Taiwan, the unsung hero of automotive innovation
As the increasingly unrecognised institutional twin of mainland China, Taiwan will never be able to host major global events like the Olympics, as its neighbour Japan will do in 2020. But with quiet diligence, the tiny island – which officially still calls itself the Republic of China – builds on its industrial success and wisely chooses the areas in which it wants to excel, including automotive.
With 23.5 million inhabitants, Taiwan has a relatively small domestic automotive market. Last year, just under 445,000 new cars were sold, the highest figure in over a decade.
Hotai Motor Co., the local sales agent for Toyota, accounted for 28.8% of the total. China Motor Corp., which markets Mitsubishi cars, had a market share of 10.9%, while Yulon Nissan Motor Co., which sells Nissan as well as own-brand cars, achieved 9.6%. Honda Taiwan scored 7.7%.
About 41.7% of the vehicles sold were imported. The fifth-largest vendor and largest imported brand was Mercedes-Benz.
Car sales campaigns in Taiwan are often highly competitive and include free gifts for customers. This year, Toyota handed out vacuum robots and Nissan gave away air purifiers to lift their sales, for example.
Producing components
It may have been a while since you saw a Made in Taiwan sticker on anything you bought. That’s because the country’s highly successful manufacturing industry has specialised in R&D, and designing and producing components rather than finished products, notably in the computer and smartphone industries. Only a few companies – Acer, Asus and HTC – have achieved global brand name recognition.
This also holds true for the island’s automotive efforts. That’s why the nation’s main annual automotive trade fair is called, tellingly, the Taipei International Auto Parts & Accessories Show (‘Taipei AMPA’ for short).
Taiwan’s most globally recognised automotive company is likely TSMC, the world’s largest independent semiconductor foundry, often used for manufacturing semiconductors used in automotive manufacturing.
The island is not as big a player in automotive as it is in computing. In 2016, Taiwan’s automotive-related output was just under $20 billion. This was divided into three almost equal parts: vehicle electronics ($6 billion), domestic car production ($6.5 billion) and parts and components manufacturing ($7 billion).
Economic output
Although Taiwan’s auto parts industry lacks the scale of its neighbours in China or Korea, its circa 3,000 companies have managed to leverage their small size into close to 3% of Taiwan’s total economic output. Taiwanese auto parts manufacturers excel in automation, prototyping and have the flexibility to produce small-batch orders on short notice. Auto parts makers rely on exports for 75% of their business.
This is mainly replacement parts for the aftermarket in the U.S. (43% of Taiwan’s auto parts exports), Europe and Japan. Taiwan-produced headlights and assorted parts take nearly 80% in the North American and European markets, for example. Another major export target is China’s car manufacturing industry - Taiwanese bumper manufacturer Tong Yong is a major supplier to Chinese OEMs, to name but one company.
An array of government-backed research institutes supports the industry: the Automotive Research and Testing Center (ARTC), Taiwan Auto Research Consortium (TARC) and Industrial Technology Research Institute (ITRI).
Automotive intelligence
ARTC has taken the lead in developing electronics systems for automotive intelligence, including the Lane Keeping, Lane Departure Warning, Forward Collision Warning and Blind Spot Detection systems. TARC coordinates expertise in public and private research organisations to advance automotive innovation, for example in developing Electronic Power Steering.
Taiwan’s automotive strategy is to replicate its successful business model for computing and achieve excellence in subcontracting – using its experience in computing for up and coming market segments such as autonomous driving in particular.
In fact, the first level-4 autonomous concept vehicle, Made in Taiwan, was unveiled at the end of last month.
The concept vehicle, which is also electric, was developed by Acer, the computer brand, and Hua-Chuang Automobile Information Technical Center (HAITEC), an affiliate of Yulon Group, Taiwan’s oldest and biggest automotive company.
Open-source platform
Probably the vehicle’s most interesting feature is its open-source platform – an invitation to Taiwan’s automotive companies to add their research and development to the country’s incipient autonomous-drive industry.
To further its ambitions in self-drive technology, Taiwan has struck up an alliance with Israel, a global leader in the field. In August, the country inaugurated the Taiwan+Israel Hi-Tech Forum, with contributions by Israeli companies Mobileye, Check Point and Karamba. The Forum’s aim: to combine Israel’s innovation dynamics and Taiwan’s IT manufacturing infrastructure to create a brand-new supply chain and cooperation paradigm for autonomous-driving tech.
However, Taiwan is also moving beyond cars and car parts themselves and is starting to offer automotive services in the wider Asia-Pacific region.
Vehicle financing
Yulon Group recently set up an auto finance business in the Philippines. Yulon Finance Philippines Corp. (YFP) is a subsidiary of Yulon’s vehicle financing group Taiwan Acceptance Corp. (TAC), which is active in both Taiwan and mainland China.
In the automotive industry as in other fields, Taiwan’s ambitions are limited both by its own small size, and by the economies of scale achieved by its bigger neighbours, China, Japan and Korea. But by working hard and specialising in lowly subcontracting, they achieve greatness – if not notoriety. Similarly, Taiwan may not be a hotbed of Olympic champions, but we wouldn’t be surprised if the medals handed out to the winners in Tokyo 2020 are imprinted with a small legend, reading Made in Taiwan.
