VZCZCXRO1697
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #1967/01 2400654
ZNR UUUUU ZZH
P 280654Z AUG 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 6557
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 3802
RUEHBY/AMEMBASSY CANBERRA 4582
RUEHHI/AMEMBASSY HANOI 3376
RUEHML/AMEMBASSY MANILA 0131
RUEHGP/AMEMBASSY SINGAPORE 6980
RUEHKO/AMEMBASSY TOKYO 9019
RUEHWL/AMEMBASSY WELLINGTON 1856
RUEHGZ/AMCONSUL GUANGZHOU 0498
RUEHHM/AMCONSUL HO CHI MINH CITY 0119
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 TAIPEI 001967 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO FOR EAP/TC 
USTR FOR STRATFORD AND ALTBACH 
TREASURY FOR OASIA/TTYANG 
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN/MCHOI 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV PREL KIPR ELAB TW
SUBJECT: TAIWAN HIGHLIGHTS SUCCESSFUL TECHNOLOGY SECTOR 
 
 
TAIPEI 00001967  001.2 OF 002 
 
 
¶1. SUMMARY. Officials and foreign investors highlighted 
Taiwan's technology and financial sectors during AIT/W Trade 
and Commercial Programs Director Rick Ruzicka's August 13-17 
visit to Taiwan.  Council for Economic Planning and 
Development (CEPD) Chairwoman Ho emphasized Taiwan industry's 
high-technology prowess, an observation reinforced during 
Ruzicka's visit to a major U.S. technology investor, and 
identified finance, health care, and telecommunications as 
Taiwan's priorities for future development.  Financial 
Supervisory Commission (FSC) Chairman Hu Sheng-Cheng 
elaborated on financial sector prospects, identifying wealth 
management as a particular focus. END SUMMARY. 
 
¶2. (SBU)  Focusing on the technology sector, Council for 
Economic Planning and Development (CEPD) Chairwoman Ho Mei 
Yueh observed that Taiwan companies are cooperating with 
Silicon Valley counterparts on research and development, but 
must also increase their cooperation with Japanese firms on 
manufacturing technology.  She noted that Taiwan now has 
thirteen 12-inch wafer factories, accounting for roughly half 
of global capacity.  Taiwan firms continue to focus on 
semiconductor foundry work, explained Ho, but are beginning 
to expand their activity in the DRAM and Flash drive 
segments.  According to Ho, Taiwan firms now have 
approximately 45% of the global large-scale thin film 
transistor/liquid crystal display (TFT/LCD) market.  When 
plasma screens are included, however, Taiwan's global 
flat-screen share drops to 35%. In Ho's view, improvements in 
TFT/LDC picture quality will cause that technology to gain 
market share at the expense of plasma, which is relatively 
less energy-efficient.  Taiwan's lone plasma screen 
manufacturer has already stopped production, she added. 
 
¶3. (SBU) During an August 15 visit to U.S.-based Corning's 
Taichung manufacturing facility, its largest in the world, 
Corning management outlined their company's success in 
supplying Taiwan manufacturers with TFT/LCD glass.  Corning, 
whose cumulative investments in Taichung and Tainan 
manufacturing facilities make it the largest U.S. investor in 
Taiwan, is a leading supplier to nearby computer, television, 
and other electronic component manufacturers.  Although much 
final assembly now takes place in mainland China, initial 
assembly of flat panel displays still takes place in Taiwan. 
Corning's Taichung and Tainan operations are located in close 
proximity to Taiwan's technology clusters in the Tainan, 
Taichung, and Hsinchu science parks.  Corning executives 
expressed satisfaction with Taiwan's business climate, 
particularly what they characterized as strong enforcement of 
intellectual property rights.  Corning management also said 
the company had no problems finding and retaining qualified 
staff for its Taichung operation, and noted that 80 percent 
of the plant's staff hold college degrees. 
 
¶4. (SBU) CEPD Chairwoman Ho stated that Taiwan has identified 
finance, medical care, and telecommunications as its three 
priority areas for service sector development.  She noted 
that Taiwan authorities still control roughly 42% of Chunghwa 
Telecom.  Chunghwa now sells bonds on the New York exchange, 
however, and in the future will increase sales of equity 
holdings to hasten privatization of the company.  Overall, 
said Ho, Taiwan is trying to promote WiMax broadband, and 
Taiwan will host a WiMax forum in October in order to 
encourage the new standard.  Invoking past cooperation with 
Intel, Ho said Taiwan will encourage cooperation with U.S. 
firms on next-generation wireless technology.  In the 
meantime, she explained, Taiwan is coordinating with Japan, 
Korea, and others in the region on setting a new wireless 
standard. On health care, Ho identified joint and liver 
transplants, research, and therapy as an area of competitive 
advantage which Taiwan hopes to exploit, in part to provide 
another stream of income for Taiwan doctors and hospitals 
caught up in the contortions of the pharmaceutical sector's 
"black hole" pricing gap (see also septel). 
 
¶5. (SBU) Financial Supervisory Commission (FSC) Chairman Hu 
 
TAIPEI 00001967  002.2 OF 002 
 
 
Sheng-Cheng outlined financial sector reforms in greater 
detail, noting that Taiwan plans to allow insurance companies 
to invest up to 45% of their assets abroad, up from 35%. 
Delineating between Taiwan and China research and development 
(R&D) capabilities, Hu asserted that the majority of foreign 
R&D investment on the mainland is oriented toward adapting 
products to the Chinese market.  In contrast, he maintained, 
Taiwan has more advanced capacity in basic R&D.  Hu also 
highlighted Taiwan's plans to develop its capacity as a 
wealth management center, noting that UBS has recently opened 
two new Taiwan branches to focus on wealth management 
services, and that Mizuho and Standard Chartered are also 
expanding their Taiwan operations in this area. 
 
¶6. (SBU) COMMENT.  Taiwan's technology sector is flourishing, 
but sustained success is likely to depend on continued legal 
reform and liberalization, as well as maintenance of Taiwan's 
vaunted ability to remain ahead of the technological curve. 
On that note, a Corning interlocutor sounded a prescient note 
when he observed that Corning has built a finishing plant 
outside Beijing.  Taiwan is not alone in this race.  END 
COMMENT. 
 
WANG