President-elect Tsai Ing-wen (蔡英文) visited semiconductor operators at the Hsinchu Science Park on March 3.
The China Times reported that at a closed-door meeting, industry representatives urged the incoming government to open the sector to Chinese investment, claiming that if it does not allow the IC design industry to interact with its Chinese counterpart, it might be completely eliminated from the Chinese market, since Beijing is actively developing its own IC design companies.
This scene is reminiscent of the Economic Development Advisory Conference in August 2001, at which a few representative business tycoons urged the government to allow the IT design industry to invest in China, lest it remain in Taiwan and be “suffocated.”
After the conference, the administration of then-president Chen Shui-bian (陳水扁) took the industry’s suggestion and lifted restrictions on investment in China for 7,078 industrial products, including laptops, cellphones and other items.
However, the economy did not improve as they had predicted, but it actually fell, helping China through the deregulation realize its dream of turning into an “IT design kingdom.”
Operators in the industry this time emphasized that, on the premise of controlling the management and key techniques by themselves, the incoming government should accept individual applications for Chinese investment in the IC design industry.
The problem is that this is applicable to US or Japanese capital, but not to Chinese capital. As an authoritarian state, China is so powerful that it was able to abduct Lee Bo (李波), a shareholder of Causeway Bay Books in Hong Kong, forcing a man holding a British passport to say that he always has identified as Chinese and that he had not been kidnapped, but had sneaked into mainland China to cooperate with an investigation into the bookstore.
This is what China is all about. Does anyone believe that Taiwanese operators will be able to control management and key technologies if the nation opens its IC design industry to Chinese investment? The incoming government should keep in mind the economic threats Beijing issued a week before the 2012 presidential election.
As some Taiwanese operators claimed, if upstream design capabilities weaken, that would affect the downstream IC foundry, packaging and testing sectors. What firms should do to upgrade designs is to cooperate with US and Japanese companies with better technologies, rather than asking low-end Chinese companies for mercy. If the IC design industry joins its Chinese counterpart, US and Japanese companies would keep their distance from the nation’s industry. Taiwanese design would weaken and degrade, becoming a Chinese sub-industry.
Fortunately, Tsai’s response was that in light of opposition throughout society, her government would not open the IC design industry until public hearings had been held and a public consensus had been reached. Hopefully, such hearings will not repeat the mistakes of the 2001 advisory conference and the government will stand by the public and take a national security perspective, while sticking to the position that the industry should not be opened to Chinese investment.
The government should review the regulations for Chinese companies that want to invest in the IC manufacturing, and packaging and testing sectors. In the face of the challenge of China’s so-called “red supply chain,” Taiwan has to secure its semiconductor industry — one of the pillars of the economy — whose production value of NT$2.3 trillion (US$69.9 billion) was the world’s second-highest after the US last year.
On March 5, China released the guidelines for its 13th five-year plan, which listed advanced semiconductor manufacturing, robots and biotechnology as “strategic emerging industries.” Obviously, the plan targets Taiwan, as it attempts to destroy the nation through economic warfare.
That being so, the new government should prepare well.
Some suggestions made by representatives of the semiconductor operators need further consideration, such as providing dividends to employees or allowing employees to become shareholders, and establishing an “industry-academia research and development laureate league” to cultivate talent. The government should form a state-level investment company, as well as a “Taiwan team” to integrate companies downstream of the semiconductor industry. That should lead semiconductor operators to the world in a timely manner, not to China.
Huang Tien-lin is former president and chairman of First Commercial Bank and a former Presidential Office adviser.
Translated by Eddy Chang
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