Taiwan should develop its own distinctive products instead of resorting to cut-throat price competition, the head of a non-profit research and development organization said yesterday.
Lin Hsin-i (林信義), chairman of the Industrial Technology Research Institute (ITRI) of Taiwan, made the remarks after being invited by a high-tech company to speak about innovation and how to acquire a competitive edge at the Taipei International Convention Center.
Lin said the value-added rate of Taiwan products was too low. Although many Taiwanese products have the lion's share of world markets, they generate little profit, he said.
He highlighted features of the manufacturing industry in recent years, including a great variety, low demand, short life cycles, high R&D costs, high quality, low prices, short time spans for delivery, a shortage of human resources, increased investment in equipment and low profit generation.
But he said that even the "worst of times will provide great opportunities" and urged Taiwanese businesses to focus on upgrading the value of their products.
He said that South Korean businesses have long heeded this trend and dedicated themselves to the research and development of key materials, parts and components.
In comparison, Taiwan manufacturers continue to engage in cut-throat price competition. Even if manufacturers relocate to China or Vietnam, they nonetheless maintain the same pattern of low-price competition instead of focusing on establishing their own brand name products.
"If the trend continues -- even if Taiwan manufacturers relocate to Africa -- the chances of them making big profits will be minimal," he added.
As an example he cited the market share of Taiwan's notebook computers, which is as high as 90 percent, while the profit margin continues to be a mere 4 percent.
"If we can't upgrade the value we bring, we can't upgrade our competitive edge," he said.
"The declining value-added rate of Taiwan's major manufacturing industry is worrisome," he said.
The value-added rate of Taiwan's electronic parts and components was 17.1 percent in 2005 from 32 percent in 1999.
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