Survey Indicates Japanese Companies Diversifying Operations

August 6, 2004

According to a 2004 MOEA survey of Japanese businesses in Taiwan, the business activities and operations of Japanese companies are diversifying as they establish locations in the Asia-Pacific region, particularly in China.

The Ministry of Economic Affairs (MOEA) commissioned the Normura Research Institute Ltd. in Taipei to perform the survey in order to understand current trends among Japanese businesses in Taiwan. The survey was mailed to a total of 1,590 manufacturing and non-manufacturing companies, with 341 companies (21.4%) responding.

In recent years, an emerging trend for Japanese businesses in Taiwan has been "diversification" in their business operations. From the 1960s and through the 1970s, Taiwan was mainly seen as a processing and export base; since the 1990s, the island has become a high-tech industry production base, serving as a production stronghold for Japanese companies in Taiwan. After 2000, Japanese businesses started to engage in other services such as R&D, product design, and capital issuance, watching its R&D services grow steadily.

Current Services Provided By Japanese Companies in Taiwan

Of the companies who participated in the survey, 104 (31%) were involved in R&D, Product Planning, and Design, with 61 (59%) of those companies planning to expand their R&D services in the future. Most companies developing products for the Taiwan market said that their reasons for taking advantage of R&D incentives in Taiwan were to "understand Taiwanese tastes" and "bring their goods to the Taiwan market".

In addition, many companies developing products for the greater China market indicated that their presence in Taiwan would enable them "to plan for goods in the Asian market," and "understand the preferences of the greater China market."

Seeking the opportunity to enter the greater China and overseas Chinese markets in Asia, Japanese companies' not only seek to maintain their position in the Taiwan market, but also to offer R&D and design services, as Japanese products already enjoy a high degree of acceptance in Taiwan. Taiwan is often regarded as the "marketing test base" for the greater China and Asian overseas Chinese markets, which is reflected in this diversification of business activities and operations of Japanese companies in Taiwan.

With this "diversification," Japanese companies' business operations not only center on Taiwan, but extend to locations all over Asia, particularly China. According to the survey, 120 of the survey participants with subsidiaries in China (35% of respondents) run business support operations in China using Taiwan as their base. In addition, 34 of these companies run business support in Hong Kong, and 16 in Thailand. ("Business support" here is defined as marketing and production/technology consultation, and support for establishing new locations.) The survey participants often cited "Chinese language communication abilities" as an advantage of locating in Taiwan, indicating that these skills made it easier to manage Chinese personnel.

In recent years, Japanese companies in Taiwan have joined their Taiwan counterparts in entering the overseas markets, as is evident with an ever-increasing capital output to locations throughout China. 51 (15%) of the survey participants indicated that they import capital to China from Taiwan.

Japanese Companies Providing Business Support and Capital to Locations in Asia via Taiwan

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