What you need to know
Will the next Silicon Valley be in Taoyuan?
By Matthew Fulco
Taiwan has bold ambitions for its industrial transformation. One of the central tenets of that bid is the Asia Silicon Valley Development Plan, which policymakers hope will create a hotbed of technological innovation in the northern Taiwan city of Taoyuan. The plan has two primary objectives, according to Taiwan’s National Development Council (NDC). The first is to make Taiwan a leader in the Internet of Things (IoT) segment, and the second is to build a solid startup and entrepreneurship ecosystem.
Policymakers say Taiwan does not aim to replicate California’s Silicon Valley in Taoyuan, but rather to encourage innovation among local firms. In a statement published on the Taoyuan government’s official website, Mayor Cheng Wen-tsan said that although “Silicon Valley is a unique and non-duplicable entity,” its innovative spirit, willingness to invest in research and development, “exchanges between professionals, and introduction of capital can all be readily adopted.”
According to Cheng, “the Asia Silicon Valley Plan will not only connect Taipei, Taoyuan, and Hsinchu, it will also create a bridge between Taiwan and technology centers in other countries throughout the world. He noted that the Asia Silicon Valley Development Plan has a “core spirit” that calls for “adopting an open and global perspective, attracting professionals from around the world, and encouraging industrial innovation and transformation.”
The Tsai Ing-wen administration has chosen Taoyuan as the site for its Asia Silicon Valley initiative because the city has a relatively large young population, is already home to a number of technology enterprises, and is close to Taiwan’s main international airport, analysts say. Through the program, the Tsai administration aims to build a startup cluster in Taoyuan that will consolidate Taiwanese firms’ R&D, innovation and manufacturing capabilities.
“There are two pillars behind this program: connect locally and act globally,” explains Patrick Wu, a green-energy analyst at the state-backed Market Intelligence & Consulting Institute (MIC) who is working with the government on the Asia Silicon Valley program. “By connecting locally, the government is set to enhance smart applications and IoT supply chains by converging them together in Taoyuan. By acting globally, the government is set to take advantage of Taoyuan’s short distance from the airport to improve export and import efficiency.”
Building an IoT hub
Further, the Asia Silicon Valley program aims to make Taiwan a hub for the emerging IoT segment, focusing on six target areas: internet security, mobile living, artificial intelligence, autonomous driving, the New Southbound Policy (a government initiative to build stronger links between Taiwan and ASEAN countries, India, Australia, and New Zealand), and virtual reality/augmented reality. “We reckon the IoT aspect of this program has the best potential to upgrade Taiwan industry,” Wu says. He notes that IoT applications will be introduced to industrial zones in Taoyuan under the plan, a development that MIC expects will boost Taiwan’s share of the global IoT industry from 3.8% (around US$4.3 billion) in 2015 to 4.2% (US$16 billion) by 2020.
Smart cities will be an important part of the Asia Silicon Valley Development Plan. Taoyuan will have a smart city demonstration area focusing on smart traffic, smart healthcare, and IoT. Additionally, the Taoyuan city government has developed a dozen intelligent-city promotion projects for execution in the coming years, primarily focusing on aspects of smart governance, smart daily life, and smart industry.
In February, Taoyuan was named one of the world’s top seven most intelligent communities by the New York-based International Community Forum (ICF). ICF was founded in 1999 to promote information technology and “the broadband economy.” It selects an “Intelligent Community of the Year” annually.
In an interview with Taiwan Business TOPICS, Mayor Cheng said Taoyuan was recognized “thanks to its remarkable performance” in three smart-cities initiatives: its smart citizen card, anti-flood river-level-detection system, and intelligent classrooms. The Taoyuan citizen card is a multi-functional card that can be used to pay for mass transit tickets or public parking spaces, borrow books at public libraries, and serve as an e-wallet, among other things. Cheng notes that Taoyuan has issued 780,000 such cards, the highest issuance of any smart card in Taiwan.
“Taiwan has consistently recorded impressive performances in the ICF rankings,” Minister of Economic Affairs Lee Chih-kung said in a statement published on the Ministry of Foreign Affairs (MOFA) website. “This is because the criteria that Taiwan has established for building smart cities are in line with the six intelligent community indicators on which the selections are based, namely broadband, knowledge workforce, innovation, digital equality, sustainability, and advocacy.”
To be sure, both Taoyuan and Taiwan overall are well positioned to take advantages of the opportunities provided by smart cities and the IoT, but some significant obstacles stand in the way. One of the most vexing is the continued heavy reliance on contract manufacturing. “The development space of Taiwanese companies is restricted as most of them are contract manufacturers focused on hardware development rather than brand building or software and application developments,” says MIC’s Wu. “They also have insufficient R&D resources in many cases.”
Taiwanese industry must better integrate its resources, he says. “Taiwan companies have a variety of solutions, but without an integrated initiative they are unable to enjoy synergies which come when businesses collaborate and are not big enough to compete with global players.”
(Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei.)