As automakers intensify their business strategies to catch up with the electrification trend and governments worldwide map out measures to address worsening air pollution and the climate crisis, the shift from fossil fuel-powered vehicles to electric vehicles (EVs) is moving faster than expected, creating opportunities for Taiwanese manufacturers, because EVs contain more electronic parts.
For a nation like Taiwan — which has a comprehensive electronics supply chain, along with a competitive edge in semiconductors as well as information and communications technology (ICT) — EVs are likely to grow into another trillion-dollar industry, something that even a decade ago was unthinkable.
Minister of Economic Affairs Wang Mei-hua (王美花) last month told reporters that the government’s industrial development policies this year are prioritizing three major industries: EVs, semiconductors and 5G communications. Assisting the industries to bolster their local supply chains and expand globally is crucial, she added.
Taiwan’s lead in the semiconductor and ICT sectors has clearly made it a pivotal partner in the world’s technology supply chains, and paved the way for the development of emerging industries, such as EVs, 5G, green energy and the Internet of Things.
While domestic auto parts makers have seen production output and exports grow rapidly over the past few years, most local manufacturers focus on the aftermarket business for fossil fuel-powered vehicles rather than the original equipment manufacturing (OEM) segment, as traditional automakers in the US, Europe and Japan continue to dominate OEM components.
However, the emergence of EVs has created opportunities for Taiwanese manufacturers of electronic components, such as drive systems, computer systems and flat panels. Several local producers of key electric systems, including electronic controls, powertrains and smart driver assistance systems, have become supply-chain partners of top automakers, such as Tesla, General Motors and Stellantis.
Hon Hai Precision Industry Co chairman Young Liu (劉揚偉) last month predicted that local manufacturers would make about 90 percent of the parts used in batteries, electric devices and power control solutions for Taiwan-made EVs by the end of 2024.
The key components of EVs — the battery, electric motor, electronic control system and onboard charger — are the focus of at least 30 Taiwanese companies. Hon Hai, which debuted three EV prototypes in October, has invested in the development of batteries and collaborated with Stellantis to produce smart EV cockpits.
Manufacturing EVs involves two industries: electronics and auto parts. The government should assist in the industries’ vertical and horizontal integration, and cooperate with global auto brands to enhance the competitiveness of the domestic EV industry.
Taiwan’s EV industry must first decide what role it aims to play in the global supply chain and what strategy it aims to adopt. This could help the industry to answer key questions: Will local firms focus on developing standardized, modular products? Will they focus on supplying custom-made parts? Will they seek to lead in developing hardware or software systems integration? Can they become as irreplaceable in the global EV supply chain as they are in the semiconductor industry?
Such questions cannot be ignored, but require serious contemplation as the government and domestic manufacturers eagerly push ahead with the nation’s technological innovation and industrial transformation.
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