TAIWAN SME DEVELOPMENT IN HIGHTECH VALUE ADDED PRODUCTS

1

• TAIWAN SME DEVELOPMENT IN HIGH-TECH VALUE ADDED
  PRODUCTS
• Taiwan has established itself as a world class
  supply source for a variety of electronic
  hardware products. In 1996, almost 60 of worlds
  desktop PC were made in Taiwan or had components
  made by Taiwanese company.
• Taiwanese companies have successfully achieved
  rapid diversification beyond PC related products
  into complementary high growth market segments
  and package of services across wide range of
  value chain activities.
• What are the reasons behind Taiwanese success?
• -International Markets and Access to Foreign
  technology
• -inter-organizational knowledge creation in order
  to absorb imported technology
• -selective and active industrial development
  policies
• -variety of linkages with large Taiwanese groups
• -early participation in the international
  production networks

2

• The dominance of SMEs
• source of flexibility for Taiwan
• In 1993 SMEs account for 96 of total number of
  companies, 69 of total employment and 55 of
  Taiwans manufactured exports. Taiwan is home to
  more than 4000 electronics firms that produce PC
  related products and components.
• In a highly volatile and uncertain markets and
  unexpected changes in demand and technology SMEs
  proved to be very flexible due to
• FIRM RELATED FACTORS
• Specific Organization of Domestic Supply Base in
  Taiwan especially for parts and components.
• EXTREME FORM OF SPECIALIZATION
• Economies of scale and Scope and Speed to Market
  which requires SUBSTANTIAL INVESTMENTS IN FIRMS
  TECHNOLOGICAL AND ORGANIZATIONAL CAPABILITIES.
• Innovation through the establishment of tight
  linkages between firms along the supply chain
  that enhances the prospects for organizational
  knowledge creation

3

• GOVERNMENT RELATED FACTORS
• -open policy to give rise to intense domestic
  competition
• -active government policy to promote
  modernization in Taiwans SMEs through SME
  Promulgation Laws. Assistance given in market
  promotion, management rationalization,
  cooperation and promoting strategic alliances,
  loans, upgrading technology and labor training,
  financial services.
• -no discrimination against small SMEs, promotion
  of competition
• -equal treatment to foreign and domestic
  investments
• -Industrial Technology Research Institute created
  in 1973 in order to develop applied industrial
  technologies for key components and capital
  equipment.
• -Encouragement of top researchers and engineers
  to start business.
• -establishment of Industrial parks devoted to
  computer manufacturing replicating Silicon Valley
  type informal networks and diffusion of
  technology
• HSINCHU SCIENCE-BASED INDUSTRIAL PARK
• ELECTRONONIC RESEARCH SERVICE ORGANIZATION (ERSO)
• COMPUTER AND COMMUNICATIONS RESEARCH LABORATORIES
• -educational policy generating high quality
  engineers and managers
• 50,000 engineers annually
• 74 technical schools, 36 colleges, 24
  universities

4

• ROLE OF INTERORGANIZATIONAL LINKAGES
• -informal professional peer group networks
• -Government Center-Satellite Program encouraging
  closer, interdependent and long term ties with
  center firms in suppliers, final assemblers and
  trading companies and component suppliers
  (International dimension added through the direct
  investment in China(Fujien Province), Philippines
  (Subic Bay) and Malaysia (Penang Scientific Park)
  and Indonesia (Kung-Hua Industrial Park)
• To increase speed and reduce cost Acer has 15
  modular assemblies around the world.
• -Linkages with Large Domestic Firms Cross
  Sectoral Business Groups
• SMEs rely on supply of basic materials provided
  by large public enterprises at low cost and high
  quality. Taiwanese business groups consist of
  loose network of mostly medium sized companies
  that produce variety of products for different
  markets with one core company exercising
  financial control. Combination of scale
  advantages of large firms with speed and
  flexibility of smaller firms.
• SMEs in turn face extremely competitive demands
  from larger firms in terms of delivery and cost
  requirements.
• Top10 firms in Taiwan control 80 of PC industry
  production.
• -Business Groups Centered Around Holding
  Companies
• federation of loosely connected companies united
  for access to common core technologies, access to
  the holding companys financial resources, market
  intelligence, product marketing and brand name.

5

• ROLE OF FOREIGN DIRECT INVESTMENT
• technical cooperation and establishment of
  factories by American, Japanese and European
  companies. (Philips, Matsushita, Mitsubishi, NEC,
  Sanyo,Apple, IBM, DEC,Compaq, HP etc.)
• PARTICIPATION IN INTERNATIONAL NETWORKS
• Computer industry in the world has involved
  different national production systems through
  outsourcing. Participation in international
  networks enable suppliers to avoid expenses for
  sales, distribution, networking and allow them to
  acquire knowledge on foreign consumer
  preferences,improve input procurement, production
  control methods, speed up product development
  cycles and delivery. IMPROVEMENT IN EFFICIENCY
  and LOGISTICS.