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Communications Industry

  • date:2024-01-21
Communications Industry

 

 

I. Policy Initiatives

1. Smart Taiwan

Taiwan launched the DIGI+: Digital Nation & Innovative Economic Development Program (2017-2025) at the end of 2016 to increase the penetration of digital services from 25.8% to 80%, and thereby realize Taiwan as a “smart nation.”

In 2021, the DIGI+ Program was renamed and upgraded to the "Smart Nation Program (2021-2025)" and included information security, Beyond 5G (B5G) satellite communications, next-generation semiconductors, cloud era industry transformation, advanced network infrastructure, and other advanced technologies to promote the overall digital transformation of the nation, society, and industries.

2.Forward-Looking Infrastructure Development Program - Digital Infrastructure

The "Forward-Looking Infrastructure Development Program - Digital Infrastructure" is created based on the "Digital Nation & Innovative Economic Development Program (DIGI+)" passed by the Executive Yuan in 2016.Due to significant changes in people's lifestyles and habits in the post-pandemic era, the contactless economy has accelerated the digital transformation of industries and expanded national demand for digital infrastructure.The government, therefore, adopted the vision of "constructing a digital infrastructure to support Taiwan's development in the next 10 years" in the 4th period (2021-2025).

3.Taiwan Mobile 5G Project

In May 2019, Taiwan launched the "Taiwan 5G Action Plan" (2019-2022), which calls for NT$20.47 billion in investments over 4 years. The Action Plan aims to "promote field-tested 5G vertical applications," "establish a development environment for innovative 5G applications," "establish comprehensive 5G core technologies and data security protection," "planned release of 5G bandwidths that meet overall interests," and "adjust regulations to foster an environment advantageous for 5G development.

4. Asia New Bay Area 5G AIoT Innovation Park

Taiwan inaugurated the "Asia New Bay Area 5G AIoT Innovation Park" in Kaohsiung on December 6, 2021. Spearheaded by the Ministry of Economic Affairs, "Asia New Bay Area 5G AIoT Innovation Park Promotion Plan" is expected to invest approximately NT$11 billion between 2021 and 2025 to set up an end-to-end application and demonstration site for 5G AIoT (refer to Figure 1) The aim is to create a comprehensive industrial ecosystem and become the largest 5G AIoT innovation testing facility in Taiwan.

 

II. Overview of Industrial Development

1. Output Value

Equipped with manufacturing systems for several communications products, Taiwan is one of the key players in the global communications industry.The output value of Taiwan's communication equipment industry (including network communication equipment and personal mobile devices) was NT$873.4 billion in 2021. In 2021, the industry benefited from the post-pandemic digital transformation of companies and the contactless economy as global demand for network equipment and 5G communication products increased. Despite the pandemic’s impact on offshore production sites of Taiwan's network communication industry and challenges in component supplies, the industry achieved incredible results in 2021, and the overall network communication industry grew by 3.3% compared to 2020.

 

2. Industrial Clusters

(1)Northern Taiwan

Generally speaking, Taiwan's communications industry clusters are located in the northern parts of Taiwan, including Greater Taipei, Taoyuan and Hsinchu, which include Neihu Technology Park, Hsinchu Science and technology Park, Tai Yuen Hi-Tech Industrial Park, and Guishan in Taoyuan. Taiwan's leading communications companies are Accton Technology, Sercomm, and Wistron NeWeb. Leading telecom operators are Chunghwa Telecom, Far Eastone, Taiwan Mobile and Asia Pacific Telecom.

(2)Central and Southern Taiwan

Communications companies in central Taiwan are mainly automobile communications electronics and consumer electronics manufacturers. Even though southern Taiwan is home to Kaohsiung Software Technological Park and Southern Taiwan Science Park, occupancy by communications companies are lower than northern Taiwan.

 

 III. Potential Investment and Collaboration Opportunities in Taiwan

1.Leveraging Taiwanese Industry Clusters to Invest in Technological R&D and High-end Manufacturing

Taiwan's communications companies have both manufacturing and global logistics capabilities. Their strengths include networking IC, parts and components, touch panels, and system integration. The industrial chain is relatively complete. At present, several leading international communications companies, such as Qualcomm and Ericsson, have established offices or R&D and design centers in Taiwan, creating new business opportunities.

 

2. Utilizing Taiwan's open 5G verification platform that meets international specifications to jointly develop 5G equipment and application services

In 2021, the "5G Open Radio Access Network" set up by the Industrial Development Administration, Ministry of Economic Affairs of Taiwan received Telecom Infra Project (TIP) certification and became the second TIP community lab with open 5G architecture system integration and TIP certification. The "Auray Lab" established by the antenna manufacturer Auden Techno Group received Open Testing and Integration Centre (OTIC) certification for third-party labs from the O-RAN Alliance, which has 5 OTIC labs across the globe, with Auray Lab being their first in Asia, once again demonstrating Taiwan's critical role in promoting Open RAN certification.

 

3. Taiwan as a Base for the Development of 5G Business Models and Innovative Applications

Taiwan has high network coverage as well as diverse industries and consumer culture, offering an ideal test environment for smart manufacturing of industries and smart transportation, smart healthcare, and new retail for consumer applications, which makes Taiwan an incredible location as testing grounds for innovative 5G applications.

 

4.Partnering with Taiwan to Take Advantage of Emerging Opportunities Due to COVID-19 

The pandemic has increased the demand for remote work, video conferencing, online shopping, channel service logistics, and home entertainment. With the development of 5G communication technologies, companies now regard AR/VR/MR, digital twin, and other immersive and virtual/real integration technologies and services, and the recent rise of the metaverse as "key applications" with immense business opportunities.

 

 

IV. Investment Incentive Measures

1. Tax Incentives

The income tax rate for profit-seeking enterprises in Taiwan is 20%. To encourage foreign investments in Taiwan, support industrial innovation, and promote industry-academia collaboration, Taiwan offers the following preferential taxes to foreign companies (Table 1):

                                             

               Table 1 Preferential Taxes

Item

Preferential   Measures

Research,Development,or Introduction of Technology or Machinery Equipment

  • Up to 15% of the company's R&D expenditures may be deducted f rom its profit- seeking enterprise income tax for current year; or up to 10% of such expenditures may be credited over three years against the profit-seeking enterprise income tax payable by the company.
  • Royalty payments to foreign companies for imported new production technologies or products that use patents, copyrights, or other special rights owned by foreign companies is, with the approval of the Industrial Development Administration, MOEA, exempt from the corporate income tax.
  • Companies are exempt from import tariffs for any machinery equipment that local manufacturers cannot produce.

Investment in Smart Machinery / 5G / Information Security

  • Smart machinery: Use of big data, AI, and IoT in brand-new hardware, software, technology, or technical services for automatic schedules, flexible, or mixed-model production lines.
  • 5G: Investments in new hardware, software, technology, or technical services that are related to 5G communication systems.
  • Information security: Companies' investments and purchases of brand- new hardware, software, technology, or   technical   services for information and communication security products or services are included in the scope of investment offsetting.
  • For investments between NT$1 million and NT$1 billion, companies can choose from either "5% of investment spending deducted from profit- seeking enterprise income tax (current FY)" or "3% of investment spending deducted from profit-seeking enterprise income tax, if the total spending spread is over three years" may be selected, but the total amount deducted may not exceed 30% of corporate income tax that year.
  • Applicable until December 31st, 2024.

Employee Stock Compensation

  • A company employee who has obtained stock compensation worth a combined total of less than NT$5 million and continuously held the stock while remaining in the company's employ for at least two years may choose to be taxed on the market price of the stock at either the time the stock was obtained or the time the stock is sold, whichever is lower.

Special Foreign Professionals

  • Special foreign professionals who meet certain criteria are eligible for a 50% deduction of total income tax for amounts exceeding NT$3 million.

Industry Park Locations

  • Companies that set up operations in export processing zones, science industrial parks, or free trade ports are eligible for exemptions on import duties, commodity tax, and business tax for the import of machinery and equipment, ingredients, fuel, materials, and semi-finished products for their own use.

Others

  • Companies that use undistributed earnings to engage in substantive investments may exclude the invested amount when calculating their profit-seeking enterprise income tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Subsidies

(1)Global Innovation Partnership Initiatives Program

Foreign companies that complement Taiwan's industries are encouraged to invest Taiwan’s R&D innovation and work with Taiwanese companies to jointly develop forward-looking technologies, key technologies, or integrated technologies beyond our current capacities. Such businesses could exert a key influence on Taiwanese industry by: (a) inspiring R&D work on industrial technologies as well as the establishment and development of supply chains; (b) improving R&D efficiency; (c) accelerating the timetable from R&D to production; and (d) contributing actively to the expansion of international markets. Foreign companies successful in endeavors relating to this program will be eligible, upon approval from the MOEA, for subsidies of up to 50% of total R&D expenditures.

 

(2) Pioneers for Innovation Leadership on Technology Program 

The program aims to transform Taiwan into a high-tech R&D center and encourage leading international manufacturers to establish cutting-edge R&D bases in Taiwan, empowering their work in forward-looking technologies in Taiwan and connecting with Taiwan’s supply chain, thereby creating a division of labor in the areas of research, co-creation, and development, with an eye to strengthening the technological competitiveness of Taiwan's leading industries and accelerating the formation of clusters in emerging industries. Program funding of up to 50% of total expenditures may be granted for any project that has been approved by the Ministry of Economic Affairs.

 

(3) Taiwan Industry Innovation Platform Program

To guide industries in Taiwan to develop high-value products and encourage corporations to enter the high-end market to increase the industry's added value, the Industrial Development Administration, Ministry of Economic Affairs, and the Ministry of Science and Technology are promoting the "Taiwan Industry Innovation Platform Program". The program provides companies that have R&D teams in Taiwan with funding of up to 40%-50% of the project budget for themed R&D projects and funding of up to 40% for projects independently conducted by corporations.

 

V. Leading Taiwanese Companies

1.Key Chips

(1) Established  in 1997, MediaTek Inc. became a leading global IC design company by consistently investing in advanced processes and technologies. The Company's core businesses include mobile communication, smart home, and automotive electronics, focusing on the development of core technologies for chips used by these three platforms. MediaTek also uses highly integrated and innovative chip designs to help manufacturers optimize the supply chain and reduce new product development time.

 

(2) Established in 1987, Realtek is dedicated to developing and designing network chips. Realtek is the largest supplier of high-speed Ethernet and a leading maker of audio codec chips for computers. Their most popular products include communications network chips, multimedia chips, screen control chips, and high-speed wireless broadband chips.

2. Network Communication Equipment

(1) Accton Technology is dedicated to Ethernet and wireless equipment R&D, design, and manufacturing and is a leader in the design of open hardware platforms for data centers, carrier access, and campus networks. Accton has R&D and sales centers in Taiwan, the U.S., and China, and over 5,000 employees worldwide4.

 

(2) Sercomm was established in 1992 with broadband network software and firmware R&D as its core business but has since become a leading vendor of broadband equipment. Headquartered in Taipei and with sales offices throughout North America, Europe, China, and the Asia-Pacific, Sercomm has several thousand employees worldwide. Its products span residential, commercial, telecommunications, security surveillance, and cloud applications.

 

3.Telecommunications

(1)Chunghwa Telecom was established in 1996, prior to which it had long operated as a business department of the Directorate General of Telecommunications, Ministry of Transportation and Communications. It is the largest general telecom operator in Taiwan, and its scope of business covers fixed network communications, mobile communications, broadband access, and Internet service. It also provides corporate customers with ICT services using its big data, information security, cloud, and network data center technologies.

 

(2)Established in 1997, Taiwan Mobile was the first private telecommunications company listed on the Taiwan Stock Exchange (TWSE) and has comprehensive WCDMA (3G), LTE (4G), and NR (5G) frequency licenses. In 2017, Taiwan Mobile announced its transformation into a next-generation network technology company. In response to the 5G, IoT, and AI smart cloud developments in 2019, Taiwan Mobile implemented the "Super 5G Strategy" to actively develop IoT services and focus innovation and R&D on 5G applications7.

 

VI.Examples of Successes Achieved by Foreign CompaniesProduction and Technology

1.Production and Technology

Qualcomm announced the establishment of its "Center for Operations, Manufacturing Engineering and Testing in Taiwan (COMET)" in June 2019 and set up 4 excellence centers/laboratories including a 5G mmWave testing center, a laboratory for the development of 5G radio frequency devices and 5G modules, a center of excellence for biometric sensing technology, a production and testing center, and an IC packaging thermal/mechanical laboratory. Qualcomm invested NT$5.5 billion in the COMET building, which spans 7,200 square meters of land, and is now collaborating with testing service providers such as KYEC and MPI.

 

2.Testing Facilities

(1)US-based Cisco partnered with the Taoyuan City Government in late 2019 to establish a "Cisco Innovation Center" for smart solutions in Taoyuan's Chingpu district to serve as an R&D hub for IoT in Taiwan.

(2)Qualcomm joined forces with ASE and Chunghwa Telecom to create a dedicated 5G mmWave private network smart factory, which was inaugurated in December 2020 and integrated three major applications into  the production.

(3)Other collaboration projects include the partnership between Siemens and Hwacom Systems. They provide Internet of Vehicles (IoV) solutions, smart signal controllers, and smart street lights to jointly set up 5G experimental sites and provide V2X IoV solutions.

 

3.Talent Development

Qualcomm actively develops startup teams and talents in Taiwan. Qualcomm set up the "Qualcomm Innovation Center, Taiwan" in March 2020 as the site for QITC that provides exclusive labs and technical support. In addition, Qualcomm also expanded collaboration with the industry, government, and academia and activated the "Qualcomm Taiwan University Research Collaboration Program" with top universities in Taiwan.In addition to company-founded competitions, to help industries discover local talents with creativity and design application abilities, the Industrial Development Administration, Ministry of Economic Affairs of Taiwan established a competition mechanism with themes based on development trends and needs of the communications industry. The 2022 Mobile Heroes competitions focused on the IoT Future Challenge, Next-Generation 5G+ User Applications and Micro Base Station Antenna System Design Competition,5G Pioneering Innovative Application Competition, and the Connectivity International Award for international submissions aimed at connecting international innovation with local industry talent. Leading international communications companies such as Google, Qualcomm, Microsoft, AWS, Sigfox, and Cisco have also taken part8 to recruit exceptional teams and talents for their companies or create new startups.

 

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