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21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program (2013)

Chapter:Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries

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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Appendix A3

Taiwan’s Industrial Technology Research Institute: A Cradle of Future Industries

Taiwan’s Industrial Technology Research Institute (ITRI) is a not-for-profit research organization established in 1973 to provide applied industrial research for Taiwanese industry. ITRI draws upon research conducted all over the world in companies, research organizations and universities and uses the knowledge to develop product prototypes and the processes, equipment and materials necessary to manufacture those prototypes. It fosters not only the creation of companies that make new products, but of entire industry chains supporting the manufacturing process, including design, materials, equipment, testing, packaging, quality control and applications. ITRI “has played an integral role in transforming Taiwan’s economy from a low-tech, labor-intensive model to a high-tech, knowledge-based industrial core.”1 ITRI’s formation was the most important aspect of a broad national effort to develop Taiwan’s semiconductor industry, a spectacular success which has subsequently driven the growth of Taiwan’s capabilities in computers, lighting, displays, telecommunications, photovoltaics, and machinery.

ITRI is located in one of the most successful technology “clusters” in the world, grouped in and around Hsinchu Science Park (HSP), a research and high technology industrial zone established by the government in 1980.2 In addition to ITRI, two world class research universities, National Tsing Hua University (NTHU) and National Chiao Tung University (NCTU) adjoin the park, which is the site of research and manufacturing operations of over 400 high technology companies. Most points within this complex are within

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1Allen Hsu, “ITRI Pushes Technology Sector to New Frontier of Innovation,” Taiwan Journal (October 19, 2007).

2Michael Porter defines “clusters” as “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms, in related industries and associated institutions … in particular fields that compete but also cooperate. Michael Porter, On Competition (Boston: Harvard Business School Printing, 1998) pp. 197-198.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

walking distance of each other, a proximity which fosters personal interchange and cross-pollination of ideas. NCTU, NTHU and ITRI train large numbers of workers for the industries in HSP; company executives and ITRI officials teach in the two universities; and university professors turn to ITRI for assistance in developing practical applications of new ideas and sit on advisory boards of local companies. ITRI “has been praised as the incubator of Taiwan’s chief executive officers of publicly held companies and talents for industries,” and the same could be said of NCTU and NTHU. 3 The companies located in HSP account for about 15 percent of Taiwan’s GDP, making the park one of the most productive pieces of real estate on earth.4

The creation of ITRI, perhaps the most important milestone in the entire course of Taiwan’s industrialization, was the brainchild of an elite group of highly competent bureaucrats and business leaders, most of them holding degrees in engineering.5 They frequently had extensive experience working for multinational high technology companies and were in a position to apply their practical experience to the development of indigenous companies and industries.6 They were relatively unhindered by political pressure—the Kuomintang Party (KPT), which held a monopoly on political power until 1990, had a tradition of relying on “scientific” government planning when it arrived on Taiwan in 1949, and technocrats “had already won a large measure of independence from party and military control.”7 This pattern was maintained

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3As of late 2006 ITRI had cultivated over 60 CEOs and 18,000 specialists for Taiwan’s high tech industries. “ITRI Transforms Into a Value Creator from a Tech Follower,” Taiwan Economic News (October 24, 2006).

4Interview with Han-Ping David Shieh, National Chiao Tung University, Hsinchu, Taiwan, February 16, 2012. In 2007, the Geneva-based World Economic Forum ranked Taiwan in first place worldwide in industrial clustering competitiveness, a distinction “attributed mainly to the effect of the world-renowned Hsinchu Science Park.” “Taiwan Ranks 1st Place in Industrial-Clustering Competitiveness Worldwide: WEF,” Taiwan Economic News (December 26, 2007).

5Eleven of the first fourteen individuals to serve as Minister for Economic Affairs in Taiwan held degrees in engineering or science. K.Y. Lin, Taiwan’s chief economic planner in the 1950s and early 1960s, had a degree in electrical engineering, and of his two assistants, one was a physicist and the other a civil engineer. MOEA’s Industrial Development Bureau, which created ITRI, was dominated by engineers at the time. Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton and Oxford: Princeton University Press, 1990), p. 98.

6Morris Chang, with 25 years of experience at Texas Instruments, is a former head of ITRI and when he moved to set up TSMC, he founded TSMC and “loaded TSMC’s ranks with American-trained managers such as Britt Brooks, Doug Chance (the successive general managers of TSMC) and other international professional manager. Among the managers, most of them are Chang’s former colleagues at TI.” Chang’s “excellent education and work experience established his professional knowledge in the semiconductor industry and contributed to the creation of the focused business model of the pure play foundry.” Similar observations could be made with respect to many members of the generation of leaders which oversaw Taiwan’s economic development. T. H. Liu, S. C Hung, S. Y. Wu, and Y. Y. Chu, “Technology Entrepreneurial Styles: A Comparison of UMC and TSMC,” International Journal of Technology Management Vo. 29 ½ (2005) p. 681. SEMI Oral History Interview, Morris Chang (August 24, 2007, Taipei, Taiwan).

7Chiang Kai-shek’s government, shaken by Japan’s seizure of Manchuria in 1931, came to believe that its survival depended on governing through a highly educated and professional bureaucracy.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

during the decades of KMT rule but is eroding with the advent of democracy and challenges to KMT policies by the Democratic People’s Party (DPP).8

ITRI has deep American roots. Its founder, Y.S. Sun, formulated a developmental strategy for high tech industry in Taiwan based on discussions in the early 1970s with a colleague, Dr. Pan Wen-Yuan, an electrical engineer then employed in RCA’s David Sarnoff Laboratories in New Jersey. The two men determined that Taiwan should develop a semiconductor industry, that acquisition of U.S. technology would be required, and that Chinese engineers working in U.S. technology companies would be an important asset for such an effort.9 RCA trained the first cadre of ITRI engineers in semiconductor manufacturing technology, a number of whom were U.S. residents holding Ph.Ds. from U.S. universities. The Taiwanese development effort was advised by a “Science and Technology Advisory Group” (STAG), established in 1979, led by U.S. semiconductor executives, including Pat Haggerty, former CEO of Texas Instruments and former member of the National Academy of Sciences, and B.O. Evans, former VP for development at IBM.10 Hsinchu Science Park represented a deliberate effort by Kuo-Ting Li, a Taiwanese leader known to posterity as the “architect of Taiwan’s economic miracle,” to replicate the best features of California’s Silicon Valley in Taiwan. 11 HSP’s first director was an American, Dr. Choh Li, formerly a research director at Honeywell in

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Chiang promoted senior officials who believed in keeping economic policymaking insulated from political interference. Chiang’s philosophy was paraphrased by a KMT official as “governments and political forms are transitory, the problems facing a nation are not.” Chiang’s son, Chiang Ching-kuo, who succeeded him in 1972, believed in recruiting “the central economic decision-makers according to demonstrated technical abilities.” Wade, Governing the Market (1990) op. cit. pp. 247-248

8In 2006, Taiwan Premier Su Tseng-chang, a member of the KMT’s rival party, the Democratic People’s Party (DPP), visited ITRI, praised the organization for its achievements, and commented that he envied ITRI “because the researchers can commit themselves to professional studies without political interference.” “ITRI Has Contributed Greatly to Taiwan: Premier,” Asia Pulse (May 23, 2006). In fact the DPP tends to view ITRI as a KMT stronghold supporting business interests aligned with that party. Voices within the DPP reportedly suggest that if the government plans to spend money on industries, the funds would be better directed toward fisheries and agriculture.

9John A. Mathews and Dong-Sung Cho, Tiger Technology: The Creation of a Semiconductor Industry in East Asia (Cambridge: Cambridge University Press, 2000) p. 158.

10STAG initially consisted of two Technical Review Boards (TRBs), one for semiconductors and one for electronics, dominated by overseas Chinese selected by Evans or his staff. Morris Chang recalls that “Pat Haggerty was really the major figure at TI. It was he that made TI a big successful company. TI was a very small unknown and not all that successful company before him. He was the one that made the key decision of entering the semiconductor business.” “Oral History of Morris Chang,” recorded August 24, 2007 (Computer History Museum, 2007) p. 7.

11Li, a former Finance Minister, consulted with Frederick Terman on how Taiwan could replicate Silicon Valley. Terman served as Dean of Stanford’s School of Engineering and spearheaded the establishment of what is now Stanford Research Park. Together with William Shockley he is widely regarded as the father of Silicon Valley. Similarly, Li, the founder of Hsinchu Science Park, is credited with transforming Taiwan from an agrarian country to a high technology center. “Fred Terman, the Father of Silicon Valley,” Net Valley (October 21, 2010).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

Minneapolis.12 Morris Chang, perhaps the most famous person to head ITRI and the founder of Taiwan Semiconductor Manufacturing Corporation (TSMC), holds two degrees from MIT, a doctorate from Stanford and served for over 20 years with Texas Instruments, including time as the company’s CEO. At present, four decades after its creation, a large proportion of ITRI’s total work force still holds bachelors and advanced degrees from leading U.S. universities.

THE TECHNOLOGY INTERMEDIARY

An industry analyst quoted in The Economist observed in 2010 that Taiwan was “the best place in the world to turn ideas into physical form.”13 That fact is substantially attributable to ITRI, which functions as the bridge between ideas and form, or as its managers express it, as a “technology intermediary” serving Taiwanese industry. Its primary function is not research but adaptation and transfer of technology from domestic and overseas laboratories to domestic companies. ITRI is “arguably the most capable institution of its kind in the world in scanning the global technological horizon for developments of interest in Taiwanese industry, and executing the steps required to import the technology—either under license or joint development— and then absorbing and adopting the technology for Taiwanese firms to use …”14 Technology is transferred to Taiwanese industry through a variety of channels, including licensing, patent auctions, co-development arrangements, spinoffs, migration of ITRI personnel to companies, and research consortia and alliances.

Strategic Direction

Although Taiwan’s National Science Council (NSC) is formally responsible for formulating the country’s science and technology policy, and ITRI is subordinated to the Ministry of Economic Affairs, strategic direction has determined through a consultation process involving foreign experts and ethnic Chinese with relevant experience in multinational companies:

“a distinctive feature of Taiwan’s technology policy making is the extensive participation of overseas technologists, mostly of ethnic Chinese origins, as advisers. Enjoying a varying level of access to the top policy circle, they help policymakers identify the industrial sectors with technological promise,

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12Constance Squires Meaney, “Taiwan’s Semiconductor Industry,”: in Joel D. Aberbach, David Dollar and Kenneth Sokoloff, (eds.) The Role of the State in Taiwan’s Economic Development (Armonk, NY: M.E. Sharpe, Inc., 1994) p. 178.

13“Hybrid Vigour,” The Economist (May 27, 2010).

14John A. Mathews and Dong-Sung Cho, Tiger Technology: The Creation of a Semiconductor Industry in East Asia (Cambridge: Cambridge University Press, 2000).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

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FIGURE APP-A3-1 ITRI as a technology intermediary.

suggest the strategies of technology transfer and adaptation, and provide technical expertise for the daily operation of research projects.”15

MOEA determines ITRI’s strategic direction in consultation with such experts and ITRI itself. The Technical Advisory Committee (TAC), originally an informal group of expatriate Taiwanese engineers working in the United States, evolved into a standing organization of Taiwanese with international education and work experience advising ITRI on relationships with multinational corporations. 16 The Science and Technology Advisory Group (STAG), which advises the Executive Yuan (cabinet) on science and technology policy, includes international experts (occasionally including Nobel Prize winners) as well as eminent Taiwanese academics and holds an annual Industrial Science and Technology Strategy Conference, which addresses themes in areas such as electronics, telecommunications, information technology and

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15Chen-Dong Tso, “State-Technologist Nexus in Taiwan’s High Tech Policymaking: Semiconductor and Wireless Communications Industries,” Journal of East Asian Studies (May 2004).

16Dr. Chintay Shih, former president of ITRI, commented in 2009 that “The TAC were our tutors and lighthouse. They have contributed the rest of their lives without any payback.” Thirty years after ITRI’s formation some of the original TAC members were still serving as consultants to ITRI. Cristina Chen, Jason Kao, Frans Nauta, Jan-Frens Van Giessel, Clement Goossens and Pipijn Veling, Excellent Government on a Far-East Silicon Island (December 2009).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

biotechnology.17 STAG prepares developmental technology blueprints for specific industry sectors regarded as important.18 The Technical Review Board (TRB) of the National Science Council consists of foreign and domestic experts who concentrate on targeting particular technologies and adapting them at the operational and project level. A number of key Taiwanese experts have served in more than one capacity in such organizations.19 This multifaceted and cosmopolitan advisory system has been widely praised, but has fostered failures as well as successes.20

Ding-Yuan Yang, a former ITRI official who founded Winbond Electronics Corporation in 1987, explained in a 2011 oral history interview that the founder of ITRI, MOEA Minister Y.S. Sun, would use the conferences with experts to absorb opinions on the development of technology. MOEA would then draft formal minutes of the conferences, “and then the plans would start.” MOEA would give “suggestions” to ITRI for execution. ITRI would respond by proposing contracts with the Ministry, sign the contracts, and begin to execute them. “These kinds of national projects were all four-year contracts, which allowed it to have a certain continuity.”21

Organization

ITRI was formed through the combination of three existing research centers subordinated to MOEA which were relocated to a new site in Hsinchu in 1973.22 At its inception ITRI consisted of 400 employees and was funded by a

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17STAG was at one time headed by Frederick Seitz, former president of the U.S. National Academy of Sciences. “STAG Provides Policy Suggestions,” Taiwan Today (June 15, 2001). “The Science and Technology Advisory Group Must Take its Job Seriously,” United Daily News (Taipei, November 13, 2009). Arthur Carty, a Canadian nanotechnology who was invited to join STAG in 2008, recalled in 2010 that in a recent week-long STAG meeting, “government officials, industry professionals, research and development experts and academics reviewed and discussed a number of investment proposals before throwing out the bad ones. We don’t have anything like that in Canada,” Carty said. “Taiwan’s Technology Success Underappreciated: Canadian Scientist,” Focus Taiwan (July 24, 2010).

18“M-Taiwan Program and Objectives of WiMAX in Taiwan,” WiMAX360° (June 24, 2009).

19Dr. Hwa-Nien Yu, one of the world’s foremost experts on semiconductor device technology and design, has chaired the TAC for ITRI since 1993. He also served on the TRB and has been advising ITRI in various capacities since the 1970s. He is an emeritus member of IBM Research with B.S., M.S. and Ph.D. degrees in electrical engineering from the University of Illinois.

20Based on advice from STAG, in 1982 the Taiwanese government decided to place a priority on the development of a biotechnology industry. Major financial and institutional commitments were subsequently undertaken. Today, thirty years after this effort began, it is not at all clear that the modest results achieved to date represent an adequate return on Taiwan’s major investment. See generally Yu-Shan Wu, Academia Sinica, “Taiwan’s Developmental State: After the Economic and Political Turmoid,” Paper prepared for delivery at the Conference on A Decade After the Asian Financial Crisis, Thammasat University, Bangkok, February 23-24, 2007, p. 22.

21Interview with Ding-Yuan Yang, “Taiwanese IT Pioneers: D.Y. (Ding-Yuan) Yang,” recorded February 23, 2011 (Computer History Museum) p. 12.

22The research centers were the Uni-Chemical Research Centre, the Metal Research Centre, and the Mineral Industrial Research Centre, all of which became internal ITRI research laboratories.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

government budget of $213 million. In 1974, the Electronics Industry Research & Development Centre was established within ITRI to create a domestic semiconductor industry, subsequently being renamed as the Electronics Research & Service Organization (ERSO). In 1990, new laboratories were established for computer and communications research and biomedical engineering.23

Currently, ITRI’s R&D activities are centered on six core laboratories pursuing “deeper and new” ideas and eight technology centers which focus on particular themes emphasizing a multidisciplinary approach and drawing on the specialized competencies of the core laboratories. ITRI’s Business Development Unit is responsible for commercializing research results, technology transfer, and relations with foreign research partners.

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FIGURE APP-A3-2 ITRI’s organization.

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23Min-ping Huang, “The Cradle of Technology: the Industrial Technology Research Institute,” in Terence Tsai and Bor-Shiuan Cheng (eds.). The Silicon Dragon: High Tech Industry in Taiwan. (Cheltenham, UK and Northampton, MA: Edward Elgar, 2006) pp. 27-28. ITRI undertook a fundamental restructuring of its organization in 2006 with an eye toward “silo-breaking” among its research laboratories, which were seen as competing with each other for resources and not collaborating sufficiently. ITRI’s eight core laboratories were reduced to six through the merger of its semiconductor and optoelectronics labs and its materials and chemical labs. “Technology centers” were established and tasked with integrating the work of multiple ITRI core laboratories.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

ITRI’s budget is currently about $600 million per year, half of which is provided by the government and half by the private sector. 24

ITRI employs 5,728 personnel, of which 1,163 hold Ph.Ds. and 3,152 masters’ degrees. ITRI’s staffing of research projects is “very bare bones,” even in technology areas regarded has having breakthrough potential.25

Technology Acquisition

In ITRI’s early years it relied almost entirely on the acquisition of technology and know-how from foreign high technology companies, which it disseminated to Taiwanese industry. In recent decades the research capabilities of Taiwan’s universities, including the Hsinchu-based National Tsing Hua and National Chiao Tung Universities, have emerged as increasingly important sources of technology. As ITRI’s reputation as an R&D powerhouse has grown, it has become possible for the institute to enter into joint R&D projects with first-tier foreign companies and research organizations. 26 Technology obtained via such collaborations remains a vital aspect of ITRI’s operations.

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24Private sector income is derived through activities such as sale of intellectual property to industry, provision of knowledge-based services to industry, other forms of technology transfer, and royalty payments. ITRI’s budget has not grown for many years despite pleas from industry to MOEA to increase ITRI’s funding. Interview with John Chen, Director, ITRI Display Technology Center, Hsinchu, Taiwan, February 14, 2012. Interview with Taiwanese semiconductor executive, Hsinchu, Taiwan, February 15, 2012. ITRI’s budget is subject to periodic public pressure based on the perception that it is channeling public resources to companies and industries that are already mature and do not need public assistance. In 1994, ITRI’s budget was cut in half by the Legislative Yuan based on such criticism. Douglas B. Fuller, Globalization for Nation Building: Industrial Policy for High Technology Products in Taiwan (MIT Working Paper MIT-IPC-02-002, January 2002), p. 12.

25Interview with Taiwanese semiconductor executive Hsinchu, Taiwan, February 15, 2012. ITRI recruits employees by offering them a good work environment, a large working team, and excellent career development prospects. Taiwan’s system of compulsory military service has served as a major source of educated personnel for ITRI. The Ministry of National Defense assigns 400 soldiers to ITRI annually, of which 70 percent are graduates of the leading universities in Taiwan. Only 10 percent of Taiwan’s soldiers are qualified for assignment to ITRI. They serve at ITRI for at least four years as an alternative to active military duty. Terence Tsai and Borshivan Cheng, The Silicon Dragon: High-Tech Industry in Taiwan (Edward Elger, 2006) p. 32. Taiwan has had a system of compulsory military service since 1949. Alternatives to active duty military service include “national defense service,” which is available to draftees with advanced degrees, particularly in engineering and the sciences. Qualified individuals who choose this option receive three months of officer training and a commission in the reserves, followed by four years of work in a government or academic research institution such as ITRI or Academia Sinica. Annual turnover is extremely high, averaging about 10 percent but in some divisions rising to 15-20 percent, posing a continual challenge to management. Interview with Mao-Jian Wang, National Tsing Hua University, Hsinchu, Taiwan, February 16, 2012.

26A number if ITRI’s foreign collaborations involve establishment of a research center on ITRI’s premises by the foreign partner. “Festo Inaugurates Automation Parts Engineering Center at ITRI,” Taiwan Economic News (February 9, 2004); Corning operates a research center within ITRI on glass technology including bendable glass. “Corning Inaugurates Research Center in Taiwan,” Asia Pulse (March 13, 2006). In a recent and significant example of technology acquisition from abroad, ITRI’s entry into the field of flexible electronics (bendable electronic devices and displays) was made possible by friendly technology transfer from Eastman Kodak Company to ITRI. Dr. John Chen,

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

TABLE APP-A3-1 ITRI Foreign Technology Partnerships

Foreign Partner Year Initiated Themes
Intel Corporation 2011 Memory chips
Lawrence Berkeley National 2011 Renewable energy
Laboratory
Corning 2006 Optical glass, materials
Microsoft 2005 Forward versatile disc (FVD)
Alvarion Ltd. 2010 WiMAX, wireless
Spirit Aerosystems 2009 Carbon fiber
Hewlett Packard 2004 Radio frequency identification (RFID)
IBM 2009 Cloud computing
Novartis 2008 Pharmaceuticals
Applied Materials, SUSS 2009 Semiconductor manufacturing
Microtec equipment, 3D ICs
SOURCES: “ITRI, Intel Announce Research Project,” Taipei Times Online (December 7, 2011); “ITRI Signs MoU with LBNL on Renewable Energy Technology Development,” Taiwan Economic News (August 11, 2011); “Corning Inaugurates Research Center in Taiwan,” Asia Pulse (March 13, 2006); “Microsoft Launches Windows Engineering Center in Taiwan,” China Post (September 10, 2005); “ITRI, Israeli Firm to Build WiMAX Testing Lab,” Central News Agency (February 9, 2010); “Taiwan Institute to Cooperate with U.S. Firm in Carbon Fiber Research,” Central News Agency (July 17, 2009); “HP Sets Up First RFID Center on the Island,” China Post (April 14, 2004); “ITRI to Spearhead Green Energy and Biotech Research,” Taiwan Economic News (September 7, 2009); “Novartis Signs Five Year Cooperation MoU with MOEA,” Taiwan Economic News (January 11, 2008); “ITRI and Applied Materials Team Up on 3DIC Technology,” ITRI Today (4th quarter 2009).

Technology Development

ITRI’s six core laboratories do not perform basic research, but are tasked with undertaking “exploratory and pioneering” research with respect to technologies with potential commercial applications.27 Projects can run five

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currently the Director of ITRI’s Display Technology Center, held numerous R&D managerial positions at Kodak between 1982 and 2006. Kodak, which had developed technology for large area roll-to-roll (R2R) fabrication of flexible displays, gave up on commercialization and sought to sell the technology “to someone who was competent,” eventually selecting ITRI. Chen led an ITRI team to Kodak’s labs in Rochester where a Kodak delegation worked with them to facilitate the technology transfer, which included transfer of equipment. ITRI’s subsequent development of R2R manufacturing processes for flexible displays was “all based on Kodak technology” but now exceeds the highest technological levels reached by Kodak. “This was the beginning of flexible displays [in Taiwan].” Interview with Dr. John Chen, Director, ITRI Display Technology Center, Hsinchu, Taiwan, February 14, 2012.

27ITRI President Johnsee Lee, “ITRI Pushes Technology Sector to New Frontiers of Innovation,” Taiwan Journal (October 19, 2007).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

years or more.28 Their competencies are concentrated in hardware-related fields, although ITRI is working to refocus on software, systems and services.29 The core laboratories develop and test prototype products, production equipment and materials, and experiment with new applications.

  • Electronics and Optoelectronics Research Laboratories: ITRI’s Electronics and optoelectronics research laboratories focus on manufacturing technology in the fields of nano-electronics, micro-optical-mechanical electronics, optoelectronic 3D integrated circuit packaging, 3D image processing, flexible electronics, and advanced display technology. This laboratory is currently heavily involved in research involving flexible electronics.
  • Information and Communications Research Laboratory: ITRI’s Information and Communications Technologies Laboratory conducts research on core technologies for the development of IT-enabled services (ITES). This laboratory coordinates with other national projects involving system-on-chip, e-learning and telecommunications.
  • Green Energy and Environmental Research Laboratory: ITRI’s Green Energy and Environmental Research Laboratory conducts research in the areas of energy efficiency, clean environment, renewable and alternative energy, natural resources, and energy management and policy.30
  • Material, Chemical and Nanotechnology Research Laboratory: ITRI’s Material, Chemical and Nanotechnology Laboratory collaborates with Taiwanese companies to develop materials and components for application in the fields of electronics, green energy, optoelectronics, and panel display. In addition, it develops high-tech

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28Interview with John Chen, op. cit.

29“An Interview With ITRI President Shyu Jyuo-min,” Taiwan Today (December 17, 2010).

30In 2011, a research team from the laboratory won an Angel Business Communications; (ABC) Solar Industry Award, the first Asian laboratory to achieve this honor, for development of a “green energy antenna.” This device “integrates antenna transmission and solar panel power storage technology, simultaneously improving the conversion efficiency of solar energy optoelectronics and the efficiency of antenna reception and emission.” ITRI has reportedly secured international patent rights for the technology and is seeking “international cooperation partners for technology transfer.” According to estimates, application of the new technology at a 3-G base station with power consumption of 500W could product about 30 percent supplementary power mitigating peak hour power consumption and relieving the load on the power grid. Lillian Lin, “ITRI’s Green Energy Atenna Technology Wins Solar Industry Award” Central News Agency (September 7, 2011). This lab has developed carbon capture and storage (CCS) technology jointly with Taiwan Cement Corp. which reportedly cuts the cost of carbon capture from the current international level of over $45 per metric ton to under $26 per metric ton. “Taiwan Unveils Microalgal Biofuel Technology,” Central News Agency (October 2, 2010). It has also developed processes to transform microalgae into biodiesel fuel. “ITRI Wins Prominent Display Technology Award from Industry Group,” Central News Agency (May 19, 2011).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×
  • fibers and specialty chemicals intended to transform the textile and chemicals industries into high value-added sectors.31

  • Mechanical and Systems Laboratory: ITRI’s Mechanical and Systems Technologies Laboratory develops technologies to assist Taiwanese companies in the areas of precision manufacturing, green energy and intelligent automation.
  • Medical Device and Biomedical Technologies Laboratories: ITRI’s Medical Device and Biomedical Technologies laboratories are performing research to create and expand a biomedical industry in Taiwan that will develop products according to the “biomedical 3Ps (preventive, predictive, personalized).

ITRI research projects are aimed at the development of technologies that can be commercialized, and involve the creation of specific product prototypes. ITRI’s main site in Hsinchu, Taiwan displays scores of recent product prototypes that have emerged from its laboratories, including a number that have won international R&D awards. In most cases, the commercial potential of these prototypes is readily apparent.

Technology Integration

ITRI operates a number of technology integration centers. ITRI “hopes the centers will become spin-off companies.”32 The centers are more mission-oriented and dynamic than the core laboratories—new ones are frequently

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FIGURE APP-A3-3 Coordinating and integrating industrial technologies at ITRI.
SOURCE:: ITRI.

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31In 2011, this lab won the silver award of Display Component of the Year by the world’s leading display industry group, the Society for Information Display. The award was given for development of the first and only technology permitting mass production of flexible and transparent displays of all sizes. The ITRI team dedicated ten years to developing this technology. Oscar Wu and Mai Huang, “ITR Wins Prominent Display Technology Award from Industry Group,” Central News Agency (May 19, 2011).

32Interview with Dr. Yi-Jen Chan, Director, ITRI Electronics & Optoelectronics Research Laboratories, Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

formed while others spin off to become start-up ventures. Currently, ITRI technology centers are addressing topics in displays, nanotechnology, cloud computing, and measurement standards. The centers seek to establish capabilities for the integrated production of advanced technologies by fostering the creation of an entire industry supply chain.

The technology centers coordinate and integrate research and technology obtained from various ITRI core laboratories, foreign partners, and Taiwanese industry. They have discretionary funds with which they can commission R&D in the core laboratories. At present, ITRI’s Display Technology Center (DTC) is performing work on flexible displays which integrates the research efforts of five separate ITRI labs as well as technology licensed from foreign companies. DTC Director John Chen observes that “we are the program office or integrator … we have the fab here so we can concentrate on process integration strategy. We don’t work on materials, we rely on our colleagues [in ITRI’s Material, Chemical and Nanotechnology Research Lab] to develop the materials we need.”33 DTC’s main facility is a 3,124 sq.m second generation laboratory pilot line (glass substrate size 370x470mm2) which has been used to produce flexible 20-inch thin film transistor liquid crystal displays (TFT-LCDs).

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FIGURE APP-A3-4 Flexible display program integration.

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33Interview with Dr. John Chen, Director, DTC, Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

TABLE APP-A3-2 Developing ITRI Industrial Chain for Flexible Electronics

Topic Companies
Materials Chang-Chun
Equipment Shuz-Tung
Gallant Precision Machining
Panels AUO
CMO
Chi Mei Optoelectronics
System Elan Microelectronics Corp.

DTC commonly engages in contract services, joint R&D, technology transfer, cross-licensing, and evaluation and verification of customers’ flexible displays materials, equipment and systems. It is currently partnering with local Taiwanese companies to establish the foundation for a complete industrial chain for the manufacture of flexible electronics products.34

DTC Director Chen observes that the multidisciplinary approach to R&D practiced in ITRI’s technology centers is the key to the launch of new industries:

The biggest strength of ITRI is the multidisciplinary cooperation. We create a complete manufacturing supply chain in its early stages. That is the secret. Then you can scale it up, then you have a complete supply chain for the industry. So DTC does not just work with display companies, but also materials suppliers and equipment makers.35

Decades of application of this holistic approach has transformed Taiwan into a major manufacturing center for electronic information products. Barry Lam, former head of Kinpo Electronics and founder of Quanta Computer, commented about the Taiwanese IT industry chain in a 2011 oral history interview:

The supply chain is very complete in Taiwan. We have semiconductor foundries here in Taiwan. We have good design houses. We have many good assembly houses. We also have many components, such as CD-ROM drive. We gave up on the hard drive business at the time, so we didn’t catch the momentum when the industry was blooming. Assembly was done mostly in Thailand or Southeast Asia. We pretty much know how to make most components in mass production. So from components … that’s why even when we make resistors and capacitors, our price is still very cheap. For components, from PCB boards to chips, we can make it

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34ITRI Display Technology Center presentation (February 14, 2012).

35Interview with DTC Director John Chen, Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

all in Taiwan. So, we can even complete the design in Taipei. And, why? Because all the vendors are concentrated in Taipei. Taipei is not big, so it’s easy to deal with everything in Taipei and everything can be done here. This is good, isn’t it?36

Technology Diffusion

ITRI’s technology is transferred to Taiwanese industry through numerous channels. ITRI research organizations participate in a large number of topical R&D alliances designed to ensure that the participating companies follow, monitor, and in some cases participate in ITRI research projects in a manner which enhances the prospect they can successfully absorb and apply new technologies. 37 ITRI licenses technology to domestic companies, frequently on more favorable terms than could be obtained from foreign sources.38 It performs contract R&D for companies.39 Since 2005 it has auctioned off blocks of intellectual property on an exclusive basis.40 ITRI’s OpenLab is an incubator for new companies which provides facilities, utilities, business services and research support to start-up companies—in 2005 OpenLab was honored as the “best incubator in Asia” by the Asian Association of Business Incubation.41 Among other services ITRI offers pilot production opportunities to companies prior to the commercialization of products, which enables companies to use ITRI’s pilot lines for process verification, product development and semi-commercial production. The newly-formed ITRI College provides customized training programs for Taiwanese companies, as well as government officials and researchers from developing countries in

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36Interview with Barry Lam, “Taiwanese IT Pioneers: Barry (Pak-Lee) Lam,” recorded March 2, 2011 (Computer History Museum, 2011) p. 29.

37An important aspect of ITRI’s industry-coalition building is organizing member companies to specialize in specific developmental areas so they do not duplicate effort. In 2003, for example, ITRI formed a “SIP alliance” with twelve of Taiwan’s leading information technology firms pursuant to which they would share their silicon intellectual property, an initiative that arose out of the recognition that many local IC design houses were doing the same work. “From the government’s point of view, this is a waste of resources,” an MOEA spokesperson commented. “12 Top IT Firms Form SIP Alliance,” China Post (April 9, 2003).

38In 2006, ITRI’s Electronics and Optoelectronics Research Laboratories licensed indium tin oxide transparent electrode technology to nine Taiwanese producers of light-emitting diodes (LEDs) on terms that “would help the island’s LED makers pare their spending on intellectual property licenses from foreign sources.” “ITRI Lab Licenses Advanced Electrodes to LED Makers,” Taiwan Economic News (July 7, 2006).

39ITRI performs contract research for both domestic and foreign companies to develop new products, improve manufacturing processes and to comply with environmental and safety requirements. In addition, it offers professional measurement, inspection and certification services to help companies address technical obstacles in world markets.

40“ITRI Puts Up 111 Patents for Sale,” Taiwan Economic News (May 18, 2006).

41“ITRI OpenLab to be Honored as Best Incubator in Asia,” Taiwan Ajourd’hui (June 10, 2005).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

innovation competencies and six technological areas.42 Finally, former ITRI employees taking positions in Taiwanese high tech companies bring extensive know-how and in some cases, technology which they are expected by their former employer to commercialize.

Spin-offs

ITRI’s most dramatic method for technology diffusion is the spin-off of parts of itself to form new companies or to join existing companies (the latter being referred to as “spin-in”).43 ITRI spinoffs entail transfer of employees, technology and in some cases equipment to a new company, coupled with the provision of a wide range of incubation services (legal and business counseling, provision of office space and utilities at modest cost, and introductions to sources of financing and to potential customers). Since ITRI’s founding in 1973 it has formally spun off a total of 162 companies, and informally contributed to the launch of several hundred others. 44 As of early 2012, roughly two dozen spin-offs were under consideration with five in the incubation phase.

Picking Winners

ITRI’s venture capital subsidiary, the Industrial Technology Investment Corporation (ITIC) plays a key role in facilitating ITRI spin-offs.45 When ITRI laboratories seek to spin off a promising technology ITIC screens the proposal, assessing whether the technology has commercial potential, and sizing up the business prospects for the new venture and the competition it is likely to encounter. ITIC works closely with ITRI’s Commercialization and Industry Service Center (CIS) in assessing whether a given proposal has commercial

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42ITRI College does not issue degrees because its training is for the purpose of hands-on application by companies in an industrial context. Technological training is offered in IT and telecommunications, optoelectronics, electronics, biomedicine, device research, energy, the environment, materials and chemical engineering and mechanical and systems R&D.

43A recent example of a spin-in arrangement is the 2008 formation of Hi-Tech Energy Co to produce lithium batteries. Hi-Tech Energy is a joint venture between ITRI and Taiwan’s Welldone Co., a producer of batteries. The joint venture was “led by a team of ITRI specialists.” R&D at the joint venture was to be led by Yang Mo-hua, “an ITRI battery export.” “Taiwan Spearheads Lithium-Battery Module Effort,” Taipei Times (May 15, 2008).

44“ITRI Encourages Formation of Spin-in Technology Venture Firms,” Taiwan Economic News (January 31, 2012).

45ITIC was established in 1979 as a wholly-owned subsidiary of ITRI to facilitate the development of high technology industries and the upgrading of traditional industries. ITIC was established because at the time Taiwan lacked a venture capital industry. ITIC provided capital to a number of Taiwanese companies that were spun off by ITRI, including United Microelectronics Corporation (UMC), Acer Display Technologies (Now AU Optronics), and Taiwan Mask Corporation. ITIC currently provides funds to over 50 companies and operates an incubation center with 30 start-ups representing various high tech sectors. As of early 2012, ITIC had four funds supplying venture capital to start-ups. ITIC has a staff of 23 professionals, half of whom have ITRI backgrounds and half previously held positions in industry. Twelve individuals comprise ITIC’s venture capital team. Interview with Ching-Jiunn Chang, Vice President, ITIC, February 13, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

TABLE APP-A3-3 Examples of ITRI Spin-off and Spin-in Ventures

Year Company Products
1999 Taiflex Scientific Electronic materials
1997 Prolific Technology ASIC designs
2005 Neo Precision Technology Co. High-speed spindles for machine tools
2006 Amos Technologies Inc. Radio-frequency identification (RFID)
2003 Phalanx Biotech Group Gene chips
2008 Hi Tech Energy Co. Lithium battery modules
2001 Phison Electronics Corp. Flash memory
2004 DelPoint Solar cells
SOURCE: “Taiwan to Roll Out High-Speed Spindles for High End Machines Tools,” Taiwan Economic News (November 21, 2005); “Mosel Vitelec, ITRI Set Up Venture Firm to Tap into RFID Market,” Taipei Times (November 8, 2006); “Gene Chip Venture Phalanx Inaugurated,” China Post (January 24, 2003).

prospects. If the answer is affirmative, ITRI will provide funding and incubation services, and in some cases will recruit one or more outside experts with business experience to join the new venture.46

ITIC provides early stage financing to some ITRI spin-offs, usually in amounts under $US 1 million. ITIC takes an equity stake in new ventures which it normally expects to sell at some point in the future. ITIC’s decision on whether to provide financial/support to a given start-up is taken independently of ITRI and ITIC is not obligated to invest in any ITRI spin-off. As of early 2012, ITRI had 24 spin-offs under consideration, of which ITIC would typically approve funding for one third of the group and turn the others down. The success rate for ITRI spin-offs funded by ITIC is currently about 3 out of 10.

Incubation

The ITRI OpenLab Incubation Center, near Hsinchu Science Park, provides temporary support for ITRI spin-off and startup companies. The Incubation Center features nearly 140,000 square feet of leasable space which can be used for offices, research space, or product assembly. Companies in the incubator receive management advice, technical consulting services, legal help, and access to ITRI’s research facilities and pilot production lines.

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46Interview with Ching-Jiunn Chong, Vice President, ITIC, Taipei, Taiwan, February 13, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

K.S. Pua, an ITRI alumnus who with four other ITRI staffers co-founded the successful start-up Phison Electronics Corp., a maker of flash memory systems, recalled the importance of ITRI’s support in the early days of his company between 2000 and 2003.47 The new company was allotted space at ITRI’s Incubation Center, which “not only provided office space, but also facility management,” so that “we didn’t have to worry about the trash, water, power, or other sundry things.” The rent was “comparatively cheap.” ITRI loaned Phison laboratory equipment that the start-up could not have otherwise afforded. Its legal adviser assisted Phison in defending a lawsuit. The new company assembled its products “right in the office,” achieving a turnover of $36.7 million in 2002. The Incubation Center Director, C.J. Chang, advised Phison to apply for a grant from MOEA’s Small Business Innovation Research (SBIR) program and assisted the company in drawing up the application. ITRI helped Phison to recruit qualified employees, connected it with investors, and vouched for it in its pitches for funding. Phison had 12 employees when it entered the Incubation Center in August 2000 and 60 when it left in January 2003.48

A key milestone in Phison’s history was the formation of a close relationship with Toshiba, which invested in Phison, provided a source of demand for its USB flash drives and assisted the company in securing patents and fending off legal challenges.49 Initially Toshiba had no idea who or what Phison consisted of, so ITRI made a presentation to Toshiba introducing the company. On the basis of the presentation and ITRI’s established high technology bona fides, Toshiba decided to invest in the company, becoming its largest shareholder.50

THE HSINCHU TECHNOLOGY CLUSTER

ITRI’s contribution to Taiwan’s industrial development has been substantially enhanced by its physical presence in a technology cluster in the Hsinchu area. Innovation or technology clusters are concentrations of knowledge-based companies pursuing research, development and production of advanced technology products in proximity to each other. The most successful clusters draw upon nearby universities for talent and research, and benefit from

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47In 1998, Pua’s team at ITRI designed a controlled which was sold to Kodak. Interview with K.S. Pua, Hsinchu, Taiwan, February 14, 2012.

48K.S. Pua, Driven to Success: Tech Star Phison’s US $1 Billion Journey (Taipei: Common Wealth Magazine, 2012) pp. 46-49.

49Characterizing Toshiba as an “umbrella” and a “shield,” Pua states that “Toshiba was the ‘door deity’ that protected us from the outside world,” Pua (2012), Driven to Success, (2012) op. cit. p. 40. Toshiba has been investing in Taiwan since the 1950s, when it acquired a five percent equity stake in Tatung Co., which was then Taiwan’s only integrated electronics company. Toshiba licensed technology to Tantung, enabling the company to develop competencies in high-end compressors, CRT picture tubes, and LCDs. Today, Tantung is a diversified multinational corporation producing consumer electronics products.

50Interview with K.S. Pua, Phison Electronics Corp., Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

an array of supportive government policies, particularly the provision of research infrastructure. The most well-known innovation clusters in the United States are Silicon Valley, Research Triangle in North Carolina and Boston’s Route 128. Technology clusters are particularly important in “bringing the upstream, midstream and downstream aspects into one complete series of connections, which possess high speed communication exchange, technical support and other competitive advantages,” and in sectors with comparatively long industrial chains, such as semiconductors and photovoltaics, the cluster effect is particularly powerful.51

Taiwan’s Hsinchu technology cluster has evolved into one of the most productive in the world. According to a recent estimate firms located inside HSP are 66 percent more productive than firms located outside.52 In 2010, 139,416 people were employed in HSP itself.53 At the end of 2010, HSP contained operations of 449 companies which generated over $40 billion in that year. The semiconductor industry was dominant in terms of percent of total revenue.54

In addition, many small technology companies are located just outside the HSP itself and contribute to the cluster effect. At present HSP receives around 1,000 visiting missions per year seeking to understand how such a technological-industrial complex can be established and managed.55

The Hsinchu technology cluster has been extensively studied by academics and by other countries and regions seeking to replicate its success. John A. Mathews, an Australian professor of competitive dynamics, has written

TABLE APP-A3-4 Hinschu Park Revenues by Sector

Sector Percent of HSP Revenue
Semiconductors 68.44
Optoelectronics 19.08
Computers 5.99
Telecommunications 3.28
Precision machinery 2.22
Biotechnology 0.42

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51Hwa Meei Liou, “Overview of the Photovoltaic Technology Status and Perspective in Taiwan,” Renewable and Sustainable Technology Reviews (2010).

52John A. Mathews, “The Hsinchu Model: Collective Efficiency, Increasing Returns and Higher- Order Capabilities in the Hsinchu Science-Based Industry Park, Taiwan,” Keynote Address, Chinese Society for Management of Technology 20th Anniversary Conference, Hsinchu, Taiwan, December 10, 2010.

53Interview with Mao-Jiun Wang, National Tsing Hua University, Hsinchu, Taiwan, February 16, 2012).

54Presentation by HSP administration, Hsinchu, Taiwan, February 15, 2012.

55Japan International Cooperation Agency, Report on Taiwan Mission (GRIPS Development Forum, April 7, 2011).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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extensively about the Hsinchu phenomenon, concluding that “firms generate mutual advantages by clustering together,” and collectively form “powerful engines of wealth generation.” In Hsinchu, these advantages have been enhanced by the presence of ITRI and the two science-oriented universities— “companies attracted to the Hsinchu park have been able to count on the universities for supplies of skilled professional staff, while they have been stimulated by exposure to the technological innovations emanating from ITRI.”56

The basic elements of a successful cluster are sometimes referred to today as “Marshall’s trinity,” based on the pioneering nineteenth century work of the British economist Alfred Marshall in his study of the Sheffield industrial district of Britain.57 According to Marshall the trinity consists of three basic elements:

  • Supplier linkages: Cluster-based firms foster economies with respect to transportation, communications, supply chain, infrastructure and logistics.
  • Labor: Specialized activities within the cluster foster growth of a pool of skilled labor, permitting increased specialization by enterprises located in the cluster.
  • Knowledge spillovers: As Marshall expressed it, in an industrial district the “secrets of trade are in the air,” and presence in the cluster enables firms to access market intelligence, new designs and new applications.58

All of these factors are present in abundance in the Hsinchu technology cluster and are critical elements in its success.

Supplier Linkages

Hsinchu Science Park has greatly facilitated the development of Marshall’s “supplier linkages” by encouraging technology-intensive firms to locate in proximity with each other. Such arrangements reduce transportation costs with respect to materials and parts. 59

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56Mathews, Hsinchu Model (2010) op. cit. p. 10.

57Paul Krugman, a U.S. economist and winner of the Sveriges Riksbank Prize in Economic Sciences (e.g. the Nobel Prize in Economics) reiterated the importance of Marshall’s trinity in Geography and Trade (Cambridge, MA: MIT Press, 1991).

58The synopsis of Marshall’s work is drawn from Mathews, Hsinchu Model (2010) op. cit. p. 13

59Agglomeration of firms from a given sector’s supply chain in a cluster enables them to specialize, achieving increased economies of scale, higher capacity utilization with respect to the specialized machinery they employ, and improved skill sets. “If the minimum efficient scale of production varies across a range of products through different stages of the production process, manufacturers can choose an optimal combination of operations by working closely with many specialized suppliers.” Eric Y. Cho and Hideki Yamawaki, Clusters, Productivity and Exports in Taiwanese Manufacturing Industries (Presented at Gerald R. Ford School of Public Policy, University of

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

Although companies in the supply chain cooperate, they also compete—any company that falls short of expectations can quickly be replaced by another. Competition continually drives down costs and forces companies to improve yields. Reflecting these dynamics, the HSP Administration has assembled data which reportedly demonstrates that firms within the park generate an average value-added (revenues minus costs as a percent of total revenues) of 50 percent, versus 30 percent for Taiwanese manufacturing enterprises located outside of the park—or a productivity edge of 60 percent.60

HSP contains complete or nearly complete industry supply chains in a number of sectors, most notably semiconductors. The presence of materials, design, equipment, fabrication, and testing companies in the park is cited as a major locational and competitive advantage by semiconductor industry executives.61

Skilled Labor

The second element of Marshall’s trinity, pool of skilled labor, is available to companies operating in HSP thanks in substantial part to the presence of two research universities adjacent to the park.62 National Chiao

TABLE APP-A3-5 Hinschu Park Industry Supply Chain for Semiconductors

Sector Number of Companies in HSP
Wafer fabrication 17
Fabless design 129
Equipment 17
Lead frame 3
Wafers 6
Test 3
Mask 5
EDA design tools 5

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Michigan, October 16-17, 2009) pp. 6-7. Ding-Yuan Yang, founder of Winbond, explained the dynamic as follows, “Taiwanese companies may not coordinate well enough, but each company clearly defines its own focus. And [they] break down the PC industry into parts. Each company does what it does best. Some do the keyboards, some do the monitors, some do the motherboards and some do the casing. This is what I call the ability to innovate.” Interview with Ding-Yuan Yang, “Taiwanese IT Pioneers: D.Y. (Ding-Yuan) Yang, recorded February 23, 2011 (Computer History Museum, 2011).

60Mathews, Hsinchu Model (2010) op. cit., p. 16.

61Presentation by HSP administration, Hsinchu, Taiwan, February 15, 2012.

62In 2010, 130,000 people were employed in HSP. Of these, 65 percent had junior college or higher degrees (compared with 18 percent in Taiwan’s manufacturing sector as a whole). 17,000 HSP employees held master’s degrees and 1,200 had doctorate degrees. “Hsinchu Science Park, a Bastion for Growth, Innovation and Cluster-Based Industries,” China Post (December 15, 2010).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Tung University (NCTU) was established in Hsinchu in 1958 and adjoins Hsinchu Science Park. NCTU supplied much of ITRI’s original R&D staff as well as much of the engineering talent for HSP when the park was created.63 NCTU was the first university in Taiwan to operate a semiconductor research laboratory, and one of its professors, Simon Sze, is the author of The Physics of Semiconductor Devices, otherwise known globally as “the semiconductor Bible.”64 At present 65 percent of the CEOs, Presidents and General Managers of companies located in HSP are NCTU graduates.65 It compares its relationship with HSP to that of Stanford with Silicon Valley.66 The University has colleges of engineering, biological science, computer science, photonics, and electrical and computer engineering, and research centers specializing in nanotechnology, photonics, bioinformatics, biomedical electronics, intelligent information/communication, brain research and interdisciplinary science.67 Its students commonly work as interns in HSP and join companies in the park upon graduation. Many top ITRI managers also serve as NCTU faculty members.

National Tsing Hua University (NTHU), adjacent to NCTU, has produced two Nobel laureates in physics and one in chemistry. NTHU is regarded by some as the premier research university in Taiwan, holding the highest citation rate for papers published by faculty in either Taiwan or China. Nearly 50 percent of the university’s research budget is attributable to grants won by NTHU faculty.68 NTHU includes colleges of life sciences, electrical engineering and computer science, technology management, engineering, and nuclear science. Researchers at NTHU have reported recent breakthroughs in nanotechnology and semiconductors.69

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63John A. Mathews and Mei-Chin Hu, “Enhancing the Role of Universities in Building National Innovative Capacity in Asia: The Case of Taiwan,” World Development (Vol. 35 No. 6, 2007), p. 1012.

64Pao-Long Chang, Chintay Shih and Chiung-Wen Hsu, “The Formation Process of Taiwan’s IC Industry—Method of Technology Transfer,” Technovation 14(3) (1994) p. 163.

65NCTU alumni who have played a prominent role in Taiwan’s high technology industrial development include Dr. Stan Shih, founder of Acer Group; Dr. Robert Tsao, founder and former chairman of United Microelectronics Corporation; Dr. Ken Kao, founder of WiFi leader D-Line Corporation; and Dr. F.C. Tseng, Vice Chairman of Taiwan Semiconductor Manufacturing Corporation. Source: NCTU presentation, February 16, 2012, Hsinchu, Taiwan.

66Interview with Ming-Jan Yao, Professor and Associate Dean, School of Management, National Chiao Tung University, Hsinchu, Taiwan, February 16, 2012.

67NCTU is the site of a number of national laboratories, including the National Chip Implementation Center, The National Nano Device Laboratories, the National Measurement Laboratory, the National Space Organization, the National Center for High Performance Computing, and the National Synchrotron Radiation Research Center.

68Mathews and Hu, “Enhancing the Role of Universities” (2007) op. cit. p. 1013.

69“Taiwanese Researchers Make Nanotechnology Breakthrough,” Central News Agency (August 18, 2011). The Hsinchu technology cluster is also supported by Taipei-based National Taiwan University (NTU), Taiwan’s leading university for teaching and research, which is about one hour’s drive from Hsinchu. In 2011, NTU established a research center jointly with Intel on machine-to-machine (M2M) communication, a cutting-edge field which aims to integrate billions of machines to exchange information and make correct decisions independently. The Intel-NTU Connected Catext Computing Center, the project vehicle, will study smart sensing, “green sensing” and context

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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ITRI itself is a magnet drawing experienced and talented overseas Taiwanese back to the Hsinchu technology cluster. 70

Alumni networks from the two science universities and NTU have played a central role in the development of the semiconductor and PC industries in the Hsinchu technology cluster. 71

The work discipline, efficiency, adaptability and élan of Taiwan’s high technology workforce are frequently cited by the founders’ generation of the country’s information technologies industries as a key element in the country’s success.72

Knowledge Spillovers

The third element in Marshall’s trinity, “knowledge spillovers,” occur in HSP in part due simply to the proximity of research institutions and companies to each other, but the presence of ITRI and the universities amplifies

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analysis. NTU researchers are collaborating with ITRI in a number of key technology areas, including biomedicine, systems-on-a-chip, and wireless communications. Interview with Dr. Si-Chen Lee, President, NTU; Dr. Ching-Hua Lo, Vice President for Administrative Affairs, NTU; and Dr. Ji-Wang Chern, Dean for Research and Development, Taipei, Taiwan, February 17, 2012.

70Ding-Yuan Yang, who served as head of planning and marketing for ITRI, observed in a 2011 oral history interview that “In the past 10 to 20 years, many friends or classmates from abroad came back to Taiwan because of fast development in Taiwan. We suggested that some come back to ITRI first for a few years and then to go into industry. The projects that ITRI supported provided a beacon, or a rallying cry; it was if they raised a flag for people to rally to. So many people kept coming back to Taiwan. For they had a specific target to go for, when they come back from overseas, lot of people who studies abroad come back to Taiwan for the same reason.” Interview with Ding-Yuan Yang, “Taiwanese IT Pioneers: D.Y. (Ding-Yum) Yang,” recorded February 23, 2011 (Computer History Museum, 2011) p. 28.

71A TSMC executive has observed that “engineers in the Hsinchu Science Park not only work very hard, but they share the same backgrounds. Most of them graduated from the same university, took the same classes, were taught by the same professors, and had similar work experience at ITRI.” Anna Lee Saxenian, “Taiwan’s Hsinchu Region: Imitator and Partner for Silicon Valley” (Stanford Institute for Economic Policy Research Discussion Paper No. 00-44, June 16, 2001) p. 27. Saxenian, Dean of the University of California at Berkeley’s School of Information, who has extensively studied HSP, observes that “it would not be unusual for a Taiwanese engineer to call a former classmate in the middle of the night to get help solving a technical problem, and many started companies with their classmates. Acer managers are far more likely to contact former teachers, classmates or colleagues when they encounter a business problem … than turn to a private consulting firm or institution.” Ibid.

72Barry Lam, informally known as the “laptop king, served as president of Kinpo Electronics, which he built into the world’s largest contract calculator maker, and later founded Quanta Computer, a maker of notebooks. Lam later recalled that National Taiwan University’s electrical engineering program provided a stream of “good engineers from my school [Lam was an NTU alumni] who were eager to learn new skills. We had low employee turnover and we had a lot of talented engineers, who were focused and honest. So the team spirit was very high. This was the fundamental competitive edge of Taiwan, the foundation was strong. How should I put it? Employees are extremely loyal to companies they work for, due to the profound Confucian influence on Taiwanese people. We had tremendous motivation. We could accomplish anything we set our hearts on.” Interview with Barry Lam, “Taiwanese IT Pioneers: Barry (Pak-Lee) Lam,” recorded March 2, 2011 (Computer History Museum). p. 9.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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spillover effects. ITRI scans the entire world for promising new technologies and devotes substantial resources and effort to spreading information about them to local companies and educational institutions. Its numerous R&D alliances are structured to draw upon knowledge gleaned from international markets and research efforts and to deliver that knowledge to domestic firms. Knowledge spillovers from ITRI also occur as its employees take positions in Taiwanese companies—between its founding in 1973 and 2008, an estimated 13,000 ITRI staff moved into industry, many of them remaining with the Hsinchu cluster.73 Research spillovers from the universities were given a powerful boost by the enactment in 1999 of legislation patterned on the U.S. Bayh-Dole Act of 1980, which allows universities to own intellectual property developed out of government-funded R&D. 74

Fostering New Clusters

Demand for sites in HSP long ago exceeded the Park’s capacity, and Taiwan has opened Southern Taiwan Science Park (1996) and Central Taiwan Science Park (2003). HSP has opened science parks in five satellite locations.75

Taiwan’s Statute for Industrial Innovation, enacted in 2010, emphasizes the formation and upgrading of knowledge-based industrial parks “to facilitate

TABLE APP-A3-6 New Clusters and Their Focus Areas

Park Industries
Jhunan Science Park Tongluo Science Park Biotechnology, optoelectronics
IC design, SiP, digital life, avionics,
biomedical
Longlan Science Park Optoelectronics
Hsinchu Biomedical Science Park Biomedical
Yilan Science Park Knowledge-based series

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73Mark Dodgson, John Mathews, Tim Kastelle and Mei-Chih Hu, “The Evoloving Nature of Taiwan’s National Innovation System: The Case of Biotechnology Networks,” Research Policy 37 (2008) p. 435. Anna Lee Saxenian observed in her 2001 study of Hsinchu and Silicon Valley that “In the Hsinchu region, as in Silicon Valley, engineers move frequently between firms and between sectors; and there is a community of senior engineers who move not only between firms, but also between the public and private sector, between universities and the private sector, between the manufacturing sector and the venture capital industry, and between Taiwan and Silicon Valley. They meet regularly at alumni gatherings and class reunions, professional association meetings, industry conferences and trade shows, and a variety of related special events … The intense communications within this community fosters imitation, joint problem solving and transfer of information and know-how about management, technology, the job markets, and new firms and products.” Saxenian, “Taiwan’s Hsinchu Region” (2001) op. cit., pp. 26-27.

74The Science and Technology Basic Law and ancillary implementing regulations provide that IPR developed whole or in part with government funds belongs to the research organization. The new rules have made it possible for academic researchers to reap substantial rewards through commercialization of research results. Mathews and Hu, “Enhancing the Role of Universities” (2007) op. cit. pp. 1008-12

75Hsinchu Science Park Annual Report (2010) pp. 12-13

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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clustering and innovation.” The government is encouraging the formation of parks dedicated entirely to specific themes, such as biomedicine, logistics, and media. The new law authorizes local governments to establish industrial parks without central government approval. The minister of Economic Affairs indicates that such policies are being implemented to foster “an overall economic environment that is conducive to innovation, the creation of value, and the free flow and application of knowledge.”76

CHALLENGES

Taiwan appears to the outside world as an extraordinarily successful high technology powerhouse. However, its leaders recognize that vulnerabilities exist which could substantially erode the gains which the country has made since the 1970s. The overwhelming majority of Taiwan’s businesses are small enterprises which lack the resources and scale for global competition. The country is arguably not well prepared for an era of global patent warfare, in which infringement litigation can suppress or destroy technology-based start-up companies. A longstanding talent shortage has been exacerbated by an exodus of skilled workers to mainland China. And the American connection, long an important aspect of Taiwan’s high tech development, may fade as the number of Taiwanese students pursuing advanced degrees in the U.S. progressively declines.

ITRI Funding

ITRI’s budget has not grown for a decade. Its leadership has put a good face on the situation by stating that lean budgets force the institute to rely on other research organizations, which is a key element of its mission. But ITRI is not growing apace with Taiwanese industries that it is tasked with supporting, and the detrimental effects of its limited budgets are evident in a number of areas.

Some observers believe that ITRI is trying to focus on too many technologies with two small a budget, diluting the impact of its efforts. Its low compensation levels for staff have contributed to a manpower shortage (see below). ITRI reportedly would like to attract more foreign expertise to Taiwan but the available funding is inadequate to create attractive compensation packages. Underfunding may explain what observers characterize as the “underpatenting” of ITRI’s technologies, which exposes licensees to litigation.

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76“Statute for Industrial Innovation Changes Thinking on Upgrading Industries,” Council for Economic Planning and Development website,
<http://www.cepd.gov.tow/encontent/m1.aspx?No+0014260>.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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The Talent Shortage

Notwithstanding the fact that Taiwan enjoys an excellent science and engineering educational infrastructure, the country has long faced the prospect that it will not have enough skilled people to staff its laboratories, research centers, and high tech manufacturing businesses. Additional talent is available in Southeast Asia and mainland China, but Taiwanese investment in these regions has resulted in a major outflow of engineers and skilled managers from Taiwan itself to other parts of Asia, particularly China, where a substantial part of Taiwan’s high tech production based is now located.77 Although nearby Korea and Japan have large pools of skilled labor, attracting talent from these countries has proven difficult.

An executive at AU Optronics, a major producer of flat panel displays, said in a 2005 interview that his industry needed about 5,500 additional skilled workers per year, but that available talent equaled only about 70 percent of that total. Top universities like National Taiwan University, National Tsing Hua University and National Chiao Tung University between them were turning out 3-4,000 graduates per year and “cannot meet market demand.”78 A 2005 ITRI study found that the country’s semiconductor industry would need 37,500 new skilled workers over the next three years but that the island’s educational system could supply only 21,800 during that time frame.79

ITRI itself has been affected by the talent drain. Companies based in China and Singapore reportedly are prepared to pay five times ITRI levels to lure its researchers, one factor underlying ITRI’s annual average manpower turnover of 10 percent.80 In April 2011, ITRI Chairman Tsai Ching-yen warned that ITRI had been hurt by a “talent drain” crisis. He said that 38 ITRI-type organizations had been established in China in recent years and that “all these mainland institutions have set their sights on luring our researchers and engineers away.” He noted that a 68-year old retired ITRI department chief

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77“Taiwan’s Wafer Fabs Need More Manpower,” Central News Agency (March 26, 2011); “Industries Facing Shortage of Skilled Workers, Poll Finds,” Taipei Times (April 8, 2005); “Taiwan Legislator Warns of High-Tech Exodus,” South China Morning Post (July 5, 2000); “Taipei’s Talent Exodus,” Time Asia (May 21, 2000); “High-Tech Talent Flows to China,” Taipei Times (March 25, 2002). In the fall of 2010 Taiwan’s President Ma Ying-jeou reportedly ordered a study by the country’s National Security Council (NSC) of the talent shortage. The study found that roughly 700,000 Taiwanese citizens resided in the Shanghai area of China alone. National Taiwan University Professor Chen Tain-jy, who participated in the NSC study, commented that “Taiwan is gradually losing its trained professionals … Singapore is using high pay to recruit Taiwan’s medical and health care personnel, Hong Kong is luring away Taiwan’s medical and health care personnel, and South Korea is targeting Taiwan’s technical talent … How to keep talented and experienced people at home has become a serious issue that Taiwan cannot afford to ignore.” “Taiwan Faces Serious Brain Drain Crisis,” Central New Agency (April 18, 2011).

78“Industry Facing Shortage of Skilled Workers,” Taipei Times (April 8, 2005).

79“Talent Shortage Escalates in Taiwan’s High-Tech Industries.” Taiwan Economic News (April 11, 2005).

80“Talk of the Day—Anti-Fat Cat Clause Hinders Manpower Recruitment,” Central News Agency (September 12, 2011).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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“was recently hired by China with a lucrative compensation package that included the promise of a villa in two years. The new Chinese employer “mainly hopes the former ITRI official can use his connections in Taiwan’s high tech industry to help recruit more Taiwanese talent to work in China.”81

Enterprise Scale

Taiwan’s economy is dominated by small businesses, which account for over 97 percent of the country’s enterprises and employ over 77 percent of the work force.82 These companies typically have a small capital base and only a few employees, and have proven particularly vulnerable to the global economic downturn which began in 2008.83 While many small and medium enterprises are innovative, they frequently lack the resources and skills needed to bring new products to the global market, to build brand recognition, and to respond to legal and regulatory challenges outside of Taiwan. One of the most important considerations underlying the creation of ITRI was the recognition by the government that Taiwan’s small companies could not afford the equipment, training and other costs associated with advanced R&D.84 While ITRI has partially offset this intrinsic disadvantage, turning ITRI research “into a successful product by SMEs has been a struggle.”85 Even small Taiwanese startups that have achieved technological breakthroughs have proven vulnerable to competitive challenges from large multinationals because they “lack critical mass.”86

The government of Taiwan commonly seeks to offset the fact that most companies are too small to undertake expensive research by forming them into

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81“Taiwan Faces Serious Brain Drain,” Central News Agency (April 18, 2011). ITRI faced a manpower crisis beginning in March 2011 when Taiwan’s Executive Yuan released an “anti-fat cat” decree to the effect that the monthly salary of high-caliber researchers at ITRI should not exceed the level earned by deputy-ministerial level officials, or about $5,500. The new rule was hampering recruiting efforts. ITRI researchers reportedly earn about half what they would be paid for comparable work in the United States. ITRI Chairman Tsai Ching-yen commented that “such rigid restrictions will only become more difficult for us to retain our researchers in some cutting edge fields.” “Talk of the Day—Anti-Fat Cat Clause Hinders Manpower Recruitment,” Central News Agency (September 12, 2011).

82“SME Competitiveness Seen Growing With High Management Efficiency,” Central News Agency (October 3, 2008).

83“Taiwan’s Suffering SMEs Cry for Help,” Taiwan Economic News (December 3, 2008).

84Tommy Shih, “Scrutinizing on Economic Development Model—The Taiwanese Semiconductor Industry Revisited,” Industrial Marketing and Purchasing Group (IMP Group) (2009), p. 10.

85Interview with Taiwanese semiconductor executive, Hsinchu, Taiwan, February 14, 2012.

86Interview with Taiwanese semiconductor executive, Hsinchu, Taiwan, February 14, 2012. In 1984, Dr. Bo-bo Wang, established Microtek, a Taiwanese enterprise which developed the first computer-affiliated scanner in the world. Roughly 20 similar Taiwanese companies entered the field, and for a time Taiwan was the world’s leading producer of scanners. However, when major image-processing firms entered the field (Cannon, HP), Taiwanese scanner firms were driven from the market. T-J. Chen, “The Emergence of Hsinchu Science Park as an IT Cluster,” in S. Yusuf, K. Nabeshihua and S. Yamashita (eds.), Growing Industrial Clusters in Asia: Serendipity and Science (Washington, D.C., The World Bank, 2008) p. 70

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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technology alliances. ITRI bases the alliances on its laboratories, which it uses to teach small firms to catch up with leading edge technologies sufficiently to enable them to perform contract work for the industrial chains of larger Taiwanese and foreign high tech enterprises. As a result, larger Taiwanese firms like Tantung, Acer and Mitac can “rely on hundreds of loosely affiliated domestic suppliers to which they can pass on an endless variety of low-margin, yet quite demanding manufacturing and design tasks.”87 ITRI commonly encourages SMEs in such alliances to divide up research tasks, to specialize and to avoid duplication of effort.88 Organizing successful technology alliances is challenging and a number of them have failed due to divisions among the participating companies.89

The government has also established a panoply of programs to support SMEs. Beginning in 1996, MOEA’s Small and Medium Enterprise Administration has utilized an SME Development Fund to promote the establishment of small business incubators in Taiwan.90 An SME Credit Guarantee Fund guarantees 70-90 percent of commercial bank loans to SME’s for purchase of machinery, plant construction, and modernization of equipment.91 In 2011, Taiwan’s Financial Supervisory Regulatory Commission set a target for domestic banks to offer domestic SMEs a total of $7.33 billion in

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87Dieter Ernst, “What Permits David to Defeat Goliath? The Taiwanese Model in the Computer Industry,” (Alborg University, International Business Economics Research Paper Series, 1997) p. 9.

88“We bring them together in a formal alliance, even though they are competitors. So we find a way to divide the work. Company A makes equipment A. B makes B. Each company must see a role for itself. It’s a huge task, but doable.” Interview with Dr. John Chen, Director, ITRI Display Technology Center, Hsinchu, Taiwan, February 14, 2012. In 2011, a group which included ITRI and 19 other organizations formed a wide bandgap electronic devices industry alliance, which would address the manufacture of silicon carbide (SiC) and gallium nitride (GaN) compound semiconductors for end uses such as LEDs and electric cars. Alliance members were “divided into groups to develop substrate materials, epitaxy wafers, devices, modules and inspection technologies according to their professions. They [planned] to complete packaging and test verification on 600-volt devices by the end of the year.” “Wide Bandgap Alliance Formed in Taiwan,” Taiwan Economic News (March 9, 2011). Jonney Shih, Chairman of ASUSTEK, a maker of computer hardware, observed in a 2011 interview that the standardization of the personal computer industry constituted a “good opportunity” for Taiwan because it permitted the rationalization of small businesses into aligned groups of specialty companies. “Because of the standardization, you can divide [the products into sections]. You can do just the motherboard. You can do the power supply. You can do the graphics card. I think that gave the Taiwan industry a very good opportunity.” Interview with Jonney Shih, “Taiwanese IT Pioneers: Jonney (Chang-tang) Shih,” recorded February 15, 2011 (Computer History Museum, 2011) p. 16.

89In 1993, ITRI promoted formation of a technology alliance to develop thin film transistor-liquid crystal display (TFT-LCD) technology. The alliance sought to raise $500 million to build a TFT-LCD production facility. However, the members disagreed over which technology to use, and the alliance was disbanded. Greg Linden, Jeffrey Hurt and Stefanie Lenway, “Advanced Displays in Taiwan and Korea” (Working Paper 109, BRIE, December 1997).

90Chia-Chi Sun, Grace T.R. Lin, and Gwo-Hsiung Tzeng, “The Evaluation of Cluster Policy by Fuzzy MCDM; Empirical Evidence from Hsinchu Science Park,” Expert Systems with Applications (2009), p. 11903.

91“SME Credit Guarantee Fund Raises Ceiling on Guarantee,” Taiwan Economic News (November 7, 2008). This program reportedly benefits 150,000 SMEs per year.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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2012; banks with “good lending performance” would be rewarded “by prioritizing approval of their applications to set up branches in China or overseas.”92 SMEs also can qualify for management and technical consulting support.

The Small Business Innovation Research Program (SBIR) was established by MOEA in 1999 to provide matching fund support to local start-up companies pursuing innovative technological research with respect to improving existing technologies or developing radical new ideas. The program is funded at a level of about $30 million. The funds can be used to perform research and to collaborate with research organizations like ITRI in joint research projects. The SBIR organization is comprised of a working group which picks promising research proposals to be reviewed by an examination committee consisting mainly of university professors. Individual SBIR grants can be up to amounts of $340,000.93 Taiwan’s SBIR program has come under considerable domestic criticism for being overly bureaucratic.94

Intellectual Property Protection

A major challenge confronting Taiwan’s high tech industries is the increasingly widespread phenomena of patent litigation used as a business strategy to block new industry entrants.95 The Economist reporting on an infringement action by Apple against HTC, a Taiwanese maker of smartphones, commented in December 2011 that—

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92“SME Loans to Taiwan Hist 5 Year High of NT $4.05 Trillion as of October 2011,” Taiwan Economic News (December 29, 2011).

93Christina Chen, et. al., Excellent Government on a Far-East Silicon Island (December 20009) p. 21.

94Paul Kuo, founder of a software startup, tried to apply for SBIR support but “the massive amount of paperwork was overwhelming” for his small and understaffed firm. Even Chung, CEO of Xinosys Co., a winner of the 2011 Asia Red Herring Award honoring innovative high tech companies, was an applicant to the SBIR program but said that the “panel of judges seemed out of touch with reality.” Jamie C. Lin, co-founder of appWorks Ventures, a company fostering Internet startups noted in a discussion of SBIR that “start-up companies need to consistently change direction, to adjust to the needs of their users. The government’s set-a-goal-then-execute-it style of funding programs contradicts the logic of entrepreneurship. The result is a startup that successfully executes a bad plan.” A government spokesperson responded to this criticism that “the SBIR program’s rigorous evaluation process ensures taxpayer’s money is well spent.” “Taiwan—A Growing Market for Startup Companies,” Central News Agency (November 27, 2011).

95Roger Borovoy, a lawyer with Fish & Richardson, P.C., a major U.S. patent litigation firm commented in a presentation at ITRI College in 2006 that intellectual property “can not only be sued as a defensive tool but also an offensive tool by businesses barring competitors from using similar patents.” “Taiwan’s Patent Commercialization Rate Far Below Global Average,” Taiwan Economic News (August 2, 2006). Morris Chang, CEO of TSMC, observed in 2008 that the light-emitting diode (LED) industry was “an industry rife with pitfalls and the biggest one involves patents,” a reason his company was unlikely to invest in the sector. “Epistar, Formosa, Epitaxy Settle Patent Dispute out of Court,” Taiwan Economic News (August 8, 2008).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Apple’s victory is only the latest episode in a fierce war in which just about everyone you can think of seems to be suing everyone else for patent infringement … “This really is the first global patent war,” says Joshua Walker, chairman of Lex Machina, which compiles and analyzes data on intellectual property litigation.96

The plaintiffs are typically “big players in their fields” who can afford the legal fees associated with securing patents and patent litigation whereas the defendant companies are often small Taiwanese companies lacking comparable resources.97 Morris Chang, the founder of TSMC, recalled in a 2007 interview that the decision to establish a company devoted purely to manufacturing itself was driven in part by the recognition that Taiwan had “no strength in IP” and that manufacturing was “the part that was least vulnerable to IP attacks from other companies. Most IP disputes were about circuit designs.”98

The increasing complexity of the technologies being commercialized by Taiwanese companies is amplifying their exposure to patent claims. Handheld devices are now comprised of huge bundles of software and hardware— according to one recent estimate there are now 250,000 patents relevant to a single smartphone.99 Payment of royalties pursuant to licensing agreements is an alternative to litigation, but also entails increased costs. As of 2008, Taiwanese companies were paying over $2.3 billion annually in royalties to foreign patent owners.100

Dr. Da Hsuan Feng, Senior Vice President of National Tsing Hua University observes that “one of the weak points of the entire Taiwan island is a shortage of IP legal competency.” He indicates that a need exists for the universities and ITRI to combine and integrate their IP and to market it as a whole—“you can’t commercialize with one patent.” 101 A number of professors from NCTU and NTHU make the point that Taiwan’s patent pools, to the extent they exist, are insufficiently broad and should be comprised of larger numbers of patents.

The best defense for a company against patent lawsuits is ownership of comparable patents, preferably bundled into packages of multiple patents

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96“World Patent War 1.0,” The Economist (December 19, 2011).

97ITRI notes on its website that “Taiwan businesses have been confronting international conglomerates tens or hundreds of times their size in patent disputes that are entangled in an endless cycle of business competition, patent infringement litigation, settlement negotiations, and cross-licensing.” ITRI, “Pioneer for Taiwan’s Brokered Patent Transactions—ITRI,”
<http://www.itri.org.tw/eng/econtent/references/references02_05.asp>.

98SEMI Oral History Interview, Morris Chang (August 24, 2007, Taipei, Taiwan).

99“Estimate by RPX, San Francisco-based patent aggregator and licensor, in “Mobile Phone Makers Wage Was to Protect Their Patents,” BBC News (October 23, 2011).

100“Alliance Formed to Help ICT Firms with Patent Issues,” Taiwan Economic News (August 19, 2009).

101Interview with Dr. Hsuan Feng, National Tsing Hua University, Hsinchu, Taiwan, February 16, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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covering all aspects of a new technology. In 2005, ITRI adopted a practice long under way in the United States and Europe of auctioning off bundles of patents on an exclusive license basis. 102

ITRI organizes Taiwanese industries, often comprised of small and medium enterprises, into “alliances” to exert collective strength “in talks with international players over patent licensing,” securing better terms and lower royalty rates.103 ITRI defends its own patents in periodic litigation and is forming an infrastructure to support Taiwanese companies’ efforts to manage and defend their intellectual property. 104 In 2011, ITRI announced that it would form an IP management company, “IP Bank,” to provide assistance to Taiwanese firms engaged in legal battles over intellectual property.105 A U.S. patent expert familiar with the IP Bank plan commented that the organization’s primary role would be “defensive” in character, identifying and preventing litigation and averting it by helping companies acquire patent portfolios that protect them from lawsuits.106

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102ITRI has a large portfolio of intellectual property—as of early 2012 it held 14,571 patents. In 2009 alone, it was awarded 397 U.S. patents, the largest number for any research organization in the world. Jackson Chang and X.L. Kao, “ITRI Ranked as Leading Patent Recipient Among Research Institutes,” Central News Agency (February 12, 2010).

103In 2008, ITRI organized Taiwanese manufacturers of compact discs, DVD players and chips into the “Blu-ray DVD alliance,” which represented the companies in negotiations with foreign firms over licensing and collaboration deals. “Taiwan Organizes Blue Ray Alliance to Strengthen License Bargaining Chip,” Taiwan Economic News (March 25, 2008). In 2009, ITRI and the Taipei Computer Association announced the formation of an “information industry mutual-benefit patent alliance” to create “a large depot of patents for domestic information and communication technology, to help companies to plan patent strategies and to secure the “assistance of experts in patent-infringement law.” “Alliance Formed to Help ICT Firms With Patent Issues,” Taiwan Economic News (August 19, 2009).

104In 2010, ITRI filed four patent infringement actions in a U.S. District Court in Texas against Korea’s LG Electronics Inc., alleging infringement of 22 ITRI patents on mobile phones, LCD televisions, Blu-ray disc players and air conditioners. “Taiwan’s ITRI Takes LG to Court Claiming Patent Infringement,” Taipei Times Online (December 2, 2010).

105“Seeking Government Aid is Futile,” Taipei Times Online (September 5, 2011); Jeffrey Wu, “Good Idea to St Up IP Bank in Taiwan: Expert,” Central News Agency (September 4, 2011).

106“Good Idea to Set Up IP Bank in Taiwan: Expert,” Central New Agency (September 4, 2011). ITRI officials said that the new entity would seek to strengthen local high-tech businesses’ defenses against litigation by obtaining international patent rights, filing annulment suits against competitors’ patents, and shifting the battleground from the United States to China. ITRI officials note that about 30 percent of patents challenged in patent infringement suits in the United States were found to be invalid, and that it could be less expensive to file annulment suits than to buy patents. With respect to shifting the battleground to China, they commented that legal action had become a business strategy “used by corporate giants to expand market share and stifle the advances of competitors.” Taiwanese companies have heavily invested in China and patents in that country cost about one-tenth the cost in the United States. “Patents obtained by Taiwanese businesses in China would then make it possible to block the sale of competitors’ products that violate those patents helping improve the market share of the Taiwanese companies in China and reinforce their global status.” “Taiwan Drafts Strategy for IT Patent War,” Central New Agency (August 28, 2011).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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SECTORAL CASE STUDIES

The government of Taiwan has promoted industrial development since 1953 through multi-year development plans targeting what were viewed as strategic sectors. The Third Four Year Plan (1961-64) called for the development of heavy industry, chemicals and electronics sectors, and major industrial growth subsequently occurred in steel, electronics, petrochemicals and shipbuilding.107 The onset of the 1973-74 oil crisis and high inflation brought economic growth nearly to a halt, and led the government to seek an industrial strategy placing more emphasis on non-energy intensive, high technology industries. Arguably, the formation of ITRI in 1973 as part of this broader effort represents the key event in Taiwan’s modern industrial history.108 ITRI’s first major sectoral development effort, in semiconductors, established the foundation for promotion of related sectors in which the country’s growing competency in microelectronics could be leveraged, including displays, lighting, computers, telecommunications and photovoltaics. 109,110

Semiconductors

In the early 1970s the island’s microelectronics sector consisted solely of offshore assembly and test operations of foreign manufacturers and one small local firm making bipolar transistors. ITRI founder Y.S. Sun worked with a network of Taiwanese and Chinese-American engineers to formulate a developmental strategy for semiconductors. Sun created ITRI in 1973 as an arm of MOEA charged with conducting applied industrial research and providing technical support to domestic companies. Within ITRI an organization was set up in 1974 to develop semiconductor technology, the Electronics Research and Service Organization (ERSO).

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107The institutional framework for Taiwan’s economic development has been established through a succession of industrial policy statutes providing for incentives to designated sectors. The first of these, the Statute for the Encouragement of Investment (1960-1990) authorized tax, fiscal and duty drawback incentives for categories of industries that were specified by the Executive Yuan (cabinet) through periodic decrees. This measure has been superseded by the Statute for Upgrading Industries (1991-2010) and the current Statute for Industrial Innovation. The latest promotional statute is distinguishable from its predecessors in its emphasis or innovation, its goal of shifting Taiwan from hardware manufacturing toward “soft power” (biotechnology, industrial services and high value-added services), and the promotion of national brands.

108See generally, Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton and Oxford: Princeton University Press, 1990) pp. 75-112.

109Chun-yen Chang, who founded Taiwan’s first semiconductor research center at National Chiao Tung University, observed in a 2011 interview that “[Y]ou can see that all the Taiwan high tech industry was originally from … the success of semiconductor industries in Taiwan. We spun off [from the semiconductors] to LCD displays and then to the computer business.” Interview with Chun-yen Chang, “Taiwanese IT Pioneers: Chun-yen Chang,” recorded February 16, 2011 (Computer History Museum, 2011) p. 18.

110“I’m Willing to Start from Scratch,” Commonwealth (June 18, 2009).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Technology from the United States

ITRI charged ERSO with developing complementary metal oxide semiconductor (CMOS) technology, which it saw as key to the production of components for application in consumer electronic products. Controversial at the time, the choice of CMOS technology as opposed to then-prevalent NMOS method proved to be an important strategic move because CMOS’ lower cost and power consumption made it attractive for use in personal computers, workstations, and other product sectors which would grow rapidly in the 1980s.111

ITRI established a partnership with RCA of the United States in 1975. RCA’s semiconductor manufacturing technology was obsolete, but RCA agreed to supply Taiwan with complete production technology, including complementary metal oxide semiconductor (CMOS) process design, product specification and testing technology, and manufacturing management and cost accounting know-how as well as a 6-12 month training program for ITRI engineers. The fact that RCA’s technology was outdated had advantages as well as drawbacks—most importantly, the mature process technology was already thoroughly tested and proven.112 RCA supplied CMOS technology and trained a group of 37 Taiwanese students in the fundamentals of semiconductor manufacturing, the “RCA 37.” “In certain respects the training of related ITRI staff at RCA was the decisive moment in the [Taiwanese] semiconductor industry’s history.”113 Out of the RCA 37, “virtually the entire senior echelons of the subsequent semiconductor industry in Taiwan [were] formed.”114

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111CMOS is a form of semiconductor technology that performs electronic functions more slowly than several alternatives, but involves lower power consumption and waste heat production and lower fabrication costs. At the time Taiwan obtained the technology CMOS devices accounted for about 10 percent of the semiconductor market. By the end of that decade, according to one estimate, CMOS devices accounted for roughly half of the semiconductor market. Korea, which had initially pursued an alternative technology in promoting its semiconductor industry, later converted to CMOS. Chiang, “Management of Technology Programs” (1990) op. cit. p. 11. Ding-Yuan Yang, who established ERSO, commented later “Thank the Heavens for having blessed Taiwan that seized the chance to develop the technology of CMOS technology from such an early stage.” Interview with Ding-Yuan Yang, “Taiwanese IT Pioneers: D.Y. (Ding-Yuan) Yang,” recorded February 23, 2011 (Computer History Museum, 2011) p. 7.

112Shih, “Taiwanese Semiconductor Industry Revisited” (2009) op. cit. p.13. RCA supplied 7.0 micron complementary metal oxide (CMOS) technology and the product specifications and design and testing technology, as well as assistance in constructing a pilot integrated circuit manufacturing plant and suggestions for equipment specifications. Chang, Shih and Hsu, Technovation (1994) op. cit. p. 165.

113Interview with K.S. Pua, Phison Electronics Corp., Hsinchu, Taiwan, February 14, 2012. Morris Chang, the founder of TSMC, pointed out in 2007 that although the RCA deal was important, at the time Taiwan acquired RCA semiconductor technology. “RCA was not a first tier semiconductor company,” and that Taiwan subsequently fell further behind industry leaders like Intel and Texas Instruments, who “Set the pace, and ITRI couldn’t keep up the pace,” because it lacked a real commercial base and volume sales. SEMI Oral History Interview Morris Chang (August 24, 2007).

114Mathews, “Hsinchu Model” (2010) op. cit. p. 18.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Ding-Yuan Yang was one of the founders of ERSO and led the original team of trainees to RCA. Wang had studied physics and chemistry at Princeton University, where he was struck by the nature of the education process. He recalled later that—

Princeton attached importance to experiments. I’ve talked about this experience many times. I took 50 hours non-credit in a machine shop making things. Some of my classmates who majored in chemistry were required to learn glassblowing. This is when I knew that when you get to do truly advanced and sophisticated research, you have to be able to design and make all the equipment yourself, instead of purchasing existing equipment, machines and tools.115

The ITRI team, which included a number of other Princeton graduates, took this approach toward the RCA technology transfer, seeking to master every aspect of the manufacturing process and applying and proving skills in a factory environment. Robert Tsao, then an ITRI engineer who participated in the project, said later that “the purpose of this project was not only to conduct pure research but also to transfer over an industrial technology. Here, the phrase ‘industrial technology’ indicated not only a transfer of the technology itself but also the ability to carry out economically efficient mass production of goods.”116 Ding-Yuan Yang recalled that the four project leaders learned not only—

engineering and manufacturing, but the four of us also learned about designing, testing, quality control, procurement accounting and database management. It was a holistic and complete packaging of training. If we only transferred these techniques in a lab, we wouldn’t have been able to attain industrial production. [The idea was] to make a demonstration plant, in the transferring of the technology. You have to get into a factory, bring in some products and transfer some of them out to verify the effectiveness of the transfer of manufacturing technology. Only when you reach a certain yield rate can the transfer be considered valid.117

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115Interview with Ding-Yuan Yang, “Taiwanese IT Pioneers: D.Y. (Ding-Yuan) Yang, recorded February 23, 2011 (Computer History Museum, 2011).

116Interview with Robert Tsao, “Taiwanese IT Pioneers: Robert H.C. Tsao,” recorded February 17, 2011 (Computer History Museum, 2011) p. 3.

117Interview with Ding-Yuan Yang (2011) op. cit. p. 8. The ITRI approach placed broader demands on the research team than a simple transfer of manufacturing techniques. Ding-Hua Hu, one of the ERSO team members, recalled that “There were a lot of problems involved. For example, the supply of gases. It wasn’t something you could just buy off the street and all different kinds of chemical raw materials. So we had to digest the transferred RCA technology and we did that very well.” Interview with Ding-Hua Hu, “Taiwanese IT Pioneers: Ding-Hua Hu,” recorded February 10, 2011 (Computer History Museum, 2011) p. 16. The RCA deal did not include some elements in the

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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When ITRI’s trainees returned to Taiwan, a pilot facility for manufacturing integrated circuits was established in ERSO to stimulate production and promote R&D, the Integrated Circuit Model Factory (1977). The pilot line produced its first integrated circuits in 1977. The operation of the pilot line served as practical confirmation for the trainees who had served at RCA and the “hidden knowledge” they had gained at RCA was passed on to other trainees who had not been picked for the original RCA mission. The pilot line enabled the RCA trainees to experiment with the actual manufacturing of semiconductors and pass the know-how to Taiwanese manufacturers. Ding-Yuan Yang commented that—

Now looking back, setting up an IC demonstration plant in a research institution was something truly unique in the world. Normally a private plant is set up, and they transfer technologies by themselves. Using the power of the government to establish a demonstration plant in a research institution, to plant it as a seed to spread it out, was a very unique method.

ERSO’s pilot line ramped up its production, and volume and quality soon surpassed that of RCA’s devices. In the technology transfer agreement, RCA had guaranteed that that the yield rate would be at least 17 percent, but the yield rate of the ERSO demonstration plant was 70 to 80 percent—a surprise to RCA. Robert Tsao attributed this success to use of new equipment and the high quality of the production team:

Those who were hired by this project were all very outstanding, such as Ding-Yuan Yang, Chintay Shih and Jian-Jun Chang, each of whom had doctoral degrees from Princeton University. Even in the semiconductor industry, it would be almost a waste of their great talents to use them on manufacturing alone. Therefore, it was natural that the yield rate was high.118

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industrial chain and these were the subject of subsequent ITRI initiatives. Hu recollects that “They [RCA] didn’t teach us photo mask technology. So we worked with an overseas Chinese, named Stephen Lin. We signed a contract with him and introduced his company, IMR, to acquire that technology and that was how Taiwan got a number of listed photo mask companies. In addition, RCA was not expert in quality assurance, so we got help through TAC to get in touch with other overseas Chinese, then we sent L.H. Chiu along with another person over to HP to learn about quality and reliability … and we found a Chinese guy, named William Mao in the testing equipment … Then Chin-Chu Chang went over there with a small group.” Interview with Ding-Hua Hu (2011) op. cit. p. 16.

118Interview with Robert Tsao (2011) op. cit. p. 5. Ding-Hua Hu made similar observations, attributing the high yield rate to the work force operating the demonstration plant. “The factory couldn’t be completely automatic, so some of the facilities required people’s judgment to make

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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ITRI continued to purchase new semiconductor manufacturing equipment, dispatched engineers abroad for training, and invited foreign specialists to participate in its development efforts.119

Creation of UMC

Despite investment incentives and technical support from ITRI, Taiwanese companies remained reluctant to invest in the semiconductor business because of the perceived risk. In response the government created Taiwan’s first major semiconductor company in 1980, United Microelectronics Corp. (UMC). UMC in effect spun itself off from ITRI, taking with it a substantial proportion of ERSO’s equipment and 31 of its personnel.120 They included Robert Tsao, a vice-director of ERSO and one of the RCA 37 who eventually became UMC’s chairman. The government took a 44 percent equity stake. ITRI provided UMC with semiconductor mask design services, relieving the company of the need to send its IC designs to foreign mask making firms.121 Dr. Chintay Shih, who served at ITRI between 1976 and 2003, recalls that “we helped them [UMC] to design and build their first site in the Science Park.”122 ITRI lined up UMC’s first customer, a Taiwanese watchmaking company.123 UMC began operations in 1982 and grew rapidly to become one of the world’s leading semiconductor producers.124

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minor detail adjustments. Every piece of equipment had their own characteristics so in other words, people were the greatest invention, and God is the greatest creator—the truth was that you could count them as an integral part of the system in the place, at that moment, and at that time. Because you saw them as a link. Otherwise if the machine acted up, then there would be a discrepancy in the control. In that kind of situation, people were the most important asset. And when it came to people, discipline was imperative.” Interview with Ding-Hua Hu (2011) op. cit. p. 17.

119Between 1979 and 1983, ITRI’s process technology was upgraded from 7.0 to 3.0 microns design rules, computer-aided design programs were introduced, and an independent semiconductor mask design capability was acquired with assistance from California-based International Materials Research (IMR). Between 1983 and 1988, process technology was further upgraded to 1.0 micron design rules, the pilot line was converted to production of very large scale integration (VLS1) devices, and a Common Design Center was established to develop and disseminate application-specific integrated circuit (ASIC) technology. Chang, Shih and Hsu, Technovation (1994), op. cit. p. 166. VLSI refers to devices with over 100,000 transistors on a single chip.

120Among other personnel, ITRI transferred to UMC a manufacturing supervisor, a testing manager, a sales manager and a sales supervisor, a quality control manager and a circuit design manager. ITRI also trained UMC employees in technologies which included process and equipment engineering, quality assurance, testing, industrial engineering and production and materials control. Chang, Shih and Hsu, Technovation (1994) op. cit. p. 167.

121Chang, Shih and Hsu, Technovation (1994) op. cit. p. 167.

122Interview with Chintay Shi, “Taiwanese IT Pioneers: Chintay Shih,” recorded February 21, 2011 (Computer History Museum, 2011) p. 13.

123Shih, “Taiwanese Semiconductor Industry revisited” (2009) op. cit. p. 14.

124By 2000 UMC had achieved such proficiency in semiconductor manufacturing that it entered into a manufacturing joint venture with Hitachi of Japan in which UMC actually transferred manufacturing know-how to Hitachi, a dramatic reversal from prior decades when Japanese firms shunned relationships with Taiwanese firms, which they regarded as technologically inferior.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Promoting Design Capability

In 1985, ERSO established the Common Design Center (CDC), a computer-aided semiconductor design facility intended to encourage start-up design firms. ERSO also provided computer-aided design tools and logic cell libraries to nine Taiwanese universities to encourage the establishment of IC design programs. ERSO published IC design manuals and sponsored training classes on computer-aided IC design. Between 1983 and 1990 it spun off more than a dozen firms with IC design capability. It transferred IC design specifications to Syntek Semiconductor Corp., UMC, and Silicon Integrated System Company.125 In 1997, ITRI spun off Prolific Technology, Inc., an ASIC design house which in 2004 was named “most competitive fabless company in Taiwan” by Merrill Lynch.126

ITRI’s most effective single initiative in promoting the IC design industry, however, was the creation of TSMC, the world’s first semiconductor foundry in 1987.

Creation of TSMC

Around 1984, Taiwan’s Premier Yu Kuo-hwa offered Morris Chang— who had moved from Texas Instruments to a position as President of General Instruments—a job as head of ITRI, telling Chang “that he particularly wanted to use my ability to transfer technology from just research results to economic benefits for Taiwan industry.”127 Taiwan was facing difficulty in growing its integrated circuit design sector further because of the lack of local manufacturing capability. The idea of a “pure play” semiconductor foundry had been discussed in industry circles for years—that is, an enterprise which provides contract manufacturing services to IC designers but does not sell its own IC products—but the idea was generally regarded as commercially unfeasible.128 With substantial government support, Chang led the establishment of the world’s first semiconductor foundry, Taiwan

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“Hitachi, UMC Join for Rapid Production of 300 mm Wafers,” Kagaku Kogyo Nippon (December 28, 1990); “Hitachi-UMC Tie-up to Generate Test Cases that Will Forecast the Future of LSI Technology and Business,” Nikkei Microdevices (February 2000).

125Huang, “Cradle of Technology” (2006) op. cit. p. 41.

126“Taiwan Design House Innovates to Succeed,” EE Times Asia (January 1, 2006).

127“Oral History of Morris Chang,” recorded August 24, 2007 (Computer History Museum, 2011) p. 9.

128Chang was one of a number of Taiwanese leaders who had read the works of Carver Mead, an influential U.S. computer scientist who argued that semiconductor design could be separated from the manufacturing process. Mead used the analogy of the printing business and postulated that there could be a “:silicon press” to fabricate semiconductors for a service fee for design companies. Coincidentally in the early 1980s, ITRI President Hsian-Chi Fang had a daughter who was one of Mead’s students, and who suggested that Mead be invited to Taiwan. Mead traveled to Taiwan and his ideas had a major impact at ITRI. Former ITRI head Chintay Shih recalls that “I was thrilled first time I heard about Mead’s concept.” Interview with Chintay Shih (2011) op. cit. pp. 14-15.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Image

FIGURE APP-A3-5 ITRI’s role in promoting IC design.
SOURCE: Chung-Yuan Liu, ITRI, “Government’s Role in Developing a High Tech Industry: The Case of Taiwan’s Semiconductor Industry,” Technovation, 13(5), 1983.

Semiconductor Manufacturing Corporation (TSMC), becoming its first CEO in 1987. “The idea came from everybody’s brainstorming.”129

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129Interview with Chintay Shih (2011) op. cit. p. 18.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

Like UMC, TSMC was spun-off by ERSO, which in 1986 set up a six inch VLSI preparatory manufacturing plant and in 1987 transferred it to TSMC. Robert Tsao, the founder of UMC, recalls that ITRI provided TSMC with what was effectively a “free foundry” to support its start-up. In a 2011 oral history interview, he commented:

So after [ITRI] spending five years and 100 million U.S. dollars on construction, the second demonstration plant was built, and about 500 to 600 trainees were all sublet to TSMC. Therefore, TSMC had foundry at first and they only needed to spend two million U.S. dollars on subletting the foundry. Apart from this ITRI even gave TSMC 7 million U.S. dollars to subsidize the cost of subletting the foundry … In other words the first 3 and a half years of running TSMC was for free and it went very well under the protection of Ministry of Economic Affairs.130

Morris Chang, brought with him 130 ERSO professionals and process technology from ERSO for manufacturing six inch semiconductor wafers. TSMC’s initial shareholders were the government (40 percent), Philips of the Netherlands (26.6 percent) and employees and local private investors (19 percent). The government’s share of TSMC’s capital was funded by the Development Fund of the Executive Yuan, a discretionary development fund at the disposal of Taiwan’s Cabinet administered by Finance Ministry.131

Philips’ participation in TSMC as an equity investor and technology partner was instrumental in the company’s success. Philips licensed key manufacturing process technology to TSMC.132 Philips was a captive customer for TSMC and provided an outlet for its production at a time when the stability of demand was perceived as a major risk factor for any company pursuing a pure play foundry business model.133 The fact that a world-class company like Philips, one of the largest electronics firms on the globe, was sourcing semiconductors from TSMC drew the attention of companies like Intel and Texas Instruments, which subsequently became TSMC customers. Philips was a multinational company with practical global business experience and experience in intellectual property management. Philips’ IP umbrella, based on a web of

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130Interview with Robert Tsao, “Taiwanese IT Pioneers; Robert H.C. Taso,” recorded February 17, 2011 (Computer History Museum) p. 9.

131The Development Fund also invested in semiconductor firms Powerchip and Vanguard. ITRI’s venture capital subsidiary, ITIC, did not invest in TSMC because “we had no money” at the time. Interview with Ching-Jiunn Chang, Vice President, ITIC, Taipei, Taiwan, February 13, 2012.

132Shih, “Taiwanese Semiconductor Industry Revisited (2009) op. cit., p. 14.

133Shih, “Taiwan’s Semiconductor Industry Revisited” (2009) op. cit. p. 14.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

cross-licensing agreements transferred to TSMC, protected the company from patent lawsuits during its initial years of operation.134

The nature of TSMC’s business served to enhance its technological capabilities. Initially semiconductor firms such as VLSI Technologies passed on technologies to TSMC because without them TSMC could not have fabricated their devices. Customers also provided feedback which was used to refine TSMC’s fabrication methods. The fact that TSMC needed constantly to shift its production to different kinds of devices contributed to the company’s cumulative manufacturing learning.135 TMC grew rapidly, largely by absorbing other ITRI spin-off companies, and became one of the most efficient and versatile semiconductor manufacturers in the world.

The formation of TSMC as a pure-play foundry, as well as UMC’s subsequent conversion into a foundry, changed the entire business model of the global semiconductor industry in a manner that worked to Taiwan’s advantage. Before the advent of foundries the semiconductor industry was vertically integrated, with manufacturing capital costs constituting a huge barrier to entry. The emergence of foundries enabled “fabless” design firms with no factories of their own—or associated capital costs—to challenge industry leaders with innovative designs involving modest investment costs. Numerous Taiwanese IC design firms sprouted up, utilized TSMC and UMC foundry services, and reaped enormous profits. A large number of expatriate Taiwanese “engineers-turned-entrepreneurs returned from Silicon Valley to drive this process forward.136

Winbond and Vanguard

Winbond Electronics Corporation was formed in 1987 to produce semiconductors memory devices. Most of its original personnel came from ERSO, which also supplied the company with licensed technology.137 Winbond has subsequently become Taiwan’s largest maker of branded integrated circuits.138 Subsequently “a new company started almost every year, and many

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134Interview with Chintay Shih, “Taiwanese IT Pioneers: Chintay Shih,” recorded February 21, 2011 (Computer History Museum, 2011), p. 18. Interview with TSMC executive, Hsinchu, Taiwan, February 14, 2012; Shih, “Taiwan’s Semiconductor Industry Revisited” (2009) op. cit. p. 14. In 2007, TSMC disclosed that Philips would sell its stake in the company in increments through 2010 as part of its strategic decision to exit the semiconductor business. “Philips to Offload US $8.5 bn Holdings in BMC by 2010,” Taipei Times (March 10, 2007).

135Douglas B. Fuller, Globalization for Nation Building: Industrial Policy for High-Technology Products in Taiwan, (MIT Working Paper MIT-IPC-02-002, January 2002), p. 8.

136By 2001, an estimated 4,292 Taiwanese engineers returned from overseas positions were working in Hsinchu Science Park. Chen, “Emergence of Hsinchu Science Park” (2008) op. cit. p. 78.

137Winbond was headed by Dr. Ding-Yuan Yang, who had served in various positions in ERSO including analyst of ERSO’s business ventures. According to Dr. Yang about 200 personnel were transferred from ERSO to Winbond, mainly from the IC demonstration plant, and Winbond “paid a lot of money to ERSO” to license technologies. Interview with Ding-Yuan Yang (2011) op. cit. p. 30.

138Mathews, “Hsinchu Model” (2010) op. cit., p. 20.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

were spinoffs from ERSO.”139 Vanguard International Semiconductor Corporation (VIS) was spun off of ITRI in 1994 with TSMC and the Development Fund of the Executive Yuan as major investors. Three hundred and ten employees left positions at ITRI to join the new company.140 VIS was originally established to manufacture dynamic random access memories (DRAMs) but in the early 2000s transformed itself into a pure-play foundry on the TSMC model.

Taiwan Mask Corporation

By the late 1980s Taiwan had a significant number of IC design houses producing application-specific integrated circuits (ASICs), devices which are tailored to specific end-use applications. ERSO was supplying some of these firms with semiconductor masks from its internal operation. In 1988 ERSO spun off the Taiwan Mask Corporation (TMC), transferring its own personnel, equipment and technology to the new company. ITRI concluded 10-year technology transfer and development agreement with TMC.141

Taisel

In 1994, a joint venture was formed by the government-owned China Steel Corporation and the U.S. company MMC, Taiwan International Standard Electronics, Ltd. (Taisel), to produce polished and epitaxial wafers for integrated circuit fabrication. “The government’s effort to create a vertically integrated industry was evident.”142

Asia Pacific Microsystems

Asia Pacific Microsystems Co (APM) was founded in 2001 by a team led by ITRI Executive Vice President Lin Min-shyong. APM took over a five inch wafer foundry for making CMOS chips from Winbond located in HSP and converted it into a six inch foundry for micro-electric mechanical systems (MEMS) devices in 2002. MEMS devices include sensors, microstructures and actuators which are used in consumer, medical, automotive, industrial, and telecommunications applications.143

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139Genda J. Hu, Taiwan Semiconductor Manufacturing Company, “Government-Industry Partnerships in Taiwan,” in Charles W. Wessner (ed.), Securing the Future: Regional and National Programs to Support the Semiconductor Industry (Washington, D.C.: National Academies Press, 2003) p. 154.

140Chen-Dong Tso, “State-Technologist Nexus in Taiwan’s High-Tech Policymaking Semiconductor and Wireless Communications Industries,” Journal of East Asian Studies (May 2004).

141Chang, Shih and Hsu, Technovation (1994) op. cit. p. 169.

142Chang, “Emergence of Hsinchu Science Park” (2008) op. cit. p. 76.

143“APM Opens Taiwan’s First MEMS Wafer Foundry,” Taiwan Economic News (November 21, 2002).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Technology Transfer

In addition to the creation of spin-off companies, ITRI contributed substantially to the development of the semiconductor industry by transferring technology to companies and undertaking joint R&D with several firms. During the 1980s ITRI transferred semiconductor process technology to Hualon Microelectronics and Advanced Device Technology Inc. (ADT). 144 In addition to ERSO, a number of other ITRI labs were engaged in R&D involving semiconductor equipment and materials, with an eye toward creating the foundation of a complete industry supply chain.

Local Content Initiatives

In 2007, Minister of Economic Affairs told Taiwanese semiconductor manufacturers that they should “adopt locally-made equipment as much as possible in order to help boost Taiwan’s chip-making equipment industry,”

TABLE APP-A3-7 Creating the Supply Chain—Participating Companies

Theme ITRI Laboratories Participating Companies
Process technology ERSO Winbond, Mosel, Vitelec, etc.
Design ERSO Via, AcerLab, SunPlus,
Communications/Computer lab Eltran, etc.
Materials Materials Research lab Union Chemical Laboratories Taisel, others
Equipment Mechanical Industrial Research Lab GPM, Union, Tong-Tai, etc.
Testing ERSO
Center for Measurement Standards
Siliconware, First, etc.
Packaging ERSO AES, Siliconware,
Communications/Computer lab Materials Research lab Energy & Resources Lab Precision, Oriat, etc.
SOURCE: Huang, “Cradle of Technology” (2006) op. cit. p. 42.

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144In 2003, ERSO announced the development of wafer level chip scale package technology (WLCSP), a high performance form of chip packaging that was less costly than conventional silicon packaging. “ERSO Unveils New Chip Packaging Technology,” Taiwan Economic News (May 30, 2003). In 2002, TSMC and ERSO announced a plan for joint R&D to develop magnetoresistive random access memory (MRAM) chips, which have applications in portable medical electronic equipment, aerospace and internet-related products, with the objective of developing product prototypes. “BMC Cooperates With ERSO to Develop MRAM Products,” Taiwan Economic News (March 21, 2002). Three years after the start of this effort, ITRI and TSMC disclosed that they had succeeded in integrating MRAM and CMOS technology, and unveiled a low-power, high density 1-kilobit MRAM chip. “BMC, ITRI Team Up on MRAM,” Taiwan Economic News (January 10, 2005).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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ITRI’s Electronics and Optoelectronics Research Laboratories (formerly ERSO) was trusted with developing a model for transactions between Taiwan’s chipmakers and equipment suppliers to foster procurement of locally-produced equipment.145

Nankang Integrated Chip Design Science Park

In 2003, the government opened the Nankang Integrated Chip Design Science Park in Taipei, emphasizing the design of systems-on-a-chip (SoC). The park featured sites for IC design firms, an incubation center for start-ups, an open lab and a service and management section. The principle objective of the new park was to incubate IC design start-ups with up to 35 employees.146 The park was part of a broader national effort to promote indigenous silicon intellectual properties (SiP) in Taiwan, to streamline electronic design automation (EDA) software, and to promote the development of a domestic IC design industry.147

Taiwan’s Emerging Competitive Edge

By 2007, Taiwan’s semiconductor industry led the world in a number of key technology areas including foundry manufacturing and testing. Taiwan had more state-of-the-art 12 inch wafer fabrication facilities than any other country in the world, 11 fabs.148 An ITRI official declared in 2007 that Taiwan’s semiconductor industry ranked “first in the world in competitiveness, with no other countries expected to rival it over the next few years.”149

TABLE APP-A3-8 Taiwan’s Competitive Position in Semiconductors, 2007.

Category Global Rank Global Market Share (Percent)
Foundry 1 66.6
Mask ROM 1 92.9
IC Packaging 1 44.4
IC testing 1 63.0
Large wafer size (10”+) 1 46.4
IC design 2 23.9
IC substrate 2 26.4
DRAM 2 22.4
SOURCE: Industry and Technology Intelligence Services (IT IS) cited in Hwa Meei Liou, “Overview of the Photovoltaic Technology Status and Perspective in Taiwan,” Renewable and Sustainable Energy Reviews (2010).

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145“Taiwan Gov’t Persuades Local Chipmakers to Buy Home-made Equipment,” Taiwan Economic News (November 27, 2007).

146“World’s First System on Chip Design Center Will Open in Taiwan Industrial Park,” China Post (April 23, 2003).

147“Taiwan Aiming to be Global SoC Design Center,” China Post (December 12, 2003).

148“Taiwan a World Leader in 12-inch Wafer Foundries,” China Post (September 26, 2006).

149“Taiwan Chip Industry Still Leads World in Competitiveness,” Asia in Focus (April 22, 2007).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

ITRI is commonly said to have ended its support for the semiconductor industry because of the industry’s commercial success, but in fact, ITRI is engaged in significant developmental work in microelectronics. In 2008, ITRI organized the Advanced Stacked System Technology and Application Consortium to develop technology for 3-dimensional integrated circuits, based on the stacking of multiple thinned ICs with through-die area array interconnects between them.150 SUSS Microtec, a German semiconductor equipment supplier and developer of 3D integration technology joined the consortium in 2009.151 The leading U.S. semiconductor equipment vendor, Applied Materials, joined the consortium in 2009. The consortium established a 300 mm demonstration production line at ITRI using state-of-the-art equipment and materials to produce “through-silicon vias” (TSVS), a technique for making stacked memory and logic chips.152 Rambus, one of the world’s leading technology licensing companies, joined the 3D IC consortium in 2011.153 In early 2012, ITRI was reportedly in discussions with a fabless U.S. semiconductor company about a collaboration in which ITRI would manufacture the U.S. firm's 3D-1C design on a pilot line.154

In 2010, ITRI was reportedly working with a team of “dozens” at National Tsing Hua University to develop architecture for a high-density 3-dimensional nonvolatile resistive random access memory (RRAM) device that would consume less power and yield higher speeds than existing memory chips.155 In late 2011, ITRI exhibited a prototype high speed non-volatile RRAM which it had developed. The chip has up to 20 times the speed of a flash memory device but consumes only 20 percent of the power and can survive up to 10 years at a temperature of 200 degrees Celsius.156 As of February 2012 ITRI believed that it was “ahead of everybody” in RRAM technology, which it expected to license to Taiwanese companies.157

In December 2011, Intel Corporation announced a five-year collaboration with ITRI to develop ultra-fast and energy saving semiconductor memory products. The collaboration will focus on producing memory devices utilizing 3D IC stacking technology for applications in cloud computing data

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150The idea of stacking arose out the difficulty in moving lithography technology forward from the 32 nanometer line width node. Stacking is an alternative to further miniaturization of 2D IC devices. “Organizations Establish Taiwan’s 3D IC Consortium,” Taiwan Economic News (July 26, 2008).

151“SUSS Microtec Cooperates with Research Institute ITRI on Technology Development in 3D Integration,” Business Wire (September 28, 2009).

152“ITRI and Applied Materials Collaborate to Advance 3D IC Technology,” Business Wire (October 15, 2009).

153“Rambus and ITRI Collaborate to Develop Interconnect and Advanced 3D Packaging Technologies,” Business Wire.

154Interview with Dr. Yi-Jen Chan, Director, ITRI Electronics & Optoelectronics Research Laboratories, Hsinchu, Taiwan, February 14, 2012.

155“Taiwan’s Tiny RRAM,” IEEE Spectrum (November 2010).

156“ITRI Shows Off Taiwan’s Latest Technology,” Taiwan Today (October 6, 2011).

157Interview with Dr. Yi-Jen Chan, Director, ITRI Electronics and Optoelectronics Research Laboratories, Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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centers and next-generation mobile devices.158 MOEA pledged to provide $5 million in funding for this project, which the General Director of ITRI’s Information and Communications Research Laboratory, Wu Cheng-wen, said would “enable Taiwanese DRAM chipmakers to produce more value-added chips utilizing existing technologies” not requiring a major investment in new equipment.159

Photovoltaics

ITRI has been working to establish a photovoltaic solar equipment industry in Taiwan for over two decades, and “in the 2000s one can see the solar photovoltaic (PV) industry emerging as the ‘third pillar’ of Taiwan’s high-tech industrialization efforts” (the first two being semiconductors and displays.160 Taiwan’s existing competency in semiconductors is a major asset in the PV effort.161 Major Taiwanese companies like TSMC, AuO Optronics, Delta Electronics and possibly Formosa Plastics are investing in the industry, moves which “promise to transform the Taiwan industry and make it one of the world’s leading global players, alongside China, Germany, Japan and the USA.”162

In 1987, ITRI’s Energy and Mining Research Division began R&D on monocrystalline and amorphous silicon, materials used to manufacture solar photovoltaic cells. In 1988, Taiwan’s first solar cell company was established, Sinonar Amorphous Company, using technology developed by ITRI and founded by two former ITRI staffers. The new company focused on indoor solar cells using amorphous silicon. In 2004, ITRI spun off a solar cell company, DelPoint, a joint venture with Delta Electronics, which received technology, capital and staff from ITRI.163 The following year Delta began production of solar cells, and a large number of Taiwanese entered the solar cell companies business, some of which “[stole] talents from the government-backed Industrial Technology Research Institute (ITRI), some of whose laboratories

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158“Intel, ITRI Team Up on Memory R&D,” China Post (December 7, 2011).

159“Government Makes Right Policy Call,” Taipei Times Online (December 12, 2011).

160Mathews, Hsinchu Model (2010) op. cit., p. 11.

161Morris Chang, the founder of TSMC, Taiwan’s largest semiconductor maker and an ITRI spin-off, was asked in a 2009 interview about his company’s entry into the light-emitting diode and solar cell industries. Interviewer: “You say TSMC wants to go into LEDs and solar cells. What core competencies does TSMC have in these areas?” Chang: “I won’t tell you outright that we have this capability. But LEDs and solar cells are semiconductors. When I was working on my Ph.D., my doctoral thesis was related to II-V compounds and LEDs were considered part of my field. The physics of LEDs are the same as they were for semiconductors.” “I’m Willing to Start from Scratch,” Commonwealth (June 18, 2009).

162Mathews, Hu and Wu, “Fast Followers Dynamics.” (2011) op. cit. p. 190.

163John A. Mathews, Mei-Chi Hu and Ching-Uan Wu, “Fast Follower Industrial Dynamics: The Case of Taiwan’s Emergent Solar Voltaic Industry,” Industry and Innovation (February 2011), pp. 186, 197.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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developed the technology.”164 The government implemented a series of policy measures to foster the grown of the photovoltaic industry, providing subsidies for installation of photovoltaic power generation systems, including installation subsidies to households for up to 50 percent of the total cost of installing rooftop PV systems.165

In 2006, MOEA established the Taiwan Silicon Conference to develop a strategy for creating an industry supply chain in photovoltaics, an initiative that led to the establishment of Taiwan’s first polysilicon manufacturing company to provide upstream materials for PV cell makers. Photovoltaic supply chains now exist at three Taiwanese Science Parks.

ITRI has emerged as Taiwan’s foremost source of expertise and research activity with respect to solar cells. Between 1984 and 2008 ITRI had secured or was pursuing applications for 1,940 patents in solar cell technology. In 2006, ITRI opened the PV Technology Center.166 ITRI-trained scientists and engineers have played an important role in the development of Taiwan’s solar

TABLE APP-A3-9 Creating the PV Supply Chain

Materials Cells Modules Systems
Hsinchu Science Park
WW Corp Gintech Gintech Delta
SAS DelSolar DelSolar
Neo Solar
Central Taiwan Science Park
Setek AUO AUO AUO
SR Solar BMC Delta Delta
Nextpower Nextpower
Southern Taiwan Science Park
Motech Motech Delta Delta
E-Ton
Nanowin

SOURCE: Dr. Weileun Fang, National Tsing Hua University, Applications of Micro Tech for Renewable Energy at Taiwan: Progress and Prospects (2011).

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164“Taiwanese Enterprises Rush to Pan Gold in Solar Cell Business,” Taiwan Economic News (July 6, 2005); “Delta Electronics to Mass Produce Solar Cells in Q4,” Taiwan Economic News (August 22, 2005).

165In 2007, the Executive Yuan’s Science and Technology Review Board recommended that Taiwan take advantage of its strong position in semiconductor and flat panel displays and its experience in developing strategic alliances with multinationals “to actively develop the photovoltaic industry.” In 2009, Taiwan enacted the Renewable Energy Development Act, which provided incentives for installation of renewable energy power generation, set up a fund for renewable energy, authorized subsidies to support the use of renewable-generated electricity, and made provision for creation of feed-in tariff (FIT) pricing schemes to make renewable energy competitive with fossil-fuel generated electricity. The government’s various incentive programs are summarized in Hwa Meei Liou, “Overview of the Photovoltaic Technology Status and Perspective in Taiwan,” Renewable and Sustainable Energy Reviews (2010).

166Mathews, Hu and Wu (2011) op. cit. p. 197.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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cell industry.167 In 2007, ITRI decided to release 233 patents in the fields of solar energy and energy storage and efficiency to local Taiwanese companies. Most of the patents covered solar power generation, and were released in order to “[upgrade] local technology levels and assist … industries to expand their global market share in the wake of surging demand for green and clean energy.”168 In January 2010, ITRI spinoff TSMC acquired a 20 percent stake in Motech Industries, Taiwan’s largest maker of solar cells, for $196 million.169

Taiwan’s semiconductor manufacturers, including two ITRI spinoffs, are playing a significant role in the development of Taiwan’s thin film solar cell industry, a technology area holding great promise for solar power generation.170 In 2008, a UMC subsidiary, NextPower Technology Inc., was the first Taiwanese firm to begin volume production of thin film solar cells. 171 In 2010, TSMC began construction of a $258 million Thin Film Solar R&D Center and fab in Central Taiwan Science Park.172 Concurrently TSMC acquired a $50 million equity stake in California-based Stion, a start-up conducting R&D in CIG5 technology.173 ITRI has worked with several Taiwanese universities to develop modification in the thin-film PV CIGS manufacturing process that do not utilize toxic selenide.174 Taiwan’s MOEA has formed the CIGS Alliance, an ITRI technology-diffusion alliance which includes a number of small TF companies as well as large firms like TSMC and AU Optronics.175

By 2011, Taiwan’s solar cell industry ranked number two worldwide by production value ($4.3 billion), having surpassed Japan and Germany. Taiwan currently holds 20 percent of the world market for solar cells, and while

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167Dr. Kuo En Chang worked on battery research as an ITRI staffer in the 1990s. He joined Motech, one of Taiwan’s pioneering solar cell companies in 1999 as Chief Technology Officer, becoming President of Motech’s Solar Division in 2008. Dr. Sam Hung, President and CEO of Neo Solar Power, previously served as ITRI’s Research Director, Solar Energy Division. He also served as Vice President and Plant Director of Taiwan’s first amorphous silicon manufacturer, Sinonar Amorphous Silicon Solar Cell Co. “Editorial Advisory Board, PVTech,
<http://www.pv-tech.org/about/editorial_advisory_board>.

168“Taiwan’s ITRI Releases Patents for Solar Power Technology,” Asia in Focus (September 27, 2007).

169Motech’s CEO was a former TSMC executive responsible for materials and risk management at TSMC. TSMC CEO Morris Chang reportedly plans to back Motech’s efforts “to expand into a solar conglomerate from a solar cell maker.” “Solar Newcomer Makes an Impact as CEO of Motech,” Taipei Times Online (May 17, 2010).

170So-called “thin film” (TF) photovoltaic cells hold great promise in the field of solar energy. TF cells are an alternative to full crystalline silicon (“thick film”) cells, and utilize a thin film of copper indium gallium selenide (CIGS) semiconductor materials on glass, permitting a substantial reduction in the cost of materials.

171“NextPower Vows to Top Taiwan’s Thin Film Solar Cell Industry,” Taiwan Economic News (September 10, 2008).

172The fab will be operated by a subsidiary, BMC Solar, with the first commercial shipments expected in 2012. “TSMC Solar’s First SIGSSe ‘5-Fab’ Prping for Commercial Production Ramp,” PV Tech (October 14, 2011).

173“TSMC Sinks $50 Million Into Stealthy Thin-Film solar Startup Stion,” Venturebeat (June 16, 2010).

174“ITRI Develops 3.5G Turnkey Solution for Thin-Film PV Production.” Digitimes (June 12, 2009).

175Mathews, “Fast Follower Industrial Dynamics” (2011) op. cit. p. 196.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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its revenues rank behind those of China, Taiwan is more technologically advanced than China in this field.176

Biotechnology

Taiwan has been promoting the development of a biotechnology industry since the early 1980s but the results to date have been mixed at best, despite a massive deployment of government resources.177 In contrast to Taiwan’s developmental effort in microelectronics, in which ITRI was the governmental entity responsible for promoting the industry, in biotechnology, Taiwan’s “agencies and units involved are so numerous and diverse that a serious coordination problem has emerged.”178 Instead of a single main technology cluster (Hsinchu) which characterized the formative years of the semiconductor industry and continues to account for most of the semiconductor industry’s output, Taiwan has already established six biotechnology parks with more planned.179 The Development Center for Biotechnology (DCB), a government research organization formed to play an ITRI-like role as a technology intermediary—turning basic research into commercial products—has drifted into an emphasis on basic research.180

ITRI has long taken the position that Taiwan’s developmental efforts in biotechnology should be limited areas where the country could leverage existing strong competencies rather than risky, leaps into blue-sky areas with uncertain prospects. ITRI has argued that Taiwan should seek to integrate its medical research infrastructure with its strengths in electronics and the information and communications technologies. ITRI also favors establishment of a few centers of excellence in the handful of medical areas in which Taiwan is a world leader—most notably liver diseases—in order to attract multinational biopharmaceutical companies to the island for R&D.181 ITRI has concentrated

________________

176Taiwan Strives to Build International Brand Names,” Taiwan Insights (July 19, 2011).

177“Taiwan’s Technology Success Underappreciated: Canadian Scientists,” Focus Taiwan (July 24, 2010); Dodgson, et al, “Taiwan’s National Innovation System” (2008) op. cit. p. 431.

178Yu-Shan Wu, Academia Sinica, “Taiwan’s Developmental State: After the Economic and Political Turmoil,” paper prepared for delivery at the Conference on A Decade After the Asian Financial Crisis, Thammasat University, Bangkok, February 23-24, 2007.

179Mark Dodgson, John Mathews, Tim Kartelles and Mei-Chih Hu, “The Evolving Nature of Taiwan’s National Innovation System: The Case of Biotechnology Innovation Networks,” Research Policy (2008), pp. 436-7. Despite the existence of erstwhile clusters, “The research institutes and firms are not effectively linked, nor are the science community and the ministries and agencies.” Yu- Shan Wa, “Taiwan’s Developmental State” (2007) op. cit. p. 23.

180The DCB was founded in 1984 to close the gap between academia and industry in biotechnology. However, DCB has many more basic researchers on its staff than translation researchers. Wong, Chi-huey, President of Academia Sinica and a biochemist, commented that “what you’re seeing is that institutions in different roles have hired people from the same background who end up doing the same things. I think there should be more coordination.” Andrea Yung, “A Long Haul for Biotech,” Topics (October 2009).

181“ITRI Advices Using Strengths in ICT for Biotech Industry,” Taipei Times (July 22, 2008). Reflecting the fact that hepatitis is one of Taiwan’s most prevalent diseases, ITRI has prioritized the

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
×

its biotechnology efforts in areas of strength, and can point to some market success stories. One analyst observed in 2007 that “only in areas where biotechnology and microelectronics overlap can one find some prospect of success.”182 ITRI’s Medical Electronics and Device Technology Center (MED) is driving this effort.183 Taiwanese medical device makers have already made significant inroads in some global markets.

ITRI established a Biomedical Engineering Center in 1999 (BMEC), which was split in 2006 to form the Biomedical Engineering Research Laboratories (BEL) and the Medical Electronics and Device Technology Center (MED). BMEC’s Biochip Program combined research efforts of five ITRI laboratories to develop DNA microarray and microfluidics technology, which is essential to the rapid unraveling of the human genome. Sixteen patents from this effort were transferred from ITRI to a spin-off company, Phalanx Biotechnology Group, established in 2003. The research effort organized by ITRI drew in the Canadian Genetic Diseases Network (CGDN) and the Information System for Biotechnology (ISB), a U.S.-based research organization. Using ITRI’s technology, Phalanx was able to drop the price of one gene chip from about $1,000 down to $50-80 per slide. A CGDN executive commented that “we have looked at technologies from around the world and we are sure this is the best tech available [in the field of gene chips].”184

In 2002 ITRI spun off CESCO Bioengineering Co., Ltd., comprised of eight team members from ITRI’s Tissue Engineering and Biomaterial Laboratory, to commercialize high cell density culture technology.185 CESCO developed a novel disposable pact bed contractile (DPBC) bioreactor suitable

TABLE APP-A3-10 Global Share for Taiwanese Medical Devices

Item 2009 Global Market Share (Percent)
Digital blood pressure monitor 42
Electric wheelchair/scooter 30
Electric ear thermometer 30
Electronic thermometer 60
Pre-filled IV auto injector 50
SOURCE: Dr. Chei-Hsiang Chen, Director, Biotech & Pharmaceutical Industries Program office, MOEA Taiwan’s Biotech Industry Overview, October 21, 2010.

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study of liver diseases. It has developed the world’s most comprehensive liver proteome database as well as projects with applications in fighting liver ailments, including high density microarray gene chips, new herbal medicines to combat liver disease, tissue engineering for artificial livers, and non-invasive liver disease medical instruments. “Taiwan Strengthens Liver Disease Research,” BioSpectrum Asia Edition (July 31, 2007).

182Yu-Shan Wu, Taiwan’s Developmental State” (2007) op. cit. p. 23.

183“ITRI and NCKU Collaborate on Biomedical Device Related Technology,” Business Wire (May 7, 2009).

184“Gene Chip Venture Phalanx Inaugurated,” China Post (January 24, 2003).

185<http://www.cescobio.com.tw/history.php>.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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for producing various proteins and viruses and non-adherent cell cultures including embryonic stem cells.186 ITRI spun off DailyCare Biomedical in 2004 to commercialize low cost, portable medical devices for home core users. The company’s new CEO was K.P. Lin, the former chief of ITRI’s Biomedical Engineering Center.187 The care technology underlying one of these products, ReadMyHeart, a portable electrocardiogram, was developed by ITRI’s BEC.188 This product was approved for use in Japan in 2007, representing the first non-Japanese company to obtain a class-II medical device license under Japan’s Pharmaceutical Affairs Law, which took effect in 2005.189

FUTURE DIRECTIONS

The Statute for Industrial Innovation (SII) enacted in 2010 is the most recent of the promotional statutes that have provided the institutional framework for Taiwan's industrial development. SII represents a departure from the previous laws in that it provides not only for the promotion of manufacturing but also agriculture and services, and seeks to redirect Taiwan from its focus on manufacturing toward innovation, “soft power,” development of national brands, and advanced logistics.190 ITRI currently singles out 20 sectors which represent developmental priorities.191

Current ITRI developmental projects are underway addressing themes relevant to all of the smart industries noted above as well as biotechnology,

TABLE APP-A3-11 Taiwan’s Developmental Priorities

Emerging Industries Smart Industries Service Industries
Health Care Cloud computing WiMAX
Biotechnology Smart electronic vehicles International medical
Quality agriculture Smart green buildings High tech finance
Tourism Patent industrialization Music/digital content
Cultural/creative Exhibitions
Green energy International logistics
Urban renewal
International cuisine
Chinese e-commerce
High education output

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186Hera Andrade-Zaldivar, Leticia Santos and Antonio De Leon Rodriguez, “Expansion of Human Hemapoietic Stem Cells for Transplantation: Trends and Perspectives,” Cytotechnology (March 2008).

187“DailyCare Announces Telehealthcare System,” Taiwan Economic News (November 28, 2005).

188Dodgson, et al., “Biotechnology Innovation Networks” (2008) op. cit. p. 440.

189“DailyCare’s Handheld ECG Penetrates Japan’s Medical Device Market,” Taiwan Economic News (May 15, 2007).

190SII established a uniform 17 percent corporate tax and eliminated tax incentives except those associated with R&D.

191ITRI International Center, “Innovation Industrialization Corporation (IIC) Program Proposed for Bridging the Cooperation Between the United States and Taiwan” (February 14, 2012).

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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health care, quality agriculture, green energy, and WiMAX. In most cases ITRI has formed industry alliances to prepare for the production of the new technologies.

ITRI is also developing what it characterizes as the latest in a series of related electronic hardware technologies which incorporate semiconductor technology, including solid state lighting (LED), resistive random access memory (RRAM, high-speed, low power consumption semiconductors) 3D television, flexible electronics, “floating image,” and optoelectronic medical devices.192

ITRI is currently seeking to strengthen its capability in “upstream” pre-competitive R&D, to enhance the interdisciplinary character of its work, and to shift from an emphasis on the manufacture of components to development of systems, services and applications.193

CONCLUDING PERSPECTIVE

Taiwan’s economic development and ITRI’s role in creating advanced industries have been widely studied, but the extent to which the ITRI model is adaptable elsewhere is unclear. The circumstances underlying Taiwan's success are not necessarily present in other countries and for that matter may not always be present in every case in Taiwan itself. The creation of ITRI brought together cosmopolitan elite commanding a vast pool of knowledge absorbed from the world’s finest research universities and the most technologically advanced international companies. This remarkable founders’ generation was backed in its efforts by a government in which the ruling party held a monopoly on political power and an abiding belief that economic policy should be conducted by skilled professionals shielded from political pressure. Government funding

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192In January 2012, ITRI reported a breakthrough in LED technology which overcomes the longstanding problem of a LED bulb’s narrow beam angle. The prototype LED weighs less than half of a normal LED bulb, is unbreakable, can be manufactured at low cost, and has a beam angle of 330 degrees. “ITRI Develops Wide Beam Angle LED Bulb.” Central News Agency (January 31, 2012). “Floating image” refers to a technology in which a device projects an image I the air in front of a person. In some cases the image may consist of a keypad which can be operated by poking a finger through the images of keys, motion which the device detects with a sensor. The device can be operated in this manner without human touch. Interview with Dr. Yi-Jen Chan, Director, ITRI Electronics and Optoelectronics Research Laboratory, Hsinchu, Taiwan, February 14, 2012. MOEA indicated in April 2012 that the government was planning to invest $339 million between 2012 and 2015 in the development of smart handheld devices and an associated supply chain. “Over NT $10 Bil. To be Pumped Into Smart Device Sector: MOEA,” China Post Online (April 7, 2012). MOEA reportedly plans to task ITRI to develop core components technology and to explore customer-oriented applications for smart handheld devices. “Taiwan Smart Handhelds to Top US $43.8 billion,” Taiwan Today (September 13, 2011).

193Interview with Dr. Yi-Jen Chan, Director, ITRI Electronics and Optoelectronics Research Laboratory, Hsinchu, Taiwan, February 14, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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for ITRI was substantial and sustained.194 Ancillary government laws and policies were implemented to support ITRI in areas such as human resources, venture capital, and creation of science parks, intellectual property protection, and start-up of new companies. Replicating this mix of factors would be a challenge for any government.

ITRI has remained relevant by continual focus on its original, carefully-defined mission—not that of a research laboratory, but of a bridge connecting the international research community to small and medium Taiwanese businesses which—although entrepreneurial and highly motivated—lack the resources to conduct research and stay abreast of international technology trends. ITRI has developed institutional practices and policies which serve this mission:

  • Its policy of encouraging its own personnel to leave after four to five years continually seeds Taiwanese industry with experienced and technology-savvy leaders.
  • Its technology integration centers perform an internal interdisciplinary silo-breaking function which in its later stages is passed along to the private sector in the form of complete industry supply chains developed in ITRI-led industry alliances and research projects.
  • The physical proximity of researchers, labs and companies in the Hsinchu technology cluster fosters continual knowledge spillovers from the research community to private companies.
  • ITRI’s incubation center provides innovative start-ups with technology with commercial potential, business and legal advice, funding opportunities, access to research facilities, and introductions to potential customers and investors.
  • ITRI’s international outreach efforts acquire technology, but are also leading to foreign research efforts located in Taiwan itself with participation of Taiwanese companies.

Significantly, ITRI has not veered off course to pursue Nobel prizes or engage in industrial empire-building like Japan’s Ministry of Economic Trade and Industry in the 1960s and 1970s. It has maintained its focus on its core mission of technology intermediation between the global research community and Taiwanese companies.195

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194ITRI’s annual budget from MOEA passes “legislative reviews without questions, which shows that the institute’s achievements have won approval from all political parties.” “ITRI Has Contributed Greatly to Taiwan’s Premier,” Asia Pulse (May 23, 2006).

195Dr. John Chen, Director of ITRI’s Display Technology Center, comments that the 50-50 split in ITRI’s funding between the government and the private sector forces ITRI to stay on-mission to remain relevant to industry. Half of its income derives from the sale of IP, technology licensing and the provision of knowledge-based services to industry. Interview with John Chen, Hsinchu, Taiwan, February 13, 2012.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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ITRI’s successes have been based, above all, on the excellence of its scientists, engineers and managers. Originally ITRI was able to draw upon a large number of U.S.-educated Taiwanese with relevant work experience in multinational corporations. Today it increasingly recruits graduates from domestic universities with strong and improving programs in engineering and the sciences. The competitiveness of the industries in the Hsinchu technology cluster “derives from the availability of a significant pool of well-trained workers and technical and managerial personnel [from ITRI and Hsinchu’s two science-based universities] who now stand in comparison with the concentration s of talent in other [global] R&D intensive locations.”196 Business Week terms this pool “one of the deepest reserves of high tech talent in the world.”197 Its existence reflects decades of public investment in education, both in promotion of study abroad and in upgrading the domestic educational infrastructure.198

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196Mathews and Hu, “Enhancing the Role of Universities,” (2007) op. cit. p. 1006.

197“Why Taiwan Matters,” Business Week (May 16, 2005).

198Soren Eriksson, “Innovation Policies in South Korea and Taiwan,” Vinnova Analysis Va 2005:03 (2005) p. 31.

Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Page333
Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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Suggested Citation:"Appendix A3: Taiwan's Industrial Technology Research Institute: A Cradle of Future Industries." National Research Council. 2013. 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program. Washington, DC: The National Academies Press. doi: 10.17226/18448.
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The Manufacturing Extension Partnership (MEP) - a program of the U.S. Department of Commerce's National Institute of Standards and Technology - has sought for more than two decades to strengthen American manufacturing. It is a national network of affiliated manufacturing extension centers and field offices located throughout all fifty states and Puerto Rico. Funding for MEP Centers comes from a combination of federal, state, local and private resources. Centers work directly with manufacturing firms in their state or sub-state region. MEP Centers provide expertise, services and assistance directed toward improving growth, supply chain positioning, leveraging emerging technologies, improving manufacturing processes, work force training, and the application and implementation of information in client companies through direct assistance provided by Center staff and from partner organizations and third party consultants.

21st Century Manufacturing seeks to generate a better understanding of the operation, achievements, and challenges of the MEP program in its mission to support, strengthen, and grow U.S. manufacturing. This report identifies and reviews similar national programs from abroad in order to draw on foreign practices, funding levels, and accomplishments as a point of reference and discusses current needs and initiatives in light of the global focus on advanced manufacturing,

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