Terry Gou (郭台銘), chairman of Hon Hai Group (鴻海集團), the owners of Chimei Innolux, launched a tirade against the government, accusing it of being unsupportive in the face of a huge fine levied by the European Commission against Chimei for alleged price-fixing. He claimed the government had been too slow in approving the relocation of flat panel production to China. The very next day, the Ministry of Economic Affairs said it would address the problem immediately. Was this a coincidence, or just another case of industry forcing the hand of government?
Whichever it is, it does make one think of Taiwan Semiconductor Manufacturing Co (TSMC) chairman Morris Chang (張忠謀), Both Hon Hai and TSMC are giants of the Taiwanese technology sector, although they have chosen different routes. TSMC has kept virtually all its major plants and technologies in Taiwan. It has not followed a policy of relocation to China or moving into the China market, but has succeeded in terms of technology and quality regardless.
It’s not that TSMC has never considered a move to China, but it was constrained by a “no haste, be patient” policy. It never claimed, however, that such a policy was stifling it. It toed the line and went about its business quietly, choosing not to rail against the government’s “N minus 1 principle” of keeping technology used by Taiwanese companies in China one step behind. They have succeeded regardless.
TSMC’s business revenue for this year is already up to US$13.2 billion. That puts them in fourth place among semiconductor manufacturers globally, and No. 1 in terms of producing wafers for other companies, leaving Semiconductor Manufacturing International Corporation (SMIC), which rushed over to China, far behind (SMIC’s revenue this year is only US$1.55 billion).
TSMC is also planning to plow US$10 billion into a large plant in either Tainan or Taichung. Last year it paid NT$9.5 billion (US$ 318 million) in taxes in Taiwan. It currently employs more than 30,000 people here, having taken on almost 9,000 staff this year by September.
It is no exaggeration to call it a major driver of economic recovery in this country, and it is certainly the bedrock of the supply chain in the Taiwanese high-tech industry. TSMC’s success is proof that a company can thrive without having to relocate to China.
Hon Hai has taken a different path. It focused on China, and once it had become established took advantage of the “active opening, effective management” policy. It could then keep prices low and increase production, enabling it to achieve astronomical growth rates and see its annual revenues increase tenfold within nine years.
Last year Foxconn (富士康), a company Hon Hai set up in China, was hit by a series of suicides by its workers in Guangdong and Shenzhen. Confounding predictions this would precipitate Hon Hai’s return to Taiwan, the company actually moved further inland, to Chengdu and Chongqing.
In fact, the plan is to move as much as 70 percent of the production volume to these inland factories within five years. Hon Hai, including Foxconn, currently employs 920,000 workers, and its exports in 2008 were worth about US$55.6 billion. The company is, then, one of the great driving forces within China’s high-tech industry.
Both TSMC and Hon Hai are corporate success stories. The former has kept its base in Taiwan, the latter has moved into China. The former is ahead in terms of technology, the latter is competitive with its low prices.