The PRC and Taiwan are standing on the threshold of accession to the World Trade Organization (WTO). Despite the current economic downturn, post-WTO prospects for US commercial partnerships with Taiwan firms are looking more attractive, especially with regard to opportunities in the Greater China market.
Taiwan has long served as a base for Greater China operations for a cross-section of leading US firms in the semiconductor, aerospace/defense, financial services, and other sectors. However, the scope and reach of those operations has been constrained by still incomplete links of communications and transport (both passenger and freight) across the Taiwan. Accession to the WTO, together with progress on the so-called Three Links, will enhance Taiwan's viability as a Greater China operations center and regional partner for US firms.
Business always seeks to produce goods in the lowest cost environment, to sell goods where profits can be maximized, and to base operations where the "hard" and "soft" infrastructure for doing business are most secure and attractive. US firms have been increasingly attracted in recent years by the low costs in the PRC, both for skilled and semi-skilled labor and for facilities construction and operations.
Likewise, the PRC market of nearly 1.3 billion consumers offers attractive prospects for long-term profit growth. While the "hard" infrastructure is improving in the PRC, Taiwan offers US firms a considerably more advanced infrastructure of transport, telecommunications, energy and environmental protection.
Even more important, Taiwan's "soft" infrastructure of legal protections, financial regulations, procedural transparency, and a globally-tested workforce is good and getting better.
It is the positive interplay of constantly improving "hard" and "soft" infrastructures -- driven by dynamics of privatization, liberalization, and democratization -- that attracts the attention of US business decision-makers. This positive interplay makes Taiwan interesting to US firms as a potential partner, and base, for Greater China operations.
The scale of this partnership opportunity is particularly vivid in the IT sector. The value of this sector in Greater China in 2000 exceeded US$48 billion. Approximately, US$25 billion of that amount was produced in China, whereas almost US$24 billion was produced in Taiwan.
Tellingly, however, 70 percent of the production in the PRC was generated by Taiwan firms with operations in mainland China. Add to this the skills of the more than 300,000 Taiwan production managers and other businesspeople active in the mainland market and the logic for US-Taiwan partnership in Greater China becomes clear.
To examine and assess these opportunities, the Commercial Section of AIT organized, on March 23, 2001, the "Taiwan/Greater China IT Matchmaker Forum" at the Marshall School of Business on the campus of the University of Southern California. The goal of this three-hour session was to examine business models of some leading US and Taiwan firms who are already leveraging IT partnerships and using Taiwan as a springboard to the Greater China market. The audience was made up of small and medium-sized US firms standing to benefit by following a similar strategy.
The companies presenting their business models at this session included Nortel, Lam Research, Proctor & Gamble, IBM, Acer, Taiwan Fixed Network (Pacific Group), Sina.com, and TSMC's WaferTec subsidiary.