The Republic of China's electronics industry, which grew at dazzling speed in the 1960s, may advance even faster in the space age of the 1970s.
In terms of production and export value, Taiwan still ranks third in Asia—behind Japan and Hongkong—but last year's production volume was US$120 million, an increase of 240 times in 10 years. Exports have climbed by more than 130 per cent annually in the last five years. The value was US$13 million in 1966 and reached US$70 million in 1968.
As a result of this outstanding performance, the Republic of China was chosen as the site of the fifth Asia Electronics Conference. The four preceding biennial meetings had been held in Japan.
The Taipei meeting November 24-26 followed by the day-long first conference of the Asia Electronics Union, which was established in April of 1968 for the purpose of enlarging international electronics cooperation among countries of the Asian and Pacific region. On view in Taipei to coincide with the two meetings was the 12-day Electronics Exhibition 1969. The two previous exhibitions of the Asian electronics industry were held in Tokyo in connection with the third and fourth AEC meetings.
The electronics industry is one of the fastest growing in free China. Success in this field reflects an advance from the simple light industry stage to much more sophisticated manufacturing.
Generally speaking, Taiwan's industrial development has followed the conventional pattern. It started off in the late 1940s and early 1950s with the improvement and expansion of traditional export industries based on agriculture. Included were sugar and canned pineapple. The manufacture of import substitutes—chiefly light consumer goods—was emphasized. Included were cotton and woolen textiles and wheat flour using imported raw materials and paper and nitrogenous fertilizer made from indigenous raw materials. Initially for the domestic market, these industries have become significant foreign exchange earners through continuous expansion and increased sophistication. Textiles, for example, have topped the export list since 1966. The 1968 value of US$190.4 million was up 67.5 per cent from 1967's US$113.7 million.
Beginning in the mid-1950s, the development of import-replacing industries continued but the objectives of investment became more sophisticated. There was a trend toward more durable goods and industrial intermediates with greater export orientation. Examples of this stage are the establishment or expansion of industries manufacturing plywood, rubber tires and tubes, rayon, glass, cement, a variety of chemical products (including pharmaceuticals and detergents), household appliances, metal products and machinery.
Since the early 1960s, export expansion has received more stress than import saving. Growth has been led by such industries as food processing, especially canned asparagus and mushrooms, synthetic fibers, plastics and resins, and electronics.
Free China's industrial production grew by 6.9 times between 1952 and 1968, averaging 13.8 per cent a year. Among the subsectors contributing to this growth were mining, 6.4 per cent annually; manufacturing, 14.7 per cent; and electricity and city gas, 11.4 per cent. Industry advanced by 11.8 per cent per year from 1952 to 1960, by 15.1 per cent in the 1961-1964 period and by 16.7 per cent in the succeeding four years.
Electronics had small but early beginnings with the assembly of tube radios in 1948. Nearly all parts had to be imported. Two years later the government put assembled radio sets on the import control list. This was followed by the establishment of large-scale assembly plants. By 1953 Taiwan had started to make power transformers, output transformers, capacitors, etc., with technical know-how introduced from abroad.
Taiwan transistor radios were first assembled in 1961. Exports began the following year and exceeded 4 million sets worth more than US$16 million in 1968.
Black and white television broadcasts were started in 1962. Receiver assembly plants were introduced soon afterward. TV gave impetus to establishment of factories supplying parts and components to radio, TV and other electronics plants. The introduction of color broadcasts in October of 1969 was preceded by local production of color sets.
Electronics production of the late 1950s was limited. Nearly all electronic consumer products are now made. Production of such specialized equipment as computer subassemblies and communication devices has been started. These are production figures:
— Phonograph production remained below 10,000 sets a year until 1966 but reached 14,000 sets in 1967 and 78,000 sets in 1968.
— Tape-recorders numbered only 589 in 1966 and 845 in 1967 but 237,600 in 1968.
— TV production climbed from 31,055 sets in 1964 to 49,540 in 1965, 64,319 in 1966, 162,000 in 1967 and 650,000 in 1968. There are 11 TV makers, excluding those that produce only for export. Annual production capacity of the 11 is about 300,000 sets but only about 160,000 were turned out in 1968 because of the limited size of the local market. The growth of the future lies in sets for export.
— Production of transistor radios started in 1961 with 1,115 sets. Volume increased rapidly as follows:
Year Sets
1962 9,412
1963 22,267
1964 434,067
1965 1,109,434
1966 1,531,665
1967 2,943,501
1968 3,787,330
The electronics industry requires skills and technology that have been developing for decades in the industrially advanced countries. Taiwan is a late comer and its technology still lags. But the island has one advantage that is lacking in the advanced countries. Abundant high-quality labor is available at reasonable wages. Industries requiring large numbers of conscientious workers have been drawn to Taiwan by this asset. The government also has a policy of encouraging investment. A business income tax holiday and other incentives are offered.
The first Taiwan electronics plant with foreign capital—a wholly owned subsidiary of the Newark based General Instrument Corp.—opened near Taipei in late 1964. In less than five years, the number of approved foreign investment cases in the electronics field reached 67. Chinese industrialists have not neglected electronics. Their investments number 83, raising the total to 150. This is the breakdown by source of investment:
Country Plants %
China 83 55.3
Japan 40 26.7
U.S.A. 24 16
Holland 3 2
Total 150 100
Geographically, northern Taiwan has the largest number of plants—65 Chinese and 47 foreign factories for a total of 112 or three quarters of the total. Southern Taiwan's share is 20.67 per cent—12 Chinese and 19 foreign plants for a total of 31. The other 7—6 Chinese and 1 foreign—are in central Taiwan. All factories are on the developed west coast. None is located in eastern Taiwan. This is the breakdown:
Location Chinese Foreign Total
North (74.67%)
Tamsui 26 14 40
Taipei 35 22 57
Taoyuan 3 1 13
Hsinchu 1 1 2
Total 65 47 112
Central (4.67%)
Miaoli 1 0 1
Taichung 4 0 4
Puli 0 1 1
Chiayi 1 0 1
Total 6 1 7
South (20.67%)
Tainan 5 0 5
Kaohsiung 7 19 26
Total 12 19 31
Grand Total 83 67 150
Investment exceeds US$146 million, including projects in process. The Americans top the list at US$85 million for 58 per cent. Chinese rank second (US$30 million, 20 per cent), followed by the Dutch (US$22 million, 15.5 per cent) and the Japanese (US$10 million, 7 per cent).
The Dutch are first in investment per case (US$7,300,000), followed by the Americans (US$3,540,000), Chinese (US$360,000) and Japanese (US$240,000). The 27 Dutch and American cases (18 per cent of 150) are all above the average investment size of US$973,333.
Combined American, Dutch and Japanese investment in electronics—about US$117 million in 77 cases—represents 42 per cent of the value but only an eighth (13 per cent) of the number of foreign investments in Taiwan since 1952 (US$276 million in 505 cases).
Overall foreign investment is broken down into the US$25 million of the 29 cases that arrived in the nine years before promulgation of the Statute for the Encouragement of Investment on September 10 of 1960 and the more than US$250 million in 476 cases in the nine years since the statute came into effect. The average annual investment increment in pre-statute years was only about US$3.12 million. The amount rose to US$27.7 million (an increase of nearly nine times) in the post-statute years. The 505 cases do not include 16 cases that were approved but failed to materialize. In other words, the 505 fruitful cases represent 97 per cent of the total approved cases (521).
Total foreign investment consists of:
- US$175 million in 136 cases from the United States.
- US$68 million in 329 cases from Japan.
- US$33 million in 40 cases from other countries.
In order of preference, investments have gone into electronics, chemicals, metals, textiles, garments, food processing, machinery and instruments, construction, rubber and plastics, and hotels and other services.
Just how much of the investment in electronics is from overseas Chinese investors is not on record but the amount is limited. Overseas Chinese have been primarily interested in services, food processing, textiles and construction.
The Overseas Chinese and Foreign Investment Commission of the Ministry of Economic Affairs reported that in the 17 years and 10 months from 1952 to October of 1969, overseas Chinese investment totaled US$133 million in 629 cases, of which more than US$120 million in 569 cases came after the 1960 promulgation of the investment statute. Chinese of Hongkong invested US$57 million in 420 cases. Those in Japan came next with 67 cases.
Overseas Chinese and foreign investment arrivals in the post-statute years have totaled US$373 million in 1,045 cases for an average of US$41 million in 116 cases per year. In pre-statute years, investment arrivals totaled only US$36 million in 89 cases for an average of US$4 million in 10 cases per year.
Also approved in the same 17 years and 10 months were 395 technical cooperation cases. Of these, 395 (76 per cent) came from Japan, 62 (15 per cent) from the United States and 30 (9 per cent) from the rest of the world. Electronics and electrical appliances topped the list with 101 cases or 25 per cent of the total, followed by chemicals (77 cases or 19 per cent), machinery, instruments and metals.
External investments and technical cooperation projects have played a major role in Taiwan industrialization. Between 1952 and 1958, agriculture's share of the economy declined from 35.7 per cent to 23.23 per cent while industry's rose from 17.9 per cent to 29.24 per cent. The private sector accounted for 42.7 per cent of industrial production in 1952. This rose to 70.3 per cent in 1968. Production of the private sector grew at an annual rate of 18.6 per cent, compared with the public sector's 9.8 per cent.
Economic structural change is reflected in the increased diversification and sophistication of exports. In 1952, agricultural products made up 26.9 per cent, processed agricultural exports 68.3 per cent and industrial products 4.8 per cent of exports. By 1968, these percentages had changed to 14, 22 and 64. The phenomenal rise of the electronics sector from US$2 million in 1964 to US$69.9 million in 1968 was one of the biggest contributions. So far, however, the net foreign exchange gain from electronics is only about a fifth of export value because of continued heavy reliance on imported parts and components.
Under the fifth Four-Year Economic Development Plan (1969-1972), the government expects electronics to grow at 42.9 per cent annually. In that case, production value would be US$297.36 million and exports US$250 million for a net foreign exchange gain of US$100 million (40 per cent of export value instead of the present 20 per cent) in 1972. Export value is expected to soar to US$350 million in 1974.
These steps have been urged to assure the development of electronics:
— Promulgation of regulations requiring export processing plants to use some Taiwan-produced raw materials and parts in assembling transistor radios.
— Improved inspection to assure quality control.
— Revised tariffs to provide more incentives for local manufacturers.
— An improved system of tax rebates.
— Training of more technicians. Labor is reasonably priced and plentiful in Taiwan but there is a shortage of technicians of the middle and upper echelons. Wages of Taiwan manual labor are about a 20th of those in the United States. But Chinese technicians are paid about a third of the American level. Shortages of skilled labor are common in most factories and turnover rates are high. Many vocational schools of the secondary level are offering electronics courses but not many colleges and universities have set up electronics departments. The electronics industry needs some 400 college graduates a year. Another 100 electronics graduates are required in communications.
— Chinese electronics factories are mostly small and uneconomical. Large factories capable of manufacturing transistors, TV tubes and other important components should be established.
Most assembly work is done by girls with junior high school education. They are skillful and loyal employees (File photo)
Taiwan's problems are duplicated in other Asian and Pacific countries. Solutions were sought by the 78 representatives from 17 countries, territories and inter national organizations who came to Taipei in late November for the three-day fifth Asia Electronics Conference. These were among the topics discussed:
1. Collection and exchange of technical and marketing information.
2. Exchange of visits by managers, engineers and technicians.
3. Technical cooperation and training programs.
4. Manufacture of low-cost radio receivers and TV sets for developing countries.
The 78 participants included 33 domestic representatives and 45 overseas delegates. The latter came from Australia, Ceylon, Hongkong, Indonesia, Iran, Japan, Korea, Malaysia, the Philippines, the Ryukyus, Singapore, Thailand, Vietnam, the U.N. Industrial Organization (UNIDO), the U.N. Educational, Scientific and Cultural Organization (UNESCO) and the U.N. Economic Commission for Asia and the Far East (ECAFE).
In his address at the opening ceremony, China's Vice President-Prime Minister C. K. Yen admitted that the nation's electronics industry still trails those of Japan and many countries of the West but "we are certainly eager to join with our Asian colleagues in strengthening our international cooperation in this particular field of technology and striving together towards our common goal of benefiting the Asian people".
Yen continued: "It has been our experience that although the electronics industry in Taiwan was first set up by foreign investment and the products were primarily intended for foreign markets, it has to a great extent stimulated and accelerated the development of our national industry."
"This catalytic effect is worth noticing and may be of interest to other Asian nations whose situation in seeking for development of electronics industry is similar to ours. Most countries in Asia are in a developing state. Regional cooperation in this area is therefore most important."
Yen declared that "we are today at the threshold of a new epoch of international community cooperation which is conducive to mutual understanding, progress and prosperity".
Country reports presented by chief delegates from abroad included these highlights:
— Australia: Foreign capital and technical investments have contributed to electronics growth with annual output of about US$270 million. Research and development are encouraged so that reliance on over seas sources may be reduced.
— Ceylon: Radio receivers and components are assembled. No reliable production figures are available but the official estimate of half a million rupees (about US$3 million) is believed to be below the actual figure. Import of expensive electronic devices is controlled and local production is not yet possible.
— Hongkong: Most major investors are from abroad. Shortage of qualified technicians is acute. International cooperation is needed.
—Indonesia: About 20 factories are producing or assembling up to 1.5 million radio receivers and 15,000 TV sets annually. Djakarta attaches importance to the electronics industry because of the country's abundant natural resources and low-cost labor. Incentives are given foreign investors.
— Iran: Electronics assembly began in 1959.
Eight factories are making about half of the required TV and radio components. Self-sufficiency rates are expected to reach 80 per cent in 1970. Most companies are private ones but they are guided and supervised by the government.
— Japan: The rapid and widespread progress of electronics technology is having a revolutionary impact on Japan's life and economy. A Space Development Association was set up in October of 1969. The Ministry of International Trade and Industry has effected a partial reorganization to place more emphasis on the electronics sector.
— Korea: Measures to step up Korea's electronics development were adopted in 1968. Research and training are stressed. The Korean Electronics Industry Association has 130 member factories. All have research and development budgets. Export goal for 1970 is US$100 million.
— Malaysia: Most electronics plants are still in the assembly stage. Research will be carried out as part of the 1970-1975 college education development program.
— The Philippines: The industry is growing but reliance on import of finished products is still heavy.
— The Ryukyus: For the population of about 1 million, there are four TV stations (two of them government-operated) and 160,000 TV sets, including 5,000 color receivers. Secondary and. college-level electronics classes turn out about 100 graduates annually. Steps are being taken to develop electronics manufacturing.
— Singapore: The number of TV assembly plants grew from 2 in 1967 to 10 in 1968 and about 20 now,
Singapore is short of natural resources but has adequate manpower to develop precision industries.
— Thailand: The industry is small and the home market limited. Development will require international cooperation.
— Vietnam: Twelve small plants are assembling transistor radios. Parts come mostly from Japan. Products are not sufficient for the domestic market. Growth is hampered by the lack of qualified technicians. The Saigon Electronics Engineering Institute, set up in 1957, has graduated about 300 students. Secondary-level vocational schools are offering training.
The first Asia Electronics Conference in Tokyo in 1961 was attended by delegates from 15 countries, territories and international organizations. It was at the second Tokyo conference in 1963 that delegates decided to hold meetings on a biennial basis. The third and fourth meetings in 1965 and 1967 were hosted by the Japanese government's Science and Technology Agency.
The conference in Taipei was sponsored by the Council for International Economic Cooperation and Development (CIECD) in cooperation with the Ministries of Communications, Economic Affairs and Education. Finance Minister K.T. Li, in his capacity as CIECD vice chairman, presided. Li was minister of economic affairs when he attended the 1967 meeting in Tokyo and invited AEC to meet in Taipei.
The Asia Electronics Union met just after the AEC meeting. It has set these objectives:
— Exchange of electronic science and technology.
— Education and training of electronics engineers, technicians and students.
— Exchange of literature and information on electronics.
A work group set up at the Taipei meeting will carry out decisions of the general assembly and present a report to the next AEC and AEU gathering scheduled for Manila in 1971.
The Electronics Exhibition 1969 attracted 32 foreign exhibitors and 52 Taiwan manufacturers occupying 151 booths at the China Sports and Culture Center located near the Mandarin Hotel, where the AEC and AEU meetings were held.
This was the fifth such exhibition in Taiwan and by far the largest. Electronics Science Exhibitions were held in Taipei in 1965 and 1967 by the China Institute of Electrical Engineering, the China Radio Association and the National Science Hall. CIECD sponsored Electronics Manufacturers' Exhibitions in 1967 and 1968 but only Taiwan products were shown.
Up to about a century ago, men had made little progress in their search for the ways and means of carrying information over long distances. Pheidippides had to run 26 miles to convey news of the Greek victory at Marathon. Paul Revere made a midnight horseback ride to warn Massachusetts colonists of the coming of British troops. Beacon fires could send only simple messages. Signaling by flags or lamps was uncertain.
Thanks to electronics, hundreds of millions of people around the world can watch and hear moon explorers as they carry out their missions a quarter of a million miles away. For Taiwan TV watchers, this was not possible at the time of the Apollo 11 moon landing in July of 1969. Four months later, Taiwan's new satellite communication earth station was relaying live Apollo 12 pictures. Taiwan's second commercial TV station went on the air in color and the first station also started color casts.
The electronics conferences, coming just after the second moon landing, were further steps in Asia's progress toward modernization. As the host nation, China derived special benefits. The Republic of China's electronics industry has new incentive to continue its remarkable progress.