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Smart Machinery

  • date:2024-01-07
Smart Machinery

 

I. Policy Initiatives

In response to the revolutionary changes to life and industries brought about by IoT, 3D printing, AI, and robot technologies, and the reorganization of the global supply chain due to the China-US trade war and the COVID-19 epidemic, Taiwan has continued with the "smart machinery industry promotion program," which started in 2016, to enhance Taiwan's edge in semiconductors, ICT, and machinery industries. Taiwan proposed the "Center for High-end Manufacturing in Asia" strategy in 2020 with the aim of expediting the adoption of 5G and AI applications to accelerate smart industries, digital transformation, and innovative applications - thereby creating smart industry value chains and expand industrial output.

The measures for this program are as follows:

1. Smart Machinery Promotion Office

This office is established to create a new ecosystem for Taiwan's smart machinery industry. The aim is to develop various solutions based on Taiwan's precision machinery and ICT industries, to help key industries applying smart manufacturing.

2. Smart Manufacturing Technology Test Site

This site is a national proofing center that equipped with 100% domestically produced high-end machinery processing equipment. The site links together digital product systems that are domestically developed and produced, develops machinery processing application service modules, and realized 9 mixed-model smart manufacturing production lines for parts and components. It serves as the domestic smart manufacturing planning center, and shows the capability of domestic equipment in Industry 4.0 applications to the industry.  

3. Smart Machinery Park

In coordination with industry characteristics, requirements, and location of industrial clusters, Taichung City Government has expanded the hinterland of Taichung Fengzhou Technology Science-based Industrial Park to a “ Smart Machinery Park” for the companies to build factories and test sites.  

 

II. Overview of Industrial Development

 

1. Output Value

In 2017, the machinery industry became Taiwan's third largest industry in terms of output value, after the semiconductor and panel industries. According to the data from the ITRI Industry, Science and Technology International Strategy Center, intensification of trade disputes between the United States and China and a significant decrease in demand for industrial machinery caused the output value in 2019 to decline 9.3% The COVID-19 pandemic and escalation of the China-US trade war further reduced demand for machinery and equipment in 2020. As the pandemic is gradually subsiding and different countries are paying more attention to supply chain resilience, we expect these developments to create digital market opportunities for machinery manufacturing. In 2022, output is expected to rise to pre-pandemic levels of approximately NT$1.2 trillion. According to figures released by the Taiwan Machine Tool & Accessory Builders' Association (TMBA), machine tool exports from Taiwan came to US$2.78 billion in 2021, a significant increase of 29.1% from US$2.15 billion in 2020.

2. Industry Value Chains

Taiwan has comprehensive industrial clusters for machine tools and accessories, with firms engaged in the production of materials, accessories, and complete machines that make their way into applications in such sectors as automobiles, aerospace, molds and dies, and consumer electronics .

 

3. Industrial Clusters

According to statistics from the Statistics Department of the Ministry of Economic Affairs (MOEA), Taiwan currently has approximately 18,000 machinery companies which collectively employ over 300,000 people. Industrial clusters have formed in northern, central, and southern Taiwan, and these have fostered the establishment of many important companies.

(1)Northern Taiwan

The northern Taiwan industrial cluster is formed in New Taipei City, Taoyuan, and Hsinchu, consists of precision sensing equipment, electronics and semiconductor production equipment, automated components and system integration, industrial computers, and controllers, in which “Fair Friend Group”(FFG) headquartered in Taipei, “Delta Electronics”(DELTA) and “Advantech” are the most representative.

(2)Central Taiwan

An industrial cluster of machine tools and parts and components, integrated ball screw, linear guide, industrial machinery (carpentry, textiles, rubber and plastics machinery), smart robots, automation components and system integration are located in Taichung and Changhua. The representative companies include “HIWIN”, “Precision Motion Industries” and “ Gallant Precision Machining Co., Ltd..

(3)Southern Taiwan

As for Chiayi, Tainan, and Kaohsiung, there are industrial clusters for machine tools and parts and components, industrial machinery (screw forming and processing and rubber and plastic machinery), semiconductor equipment, smart robots, controllers, and precision molds, in which "Tongtai Machine & Tool", "CCM", and "E&R Engineering Corp." are the most representative.

Figure 2  Taiwan's Precision Machinery Industrial Clusters

 

 

 III. Potential Investment and Collaboration Opportunities in Taiwan

 

1.Joint development of smart manufacturing applications

Taiwan has developed complete industrial clusters for the semiconductor, ICT, metal processing, the auto parts and components, and petrochemical products. The tightly knit machinery industry supply chains alone with the government's active promotion of industrial parks and preferential taxes, foreign companies will have the optimal site for developing and verifying innovative smart manufacturing application projects.

 

2.Cross-industry Supply Chain Collaboration Brings R&D Breakthroughs

(1)Taiwan is the world's seventh largest producer and fifth largest exporter of machine tools. Taiwan has complete industrial clusters and supply chains, and has all of the equipment or systems for machine tools, robotic arms/robots, smart factories, and industrial IoT.

(2)Taiwan's machinery industry has detailed division of labor with the flexibility to meet customers' requirements. The abovementioned industrial foundation will benefit foreign companies in establishing R&D or production sites in Taiwan.

 

3.Exploration of the continuously growing smart manufacturing market

Industry 4.0 has become a global trend. The trade war between the United States and China has also compelled companies to readjust production capacity plans and the supply chains that were previously concentrated in a handful of production sites have gradually become more regional and dispersed. This trend is expected to encourage manufacturers in all areas to increase vertical integration, automation, and demand for smart machinery applications such as robotics. The COVID-19 epidemic has also increased the demand for service robots in the cleaning and healthcare sectors. Foreign companies can seize business opportunities of Taiwan's smart machinery industry through investment in Taiwan, and further expand into the future regional/global market.

 

IV. Investment Incentive Measures

1. Tax incentives

  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)The Global R&D Innovation Partner Program

Some foreign companies have a high degree of complementarity with Taiwan's industries. To encourage them to engage in R&D and innovation activities in Taiwan, such companies, after gaining approval from the MOEA, will be eligible for subsidies of up to 50% of total R&D expenditures if they: a. have technologies that are not yet mature in Taiwan or overseas, and could create strategic products, services, or industries over the course of future industrial development; b. have potential to help Taiwan produce leading technologies or significantly enhance the competitiveness and increase the added value of important industries; or c. engage in key and common technology R&D, vertical or horizontal technology integration, and can create an industrial value chain.

 

(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. Machine Tools

(1) Fair Friend Group

Fair Friend Group, headquartered in Taipei, has three business divisions – Machine Tools Division, Industrial equipment, and Green Energy Division. The company has 52 brands and 79 production bases in total and has been actively promoting smart manufacturing in recent years.

 

(2) Tongtai Machine & Tool

Besides developing cutting machine tools and conducting application research, Tongtai Machine & Tool expanded into advanced processes for ultrasound-assisted processing, laser processing, and metal 3D printing to provide customers with one-stop services for smart machinery

 

(3) Yeong Chin Machinery

Yeong Chin Machinery Industries Co., Ltd. was founded in 1954 and is one of the few machine tool makers in Taiwan with in-house casting facilities. The machine tool manufacturer has full capacities to support integrated production operations including casting, machining, machine assembly, inspection, packaging, and shipping.

 

2.Industrial Robots

 

(1) HIWIN

HIWIN specializes in research, development, and production of precision integrated ball screws, linear transmission components, and industrial robots. To align with industrial development trends, HIWIN is gradually transitioning from individual parts and components to system development, and is actively investing in medical devices, solar power, wind power, semiconductors, ICT, and precision machine tools to aid the development of Taiwan's industries towards smart manufacturing

 

(2) Delta Electronics

Delta Electronics has capacity for the production, research, and development of smart machinery applications, including inverters, servo drive systems, power management, sensors, logic and motion control, industrial robots, SCADA software, and industrial information management systems

 

(3) Techman Robot

Techman Robot was founded in 2016 as a subsidiary of Quanta Group, one of the largest computer and laptop manufacturers in the world, and is the first collaborative robot manufacturer in Taiwan – with the second largest market share in the world for a company of its kind. Collaborative robots from Techman have built-in vision systems, smart factory management software, and solutions.

 

3.Smart Automation

(1) Advantech

Advantech is a leader in comprehensive system integration and design services in Taiwan, and offers products and solutions such as remote I/O modules, industrial communication equipment, automation controllers and I/O, embedded automated industrial computers, industrial tablet PCs, smart factory cloud integration, and smart equipment automation.

 

(2) Mirle Automation Corporation

Mirle Automation Corporation was founded in 1989 and has become a major manufacturer for automation engineering services in Taiwan. The corporation provides automation production and process application equipment and products such as integrated touch panel conveyor systems, clean room automatic material handling and storage systems, robot applications, computer network equipment services, and industrial controllers.

 

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