Invest in TaiwanDepartment of Investment Services, MOEA
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Taiwan's semiconductor industry has developed at a rapid pace in recent years, and Applied Materials has played a major role in its progress. The company set up its first business base on the island in 1989, quickly recording strong revenues.
Jack Liu, vice president and operations head of Applied Materials Taiwan, foresaw that the local firm's revenue would experience a high rate of growth in the period of 1991 through 1993. In view of Taiwan's market potential, he predicted, Applied Materials Taiwan would record operating revenues of US$200 million in 2000.
I never expected my prediction to be accurate, or to come true so soon!
Liu exclaims. In no more than two years Applied Materials chalked up US$200 million in business in Taiwan, far exceeding its plans at the time. We were just about working our heads off at then,
Liu recalls, with everybody in the company struggling to keep up.
The work force had to be expanded constantly to accommodate the rapid growth, and the company had to move its offices six times; and that, Liu laughs, made him an expert in real estate. This rapid growth came along with the take-off of Taiwan's semiconductor industry. Liu comments that in the early 1990s the global semiconductor industry was led by Japan; then Korea stepped in, followed by Taiwan, and the industry's operations as a whole moved steadily toward Asia. Despite the general slump in the semiconductor industry over the past three years,
Liu notes, in Asia the industry grew by 30%. And for Applied Materials alone, at the end of the second quarter of 2004 80% of our global revenues were being generated in Asia.
Looking at the overall development of Taiwan's high-tech industries in the past several years, it is obvious that there has been a gradual shift from the vertical integration of earlier years to a professional horizontal division of labor today. Vice president Liu feels that technology needs constant advancement and deepening, and that market demand has led to a dismantling of traditional value chains. Because of the speed, specialization, and sophistication that high technology requires, the move toward a professional horizontal division of labor is inevitable. The semiconductor industry, for example, is divided into such sectors as IC design, masking, ackaging and testing, and marketing.
The characteristics of the semiconductor industry are capital intensiveness, technology intensiveness, and large fluctuations,
Liu notes, explaining that this is why the horizontal division of labor is needed. We can say that Taiwan is a model of the horizontal division of labor developed to the utmost.
With their expertise and persistence, Taiwanese manufacturers are able not only to enhance their production capacity but also to economize on costs; further, The cluster effect that they produce strengthens the overall competitiveness of our industry.
And, he goes on, In its investment in 12-inch silicon wafer fabs, Taiwan's is moving particularly fast!
The only way to beat the high risk of the semiconductor industry, he stresses, is to keep constantly ahead of your rivals. But every wafer fab costs a huge amount of money, and it is not a game that everybody can afford to play. Taiwan's advantages in this game are industrial clusters and a horizontal division of labor, and the use of cutting-edge 0.15-micron technology that raises the industry's threshold; this is how the island leaves its competitive rivals behind. The island's semiconductor production value currently makes up 18% of the global total; for 0.15-micron products, Taiwan accounts for 30%. These figures make it apparent that Taiwan has overtaken the rest of the world in this field. Over the next six years, the island's semiconductor subcontracting industry will grow at a compound annual rate estimated at 17%.
As Applied Materials has advanced along the road of progress together with Taiwan's semiconductor industry, its relationship with Taiwanese manufacturers has evolved from that of a pure customer and supplier in early days to that of a complementary partner today. In the late 1990s the company began participating in the planning of its customers' production processes and turning out equipment that filled its customers' needs, and using pre-production planning, post-production services, and other operations to help customers acquire complete solutions. The company's own organization and operating methods have been adjusted in line with the global deployment of its Taiwanese companies; whereas its operating scope used to be divided by region, it is now defined by customer enterprise group with the aim of achieving global integration and allocation of resources. In other words, Wherever the manufacturers go, Applied Materials will follow.
The company set up its Technical Training Center in 1996; Liu reports that by 2003 the center trained a total of 26,000 engineers, helping other companies save large amounts of spending. In addition, he continues, Having engineers study right here in Taiwan is more convenient in terms of both time and practical operation. It's just like an extension of the companies' own equipment departments.
The Allied Materials Technical Training Center has an advanced set of 12-inch equipment, the only one of its kind in Asia, on which engineers can train on the spot.
After intense competition among contending sites, Allied Materials established its Asia Continental Distribution Center for Semiconductor Parts in Taiwan in December 2001. When the headquarters company began evaluating possible sites in 1998, Taiwan, Japan, Korea, and Singapore fought for the project so fiercely that, at one point, the contending pressures caused it to abandon the effort. In 2000 the company carried out the evaluation again, and Taiwan emerged victorious thanks to its geographic position, the quality of its manpower, and the incentives offered by the government for the establishment of logistics centers. This also brought significant benefits to related manufacturers on the island. Jack Liu cites electrical outages as an example of Taiwan's advantage: Every time an outage happens at the Jhunan district of the Hsinchu Science Park, it causes losses calculated in hundreds of millions of New Taiwan dollars. For manufacturers who count every second as important, a nearby supply of parts and components can shorten processing time--and the effect of this is frightening.
Since Taiwan holds such a vital position in the global supply chain, the shortening of the production process and the resulting reduction of costs can strengthen the manufacturers' international competitiveness.
After developing its operations in Taiwan for so many years, Applied Materials is deeply grateful for the establishment of science parks on the island because these parks have single windows that allow for more effective operations and resource integration. Vice President Liu feels that for multinational enterprises, Taiwan's human talent is its greatest attraction; but although the island's colleges and universities product a large number of graduates every year, it is never enough to satisfy Taiwan's industries. He hopes that the relevant agencies will carry out more thorough and more forward-looking planning of high-tech human resources; and that, when necessary, engineers and technicians can be brought in from overseas to help out. This will provide for the better integration and flow of international resources.
In Applied Materials'development model in different parts of the world, priority is always given to the utilization of local personnel. Applied Materials Taiwan is happy to use its own resources to help nurture the island's high-tech personnel; its technical training and equipment, for example, can be used by related agencies as an accreditation platform
for completing the practical training of engineers. The company's experience indicates that to upgrade Taiwan's competitiveness in the future, it will be necessary to make the flow of materials for manufacturers more efficient. To this end, the shortening of the current time needed for the distribution of materials to mainland China-without involving political considerations, of course-would attract more multinational enterprises to establish operations centers on the island.
Applied Materials is the world's biggest supplier of semiconductor production equipment and services; and according to a survey by VLSI Research, it has been so for 14 years in a row. It is also listed among the top 500 companies in the world. With its headquarters in Santa Clara, in America's Silicon Valley, the company operates more than 60 service bases in 14 different countries including Israel, Japan, Korea, Taiwan, mainland China, and others in Europe and America. The locations of all these bases are near to major clients or semiconductor manufacturing centers, enabling it to better serve semiconductor companies. Applied Materials has approximately 12,000 employees worldwide. Applied Materials Taiwan is headquartered in the Hsinchu Science Park, with operations and services bases at Linkou and Tainan as well. The company currently employs 600 people. The products that it provides includes equipment for chemical vapor deposition, physical vapor deposition, epitaxial and polysilicon deposition, rapid thermal processing, ion implantation, plasma etching, electrochemical plating, chemical mechanical planarization, wet cleaning, metrology, inspection, and mask pattern generation, as well as flat-panel display production equipment and manufacturing execution systems software.
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