing Group and a leading businessman with an extensive list of corporate connections (his business card literally folds out) who was recently part of a trade mission that met with Chinese President Hu Jintao.

“They are actually gradually opening the marketing, and eventually the currency will be back to the free market. We had a lot of discussions on this during the (trade mission).

“Their banking system has really improved,” he adds. “And they are starting to get back on track. There was a concern that there might be a problem, but that hasn’t happened yet.”

As with many Taiwanese, Hsu believes that the wise route is to develop business relationships with Mainland China. Taiwanese companies are, collectively, the largest participants in joint ventures in Mainland China’s manufacturing plants.

“We are trying not to let political issues influence us. The better the business, the better the politics. This creates a very good atmosphere.”

However, he says, China’s policies do sometimes get in the way of business. For example, you can’t get a direct flight from Taiwan to Shanghai. Currently, flights must land in a third country, usually Macao or Hong Kong, before proceeding to Shanghai. This means that a flight that should take two hours can take all day.

“I have been dealing with committees in China for 16 years. And they are getting more open and democratic. Now in China, from the lower to higher level, governors are trying very hard to improve their economy.

“Both sides should have closer ties. A more open relationship would benefit all.”

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