Mon, Jun 04, 2001 page22

• Paul Zeven says China a `tremendous opportunity' for Taiwan

  Philips Electronics Industries has been doing business in Taiwan for the past 35 years. What started as a components factory in the southern city of Kaohsiung in 1966 is now a bustling NT$200 billion-a-year enterprise that includes investments in local firms such as Taiwan Semiconductor Manufacturing Co. Philips-Taiwan President Paul Zeven told `Taipei Times' staff reporter Dan Nystedt about how doing business in Taiwan has helped his company in China

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  Taipei Times: How much business does Philips do in Taiwan?

  Paul Zeven: We did NT$200 billion in business here last year [with] just Philips-Taiwan ... so we have quite a sizable industry here, as you know. It's basically what we produce and sell in Taiwan.

  Of course a lot of what we produce here -- in fact most of it -- is exported, about 75 percent.

  

  Philips-Taiwan President Paul Zeven speaks into a microphone. Philips Electronics Industries has been in Taiwan for the past 35 years. What started as a components factory in Kaohsiung in 1966 is now a NT$200 billion-a-year enterprise.

  PHOTO: GEORGE TSORNG, TAIPEI TIMES

  The rest of it is sold locally, of course, to a large base of customers and corporations here or satellite industries here in Taiwan. But a lot of it also goes to our sister companies who then sell to their customers outside of Taiwan. It's quite a sizable activity.

  This year, of course, will be a difficult year. We are no more or no less than the state of the industry this year.

  TT: Do you expect to meet the same numbers as last year?

  Zeven: Well, that is our hope, but it's too early to say. It depends on when the upturn comes. That's the big question.

  TT: Philips has long been viewed as a major player in Taiwan, with its major investment in Taiwan Semiconductor. When Intel decided not to invest [in the company], Philips stepped in and put up a sizable amount of start-up cash. What led to the decision to work with TSMC?

  Zeven: I think this question fits very nicely into Philips' objectives in Taiwan. We've always been very much integrated in the Taiwanese environment both as a business and [as a member of the] community.

  We've always grown with the trends in Taiwan ... and ... to go into this kind of activity with Morris Chang (張忠謀) [TSMC's chairman], with all of his experience at the helm, Philips was of the opinion that it fit very nicely with our policies to grow with Taiwan and to also [grow] in this direction.

  And of course we have fared very well. TSMC is a model company, not only in Taiwan but also I think in the semiconductor world.

  They are leading the industry in the foundry business for semiconductors. It's a fantastic company and we are very proud to be a part of it.

  Y.C. Lo (羅益強), our former president, was very much part and parcel of the creation of the relationship between TSMC and Philips. He was present at its birth so to speak, so all the credit -- at least as far as Philips is concerned -- goes to Y.C. Lo.

  TT: Does Philips still own a large portion of TSMC?

  Zeven: Yes, we own a very significant part, but I would not like to mention percentages ... but it is a very significant part anyway. A very good investment.

  TT: Another big deal for Philips in Taiwan was the sale of Philips' capacitor division to Yageo Corp (國巨). What was involved in that deal?

  Zeven: Philips is very much in the process of resetting its priorities for high technology. The operation which we sold to Yageo was part of a worldwide divestment of ceramic components -- which historically was a very integral part of Philips but does not fit anymore into our priorities.

  We do not want to sell really loose components but rather solutions, and digital systems and ceramic components no longer fit into that. It is better to divest the company to another investor who wants really to make that its priority. Yageo is a very healthy company and is doing very well.

  TT: Would you care to comment on the intellectual property dispute regarding CD-R technology that has been going on between Philips and Taiwanese firms like Ritek (錸德) and CMC Magnetics (中環)?

  Zeven: We have chosen a rather low profile approach with regard to this issue. This is actually the first comment that I am making [on the matter.]

  I do not believe we should fight out our business disputes via the press or via ... politics ... it is a very difficult and complicated issue which has to do with the very basic rights of IPR [intellectual property rights] and even though the FTC [Taiwan's Fair Trade Commission, 公平會] has ruled negatively against us, we are abiding by its decision even though we are appealing it.

  With one of the major companies we have already reached an agreement. With the other major companies, we are already in quite a far stage of negotiations ... We are all looking for a solution in the win-win sphere and I am quite optimistic.

  TT: Do you feel Philips has been treated fairly so far?

  Zeven: Let's put it this way: For us this is a business dispute ... You should know that Philips Taiwan is only involved at a distance in this. It is a discussion which only involves local CD-R disc manufacturers who are involved in the global scene and the headquarters in Holland.

  But, we are Philips' representative in Taiwan, and as such we know very well what is going on. Of course the press has presented its views ... it's too complicated an issue to make clear to the public at large in a few articles. The best I can say is I am cautiously optimistic we will reach an agreement soon.

  TT: Since Philips has been such a strong partner with Taiwan in the past, what does the future hold? Are there any partnerships or deals you can talk about now?

  Zeven: We are now implementing our expansion in the Kaohsiung (高雄) semiconductor operation. It's two expansions, one expansion in volume and the other one in introducing more complex products. That's a US$500 million investment, which started last year and will continue for a couple more years.

  We are also expanding and consolidating our research activities here, and there will be a number of smaller mergers and acquisitions, possibly divestments which might involve Taiwan.

  There are a couple of big ones which also involve our operations here. We will be bringing all of our display products which include our large displays for TVs and monitors under a 50-50 joint venture with LG Electronics (a South Korean firm) that will hopefully be consolidated by the middle of the year.

  We have a number of picture tube operations here in Taiwan and they will fall under that joint venture. For the rest, I would say there will continue to be mergers and divestments and how exactly the Taiwanese opportunities will be reflected in this, I cannot yet really comment on.

  TT: At the Kaohsiung semiconductor plants, what kind of chips will you work on?

  Zeven: There are a lot of discretes, the 64-bit ... They are the more higher level semiconductors, mainly in communications but also a number of chips for the video industry.

  TT: Phillips has had a long history in Taiwan, how would you say that has helped prepare the company for China?

  Zeven: I think very well. I believe that the strengths of China and the strengths of Taiwan combined will be a very important part of the future from an economic and technological point of view.

  I think Taiwanese companies also see that there are more than 50,000 Taiwanese companies already operating in China and I read reports of more than US$50 billion in investments there over the past few years, so obviously Taiwanese industry is preparing itself for that.

  You also see a lot of the mass manufacturing, low-tech products, which were the mainstay in the creation of Taiwan as an industrial powerhouse, a lot of them are shifting now to mainland China, including the Philips operations by the way. So there is already very much a strong interrelationship between the two and I think that will only strengthen in the coming years.

  TT: What has that done for Philips?

  Zeven: We very much use Taiwan as a base to support our operations in China. Both are very much Chinese environments, so we use our Taiwanese specialists to support our operations there. I think it's a very structural relationship, and we work very closely with our mainland China groups.

  TT: Are your China operations already as big as Taiwan operations?

  Zeven: They're already bigger. We have more than 20 joint ventures there and we are continuing to expand. China will be one of the major -- if it is not already -- markets for multinationals over the coming years. So I think it's a tremendous opportunity for Taiwan.
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