What you need to know
'The need for improved communications is an important but also sensitive topic.' In a rare move from the diplomatic community in Taipei, Germany's representative in Taiwan speaks out about a muddled policy platform and lack of communication. Taiwan's Ministry of Economic Affairs responds.
Last week, DDG focused on Industry 4.0 and smart machinery to suggest that Taiwanese companies must learn to value communication. But what about communication between governments, industry and other important stakeholders? In a special report for The News Lens International, DDG sat down with German Trade Office Executive Director Andreas Hergenröther to discuss the reasons behind cooperation between Germany and Taiwan in the area of Industry 4.0, and what Taiwan might be able to learn about the development of the sector from a global leader such as Germany.
DDG: At what point did Germany and Taiwan begin their cooperation in the field of Industry 4.0, and which side first took the initiative?
Andreas Hergenröther: Industrie 4.0 was launched as part of the German government’s High-Tech Strategy 2020 Action Plan. Government, research institutes, business and civil society are all linked through different Industry 4.0 platforms, though in the end it is all industry driven. We as a Trade Office were charged in 2013 by our Ministry of Research and Education to conduct a study on the potential for cooperation in 4.0. Only a few countries worldwide were selected apart from Taiwan: Japan, China and South Korea.
The official term in Taiwan was only coined in 2015, starting with the Productivity 4.0 program [which included not just machinery and smart factories, but sectors such as agriculture, electronics and information technology, foodstuffs and textiles], which has now been transformed by the new government into “smart machinery”. But the definition of what this means is still under discussion. There was some agreement during the visit of our State Secretary of Economy in September last year that we would like to set up a common, also industry-driven, 4.0 platform.
DDG: Was the switch in terminology from Productivity 4.0 to “smart machinery” simply linguistic, or does it represent a narrowing of the scope of the program?
Hergenröther: The switch to smart machinery is not linguistic because when we heard about the change we immediately contacted all the institutions to get more information, but this did not make it clearer. Before, Productivity 4.0 was quite clear. We had defined sectors. A clear budget [of NT$36 billion]. We had a clear commitment from the government to this project.
Now we also have a clear commitment to smart machinery but we do not know how to achieve the objectives, or exactly what those objectives are. So the first impression from the linguistic point of view [is that] smart machinery has to be narrower, but given the industrial background we question whether this is really a good move. Taiwan is very strong in electronics, semiconductors, and in some parts ICT, so the question is really...
DDG: What role in the Industry 4.0 supply chain does Taiwan want to take?
Hergenröther: Yes, and to be honest until now there is no official statement.
DDG: But there was a joint statement following the recent Green+ Together 2016 Taiwan Sustainability Summit that included seven joint statements aimed at focusing future collaboration. What was the reasoning behind the creation of those statements?
Hergenröther: The seven statements are quite clear. What is important is how manufacturing industry can be supported to apply and integrate digital solutions into their production lines. What we have in Germany are learning factories organized at the level of chambers of commerce. They provide integrated platforms in the IT and machinery industry for medium-sized companies, and we have a very clear promotion strategy for start-ups. These subjects should be addressed and that’s why we developed the seven statements. They come from four different players: the German Institute, our trade office, Siemens and the Taiwan Institute for Sustainable Energy.
DDG: You mentioned that the details of Taiwan’s smart machinery program are not yet clear. If you were to advise on a focus, given the experience and success of Germany in this area, what would you say would be most valuable for Taiwan?
Hergenröther: The definitions should be clear and the political will should be clearly defined. To my knowledge, Taiwan has not concluded any cooperation with any other foreign country in the field of 4.0. It’s now a process that’s going on in the government and it is quite difficult if you have not defined 100 percent transparently what you want to achieve.
Semiconductors and different kinds of ICT should be visibly integrated because now, when I see reports and they are only talking about smart machinery and Taichung and machine tools - and machine tools are very important for Taiwan I agree totally - but it makes it very narrow. You have Asian Silicon Valley and the smart machinery idea in Taichung - I think it would be good to integrate these and have real innovation clusters.
In Germany, we combine or push the different players closer together. The industrial platform for 4.0 has about 20 companies and they come from very different fields. You have companies like SAP, Siemens, Bosch, Wittenstein, and also SMEs that are very focused on exhibiting at the automation show - so they have industrial software. It’s really considered in a much broader sense, and I think that’s what needed. The degree of innovation would be heightened.
DDG: Siemens’ Taiwan CEO Erdal Elver recently said the company would do everything to assist Taiwan in its industrial transformation. Perhaps taking Siemens as an example, can you explain what kind of cooperation between German and Taiwan firms is occurring already, and how this might develop in future?
Hergenröther: On the company level we have several cooperations, for example Siemens signed with the Productivity 4.0 Promotion Office of Taiwan [under Taiwan’s Industrial Development Bureau], and the cooperation was focused on the educational pillar. Siemens would offer courses regarding the use of CPS (Cyber-Physical Systems). There was also the idea of setting up industry driven demo sites for Industry 4.0, and of course to a certain extent technological cooperation.
This project has been set up but there are no results yet. One focus will be the promotion of talent on the educational side. Siemens also established contact between German institutions and the Taiwanese government. In Germany, we have learning factories related to 4.0 that are especially for SMEs that are not familiar with the concept - they associate 4.0 with automation - which is wrong because that is Industry 3.0. This is definitely an area where Siemens wants to go, and another is to establish multiple demonstration sites and to identify business opportunities.
DDG: And what role does the German Trade Office play?
Hergenröther: We help match companies together and actively support start-ups from both sides. We have requests from both sides to identify start-ups, in ICT especially, that could be matched and benefit from synergy with bigger companies. From big companies in Taiwan for start-ups in Germany and vice versa. It was a good move to setup Innovex here at Computex here for the first time, and interesting that some big players took part.
Apart from this there are a lot of purely private co-operations. For example, Foxconn and BMW [have worked on] an interactive touchpad key that has been designed for the i8, the new e-car from BMW, which has several 4.0 functions. The key has the technology of an iPhone inside. There are several others: Audi and HTC. FFG and Bosch signed a memo of understanding last month in Stuttgart. The BMW cooperation was very result orientated and was not systematic cooperation on the institutional level, which is still missing in this form.
DDG: It seems from what you have been saying that Taiwan is lacking a body that can play a similar matchmaking role within its own domestic industry, or that there is a lack of communication between the different stakeholders. Why do you think this is the case?
Hergenröther: The need for improved communications is an important but also sensitive topic. We need to respect tradition - the different style of doing things. In Germany the communication is focused and industry is quite demanding. Proposals come from industry and the research institutes, and the government executes them. Here, the 4.0 initiative itself is coming from the official political side. There are some companies that are very interested in the topic, like FFG, HIWIN and Delta, but I don’t yet see the industrial body that’s driving this initiative with concrete content.
We don’t have here an industrial platform 4.0 that is really driving the content. And that has an effect on communication. Because even if you look at the communication in Germany it’s part of industry and national strategy - politics and industry go hand in hand.
In Germany, we’ve had chambers of commerce and industry associations for a really long time and they have become important players in continuous dialogue with the government. In Taiwan, we have some business associations but it does not have as long a history of democracy or being organized and raising voices in discussion with politics. It’s quite recent and I think it has to be developed.
It’s very important to promote dialogue between different industries, research institutes and government in an institutionalized way, because we have seen some changes introduced in the last months that have a deep impact in industries that have not been communicated that well, but which have been agreed on. That’s a very important point - to be in dialogue while developing new strategies and setting up new processes.
DDG: German Institute Taipei Director General Martin Eberts said at the Green+ Together 2016 Taiwan Sustainability Summit that Taiwan and Germany share the same values, can you elaborate on the nature of those values?
Hergenröther: Both countries believe very strongly in innovation. Taiwan has been number one in patents relative to the size of its population [Taiwan was ranked in the top 10 in Bloomberg Rankings’ 2014 list of the most innovative countries, and number one in terms of patent activity].
On the German side, we have been in the top 10 of the global innovation index [10th in 2016] and we are definitely two of the most innovative countries in our respective regions. The companies themselves, especially the bigger and more innovative ones, are well organized and are pushing innovation for smaller companies. This has helped Germany to stay the world market leader in different fields of machinery: we consistently have growth rates of 5 percent or more, mostly in machine related areas. In Taiwan, also in their sectors - machine tools and semiconductors and in different parts of the electronics industry, they have constantly reinvented themselves, and have been very self-disciplined, maintaining their position as world market leaders for many years. This is something that needs a certain kind of spirit. Germany and Taiwan share this together. We also have an equal trade balance. The German market is really very difficult, especially for Asian products. Most of the products that Taiwan is delivering high-tech products to Germany - optoelectronics is a big part of that.
DDG: Was anything else discussed at the Green+ Together 2016 Taiwan Sustainability Summit?
Hergenröther: At the end of the 4.0 Summit with Premier Lin Chuan (林全), we also raised some points related to Taiwan, the most important of which was harmonization of standards. This is very important for 4.0. We have to speak the same language. With the balance of trade this is also an important issue, especially for German machinery if you have to do double certification. In some areas Taiwanese standards are not recognized and that makes things quite cost-intensive. But this is an issue that Taiwan has with most other countries because there are no free trade agreements apart from those with Singapore and New Zealand.
Another area that was discussed was the visibility of Taiwan’s industrial strategy. In 4.0, but also in other areas such as chemicals and energy, it is not very clear. We have statements like we will phase out nuclear power by 2025 but we don’t know how to achieve this objective. And we talk about having 3GW offshore wind power [by 2030] but we don’t know how to achieve it. We have a renewable aim here in Taiwan for many years [now at 17.3GW by 2030] but the results are very low. Renewables now account for 4.1 percent in the energy mix. We have a law [draft amended last week to liberalize the sector and break the hold of fossil-fuel focused Taiwan Power Company] but if you don’t have an agenda, and this is currently lacking, it creates insecurity. Industry is asking itself where does the energy come from after nuclear is phased out? What effect will this have on energy prices? This is an important point that many companies say needs to be addressed as a challenge in the current situation here in Taiwan. Communication is an important subject and it needs to be improved - the detail is an important point for industry.
The discussion raised a number of important questions about the communication of Taiwan’s industrial policy. As such, The News Lens International offered the Ministry of Economic Affairs (MoEA) an opportunity to respond to some of the points raised in this discussion. Details of this exchange can be found below.
DDG: In 2015, Taiwan agreed and budged for a Productivity 4.0 strategy, [detailed here and here] that encompassed the development of smart machinery. Yet in July, the Cabinet gave the green light to a program focusing on “smart machinery”. Does the smart machinery program mean that the Productivity 4.0 program is now canceled? If not, how does the smart machinery program fit in with the existing Productivity 4.0 plan?
MoEA: We (the Executive Yuan) passed the ‘’Smart Machinery Industrial Promotion Program’’ on July 21. The Productivity 4.0 plan had already transformed into the ‘’Smart Machinery Industrial Program’’, with the aim of promoting greater range and innovation.
The ‘’Smart Machinery Industrial Promotion Program’’ is based on integrating Taiwan’s existing high level precision machine tools with communication technology; importing related smart technology and launching three big promotion strategies: ‘’Connecting Local’’, ‘’Connecting the Future’’, "Connecting International’’ to build a new ecosystem for Taiwan’s smart machinery industrial chain. The technology mentioned in the smart machinery industrial promotion program includes the Internet of Things, big data, integrating existing capabilities with more efficient management, as mentioned in Productivity 4.0, but also increasing the use and integration of robotics, 3D printing and sensors.
Moreover, the smart machinery program aims to accelerate the integration and sharing of related knowledge, experience and technology to meet market demand, and also strengthen the cooperation of central government and local government at the crossroads of industry and academia: providing a nexus for innovative technology, international marketing, funding and talent.
DDG: How does the government plan to bring such high-tech companies in ICT, electronics and semiconductors together with machine tools companies, especially when many such companies are not close to the proposed smart machinery hub in Taichung?
MoEA: ‘’Dadu 60 km’’ in Taichung is a well-known global machinery industrial hub, reputed for producing machine tools and machinery components, bikes, woodworking machinery, hand tools, as well photoelectric panels. Not to mention that companies including Apple, Google Solar Energy, Siemens, Porsche, Tesla and TSMC all rely on the Dadu smart machinery hub. So we are looking forward to establishing Taichung as the core that will connect the surrounding areas of Changhua, Yuanlin and Chiayi, in order to build a global smart machinery city.
The smart machinery program will focus on extending product lifecycles, first incorporating aerospace and semiconductor expertise to build the core technology, and then extending this to machine tools, metals, transportation, electronics, energy, 3C, foodstuffs, textiles and so on. This will help set up an overall solution between factories.
To further cooperation between machine industry and communication industry, the Industrial Development Bureau held matchmaking events for machinery industry to connect with professional technological advisors. In July, it helped match the machinery guild and the Taipei Computer Association, CISA, and they have since signed the paper to establish a long-term cooperation. In July and September, it held two matchmaking activities, prompting 32 machinery businesses from HIWIN to match with several communication technology companies for 113 one-on-one consulting meetings related to smart technologies like big data analysis, smart IoT applications, smart machinery and robotics, as well as accurate management - helping machinery companies to improve their smart machinery ability and knowhow, and improve national competitiveness.
DDG: Do any plans exist to promote dialogue between industry, research institutes and the government around the area of Industry 4.0 in an institutionalized way?
MoEA: Under related programs, we have helped bring together 25 public associations (including those for machinery, machine tools, moulds, bikes, aerospace, vehicles, computers, circuit boards, artificial fibers, cottons and cottons dying) with various factory unions to launch the “Smart Machinery Promotion Committee’’. Each member will regularly hold Government-Industry-University-Academia meetings, as well as promote activities. This platform offers an opportunity for industrials, related research institutes and government to discuss policy, fostering talent, technological development, international interaction, industrial cooperation and market expansion, opening dialogue between industry, research institutes and the government around the area of Industry 4.0.
Editor: Edward White