By the end of 2020, the COVID-19 pandemic, which reportedly started in the December of 2019, has caused more than 82 million cases and 2 million death. Currently some countries have begun to vaccinate, but they also have been hampered by the new virus variation. Taiwan has just announced that it will start to lock the country for one month in January 2021 and prohibit foreigners from entering. Therefore, it is necessary to observe whether the pandemic will be worse than expected and more difficult to control. Compared with SARS in 2003, MERS in 2012, COVID-19 in 2019 by far has the largest impact. The World Health Organization (WHO) warns that the cycle of emerging large-scale infectious diseases has shortened, indicating that the frequency of large-scale fatal diseases in the world may be entering a "New Normal" stage in the future.
Major Changes in Human Behavior
Based on research reports around the world, after the pandemic, the "New Normal" will prompt some people to undergo major changes in their behavior patterns, including:
Low-touch social interaction methods:
From the previous booming social networking to maintaining a safe social distancing, no hand shaking or wearing a mask is becoming less offensive and more common.
Mixed work and living fields:
In the past, companies were not accustomed to using remote work for employees. In the future, they will not only be more used for working from home, and be gradually moving to ubiquitous work from anywhere, and even further to use “working hub” between work place and home to avoid being disturbed by other things at home.
More suitable for digital consumption:
The elderly, young, and children are more accustomed to using online shopping and online experience. And because of the use of non-contact payment methods, the use of third-party payment has been accelerated.
More attention to public health:
More people attach importance to food safety, personal health, public health, and the legitimacy of accepting electronic health records because of pandemic prevention, and tolerating pandemic prevention policies or accepting the legitimacy of using personal information.
Reduced willingness for crowd activity:
People will reduce their participation in large-scale crowd activities. In addition to increasing home activities, they will also be more willing to go to open areas in outdoors because they cannot bear to stay indoors over long period of time.
Reduced demand for public transportation:
People will reduce the use of public transportation, or even reduce ride-sharing services, and increase the use of private vehicles.
Among them, the behavioral changes of "Reduced willingness for crowd activity" and "Reduceddemand for public transportation" will not only affect the relationship among people, but also reduce the utilization rate of green transportation or ride sharing, affecting what has been advocated for energy saving, carbon reduction and environmental protection. In the future, it should be through innovative pandemic prevention technology to increase everyone's confidence in health protection and return to the track of their original efforts in environment protection.
Major Changes in Enterprise Operations
In addition, if a large-scale pandemic becomes the "New Normal," many companies will have major changes in their business models in order to increase risk management and accept emerging employee behaviors in workplace, including:
Rise of remote work:
Work remotely for employees will become one of the more accepted options, and also as the new workplace culture for enterprises.
1.5m Economy as New Normal:
Enterprises will pay more attention to a socially safe working environment, and will actively grasp relevant business opportunities in response to new service models which are automated, unmanned, and low-touch.
Omni-channel marketing era:
Customers' cross-channel digital footprint, data-driven marketing and business decisions will affect digital marketing, thus help embracing the era of customized and precise marketing early.
Increased investment in digital technology:
Enterprises are expanding their investment in remote collaboration tools and virtual and real integration. On one hand to strengthen the digital integration of customer experience, and also on the other hand to enhance network security protection.
Improving resilience in enterprise operations:
Many enterprises will improve the capabilities required for operational recovery, such as supply chain flexibility, transparency, resource inventory, disaster simulation, remote backup, and rapid manufacturing relocation.
Increasing social responsibility for the safety of the pandemic:
During the pandemic, many companies showed their care for employees, consumers and society. At the same time, they will be more in compliance with government health policies and travel restrictions.
5-0 Business Opportunities in 2020-2030
This year, due to the COVID-19 pandemic and the US-China science-technology war, many Taiwanese companies have returned to Taiwan to invest in high-end manufacturing and high-tech R&D. In the future, the government should consider how to assist the global footprint strategy of the manufacturing industry, while encourage companies to keep high value-add in Taiwan for enhancing the resilient industry ecochains. First of all, the short- and medium-term business opportunities that Taiwan’s industries must grasp in 2020 include the "0-Touch Economy" with a 1.5-meter social distance and the "0-Border Manufacturing" with a global footprint strategy. Furthermore, looking out to 2030, there will be more long-term opportunities and higher challenges, including the "0-distance innovation" for smart living, the "0-Burden Health" for healthy life, and sustainable environment "0-Pollution Ecosystem" for sustainable environment.
Figure 1: 5-0 Business Opportunities in 2020-2030
Because pandemic prevention needs to avoid physical contact, many activities such as food, clothing, housing, transportation, and entertainment will be conducted in a non-contact mode as much as possible, including various onsite detection technologies and remote systems through the Internet. In the past, the development of the digital economy emphasized the expansion of social networks, but now because of the pandemic, it is necessary to maintain a social safety distance of 1.5 meters. Many of the functions that have been heavily used this time, such as remote meetings, remote operations, online teaching, remote care, and food delivery, are emerging business opportunities that need to be grasped immediately. Past history shows that even after the pandemic, the people's usage habits may slightly return to the pre-pandemic mode, but some new usage behaviors or new lifestyle habits may accelerate the acceptance, or even mix with the original mode.
Because of the two major trends of US-China technology divide and pandemic risk control, the existing division of labor in the manufacturing supply chain will face challenge. In the future, the manufacturing industry will move toward a global footprint of decentralized manufacturing, rather than being concentrated in a very small number of countries. In the past, the manufacturing industry mostly used one or two countries with lower labor costs as production bases, and exported them to all parts of the world through the WTO's low-tariff reciprocal model. However, in recent years, many large countries need to take care of local economies and employment opportunities, and gradually require global manufacturing to be transferred to local manufacturing in various countries. High intelligence and automation will be the focus of technological innovation and application in advanced European and American countries to reduce total manufacturing costs.
In the long run, smart life will extend from today's "Zero-Touch Economy" model, through the integration of cloud and edge technology, to provide remote users with intimate and warm experiential services and business models without distance. The so-called "physically separated but virtually connected" experiential service is to use cloud technology to narrow the distance between each other with online and offline integration, thus displaying extensive experience models to users. Take tele-conferencing as an example, although the tele-conferencing system is used for meetings or small talks, the current tools are less able to maintain body language or contact when interfacing with people, or to understand the mental focus of participants from remote sites. It is also impossible for technology to show the temperature of "people-centric." These challenges represent unmet needs and future business opportunities which can potentially be solved through innovative technology.
In response to the trend of aging and declining birthrate, healthcare in the future will become an important social policy for many countries. Both caregivers and care recipients need to better attention. However, the social cost of healthcare will also be a problem to be resolved by government financing. Therefore, how to move towards precision health of people while incurring the lowest burden? In addition to the cross-ministry cooperation among government organizations, financial income must also be resolved through the establishment of cross-industry and cross-field ecosystems. Even through big data analysis, the establishment of new business models can help share the financial burden.
Before the COVID-19 outbreak, sustainable environment generally talked more about green energy, energy saving, emission reduction, and circular economy. Now, after the pandemic outbreak, everyone is now aware that the scope of sustainable environment should also include elements of resilient ecosystem. Therefore, instead of recycling and reusing the product at a higher cost after the product is discarded, the concept of low pollution and recycling should be added to the source of product design in the future to reduce cost from the redundancy of recycling and reuse.
In order to advance the deployment of the new era of post-pandemic disease, the innovation framework of "0-Touch Economy, 0-Distance Innovation" proposed by the Industry, Science and Technology International Strategy Center (ISTI) of Industrial Technology Research Institute (ITRI) is to assist the industry with agile and focused innovation with integrated digital technology, thus providing remote users with emerging application services and business models which are "far away in the cloud but all in front of people’s eyes" through the integration of cloud and edge technologies, and experiencing intimate and warm services at zero distance. This framework’s architecture has four types of models (Figure 2).
Figure 2: Architecture for “0-Touch Economy and 0-Distance Innovation”
Renewed Time and Space:
After the outbreak of the COVID-19 pandemic, some remote models which were not previously accustomed to by the mainstream, such as remote work, remote medical care, food delivery, online gaming, online education, etc., began to be accepted by people via "Renewed Time and Space" due to the need to avoid closed contact for "0-Touch Economy." After a large number of users have poured in, because the system has never undergone major "stress test," many problems such as network bottlenecks, information security concerns and user experience have gradually occurred. The service providers urgently adjusted the hardware and software architecture and service design at this time. They made it possible for schools, which could not use physical teaching during the pandemic, to replace traditional online teaching, which are mostly non-real time broadcasting, with live broadcasting which has accelerated remote education that is becoming more popularized.
By using smart automation, unmanned vehicles or smart customer service to replace humans with machines, “0-Touch” can be achieved with the effect of uninterrupted production and service during the pandemic prevention period. However, for small and medium-sized enterprises in the past, smart factories, Industry 4.0 or smart customer service, because of high entry barriers and high cost, will be regarded as irrelevant and out-of-reach slogans. However, the development of smart set-top boxes allows manufacturers to perform intelligent manufacturing processes such as process data collection, remote monitoring and operation, machine communication, and machine work allocation without total equipment replacement. Similarly, reservation and food ordering through cloud system, and mobile payments provide more hygienic and safer processes for consumers to take a meal with peace of mind and willingness.
In order to fight the pandemic, all institutions or public places need to track the body temperature of visitors or employees. Although thermal imaging sensors in the past have the concept of “0-Touch,” due to technical limitations, people still need to wait in line for testing. Long queues often increase the risk of exposure for workers or students during peak hours. Thorough the technology development project supported by the Department of Industrial Technology (DOIT) of the Ministry of Economic Affairs (MOEA), ITRI has used the infrared image detection technology, originally designed for the smart long-term care for elderly, through the value-added innovation of the project team to transform from consumer market applications to pandemic prevention applications. This "thermal image abnormal body temperature detection technology" developed by ITRI has "indoor and outdoor usages," "multi-person dynamic measurement" and "easy to quickly deploy" features to provide "Reinvigorated Services" at “0-Distance” and solve many pain points. This technology also can help people to quickly invest in the pandemic prevention and future innovative applications.
In this wave of pandemics, of the people mostly affected by the pandemic are those in the tourism industry which relies on attracting tourists to generate wealth. They can use the aforementioned “0-Distance Innovation” strategy flexibly to avoid sitting still for nothing. For example, the "Redesigned Operations " can be achieved by incorporating smart customer service and digital marketing; The use of 360-degree panoramic technology or a live broadcast platform to remotely present scenic spots and travel experience for "Renewed Time and Space"; Using e-commerce platform or application tools to promote featured products, the "Reinvigorated Services" expands customers from tourists to general consumers. These innovated measures all have opportunities during this pandemic to create a secondary financial source, maintain customer reservations for future consumption, and rebuild cash flow.
In addition, due to the fact that the industry resilience of Taiwan's traditional tourism industry is generally inadequate, their travel businesses and operational models in the recent years have been challenged by new tourism innovations and changes in consumer behaviors driven by the rise of sharing economy.
Therefore our tourism industry should consider thoroughly about the transformation of their own industry roles and positioning. For example, making good use of human resources to create digital content for tourism such as VR (Virtual Reality), AR (Augmented Reality), and CR (Cinematic Reality) mixed with real scenes. Using various MR (Mixed Reality) technology to move foreign attractions to Taiwan through online technology, promote Taiwan attractions globally through online platform, or even create virtual scenic spots, can help tourism companies who used to rely on real scenic spots for their livelihoods, to reshape their own industry roles by owning sightseeing spots or theme parks to achieve "Renovated Industry" with “0-Distance.” They not only can create new revenue channels for themselves, but also strengthen their own corporate resilience. When the next disaster or virus variant strikes, they can diversify risks and welcome opportunities.
Looking to the future, many new applications and business opportunities will emerge in the post-pandemic era. It is recommended that Taiwan should embark on advanced deployment and accelerate the implementation of the following policies for key industry development:
Capture the business opportunities of epidemic prevention technology:
The effectiveness of Taiwan’s epidemic prevention this time has been noticed by the world. In addition, Taiwan’s medical standards, comprehensive health insurance data, and ICT manufacturing capabilities are recognized by the world. Therefore, Taiwan should be able to capture the future business opportunities for applications related to healthcare and epidemic prevention technology in the future, thus creating “3-Stage and 5-Level” of needs for "Epidemic Prevention Technologies" (Figure 3). For example, business opportunities related to "Pre-epidemic Protection" include: epidemic prevention equipment (e.g. masks), physiological detection (e.g. thermal imaging temperature detection), body temperature monitoring, and rapid screening; Business opportunities related to "Response to Epidemic" include : Virus therapy drugs, respiratory therapy devices, intensive care systems, remote diagnosis and treatment, online monitoring and rehabilitation systems; In addition, opportunities for "Post-Epidemic Care" include: Smart rehabilitation systems and medical materials, home management, and autonomous mobile robots . Even Taiwan's industry, government, academics and research institutions should actively join the international epidemic prevention related alliances. Not only Taiwan can join the international ecological contribution in the field of biomedicine, but also help Taiwanese companies enter the international biomedical, mechanical, and electronic information related markets.
Figure 3: Initiate “Pandemic Prevention Technology” Needs
Strengthen the Smart Value of Manufacturing by Taiwan
Although Taiwan does not have a large domestic demand market, there are many Taiwanese manufacturing factories and supply chains all over the world. These are the largest de facto domestic markets for Taiwan's smart machinery and related application systems. However, Taiwan’s past OEM manufacturing model with large revenues but small profits has continued to upgrade its smart manufacturing capabilities through the "Industry 4.0" transformation over the past few years. Also as a result of the epidemic and the US-China technology divide, many Taiwanese companies have moved overseas factories back to Taiwan and expanded its local production capacity.
In the future, Taiwan’s overall manufacturing policy should consider how to play the "Smart Taiwan Value" and launch "Made by Taiwan" with global manufacturing footprint strategy with company headquarters in Taiwan plus overseas manufacturing bases. The so-called "Smart Taiwan Value" refers to achieving the holistic value of "Innovation Economy, Inclusive Society, and Sustainable Environment" through the Taiwan style of "Manufacturing Kung Fu × Service Industry Spirit" for system integration of software and hardware. By working closely with global consumption and supply ecosystems, Taiwan industries can become a key partner for co-innovation and mutual prosperity.
The global footprint strategy of "Made by Taiwan" is to establish the global manufacturing headquarters based in Taiwan for assisting the management of key operations of overseas factories (such as operation monitoring, defect rate analysis, etc.) through remote systems to satisfy the needs of smart manufacturing. Advanced technology R&D and local pilot plants can be first piloted in Taiwan before being rolled out to other regional factories. The R&D talent invested in the Taiwan headquarters can create higher value locally. On the one hand, it can allow Taiwan to join the ecosystems of science and technology centers in the world. On the other hand it can continue to recruit globally top R&D and application talents and cultivate locally in Taiwan to drive the overall development of Taiwan's technology industries.
For example: McDonald’s global expansion strategy for franchise restaurants is that every time a franchise store opens globally, although it is local consumption revenue, it is still closely linked to the US headquarters: Such as food research and development, training system, brand royalties, operating software system, brand advertising, profit sharing system, etc. For the overall Return on Investment (ROI), the ROI ratio of the headquarters will be higher than that of each branch. In addition, take the famous semiconductor equipment manufacturer ASML as an example: Its R&D headquarters is located in Veldhofen, the Netherlands. The most advanced EUV exposure machine products are high value-added products. A new EUV exposure maneuver costs more than 100 million US dollars. In terms of expenditure per employee, ASML ranks second in Europe, and high value-added activities such as R&D, procurement, and manufacturing services remain in the Netherlands. Nonetheless, ASML is actively using Mixed Reality (MR) technology in 60 locations around the world for long-distance installation and maintenance services, while providing local technical service for talent cultivation, non-profit activities for green environmental protection. Also ASML is committed to working with the key partners of local semiconductor industry to create and prosper together, so that the "Smart ASML value" can be brought to the highest level.
Assist SMEs with technology services
Taiwan's service industry and small-and-medium manufacturing industry, although overall accounting more than 60% of GDP and employment contributed by the service industry, and over 96% of the total manufacturing industry belonged to the small-and-medium manufacturing industry, have long been in lack of innovation momentum due to large enterprises having stronger financial resources and talents. It is more difficult for these smaller industries to attract science and technology talents, especially facing difficulties such as transformation and value upgrading.
Before the pandemic started, Taiwan’s smaller industries had already been impacted by the global technology trends. After being hit by the epidemic in Taiwan, nowadays, not only the government’s “bail-out” resources were needed for many industries to survive, but also the “revitalization” strategic support plan should be planned as soon as possible. Instead of directly feeding fish to the hungry people, it is key to think about how to give the fishing rod and teach people how to fish. For example, through the "Technology Service Industry" based on emerging technologies (such as software development, system integration, technology platforms, R&D testing, and technology consulting), professional consulting, planning and introduction of technology solutions can be provided to assist the service industry and small and medium-sized manufacturing industry via successful transformation and upgrading to strengthen future competitiveness.
Build Resilient Industry Ecochain
In the face of the digital transformation trends due to digital technology, many countries will inevitably ask for localized manufacturing industries, which will force Taiwanese manufacturers to establish a global footprint. Therefore, Taiwan’s industries must be transformed and upgraded in all aspects - like a person doing fitness training to have stronger body and clear mind. There are four major needs from the industries: 0-Touch epidemic prevention to make immunity more worry-free; Uninterrupted operation to make the body stronger; Decentralized manufacturing to make the hands and feet more agile; And Smart decision-making to make the brain wiser (Figure 4; Excerpt from the topics discussed at the 2020 R&D Strategy Meeting of the Department of Industrial Technology, the Ministry of Economic Affairs).
Figure 4: Future Industry Needs for Taiwan Resilient Industry Ecochains
0-Touch epidemic prevention:
Using remote monitoring/collaboration/maintenance, personnel on-site operations to reduce or avoid personnel infection in a 0-touch environment. After the outbreak of this epidemic, many factories encountered equipment manufacturers' machines had to stop operations, mainly because equipment engineers could not fly from headquarters to manufacturing sites. Therefore, the ability of remote collaboration and maintenance in the future will become part of competitiveness. Equipment manufacturers need to develop innovations for related technology applications.
Therefore, "0-Touch Epidemic Prevention" emphasizes that companies use cybersecurity, automation, or autonomous technology to provide employees or customers with a "0-Touch” epidemic prevention environment: When the epidemic starts raging, companies can protect the health of employees or customers and avoid personal contact or gathering, and start remote operations (such as work from home, remote maintenance and training), and introduce a resilient, data-safe operating platform. For example, during the epidemic, iWECARE and Special Topology Technology cooperated to use temperature sensing patches for intelligent epidemic prevention, combined with indoor positioning technology to track quarantined persons, to provide home quarantined people and sample-testing workers for measuring and reporting their body temperature regularly, which can reduce the human resource needs of regular visits by medical staff.
Producing according to customer needs, and managing the self-control of key materials in order to maintain continuous production, non-stop machine operation, non-stop service, fast recovery, etc. Therefore, in addition to a single production base, there must be a diversified backup system, including materials, equipment, systems, personnel, etc. It also requires the design of an emergency support system across different production bases.
Therefore, "Uninterrupted Operation" means that the company is ready for any emergency at any time, and must evaluate and review value activities to establish comprehensive backup system according to the degree of risk, including materials, equipment, systems, personnel, etc. The emergency support system is designed to ensure rapid recovery across different production bases. For example, during the epidemic, General Motors, a major American automobile manufacturer, urgently discussed the specifications of respirators with hospitals, and manufactured key components through 3D printing for molding duplication based on demand. Finally respirators were provided to medical rescuers to achieve uninterrupted operation.
Constructing a full-time, full-domain, full-connected, and global production supply chain system to improve the risk management and control capabilities of major disasters. Therefore, the global decentralized manufacturing needs not only large-scale manufacturers, but also local supply clusters, with ultimate ability to control total costs for maintaining global competitiveness.
Therefore, "Decentralized Manufacturing" means building a 24/7 full-time, cross-border production and supply system. In addition to having production and supply closed to customers, the system can also deploy and adjust production capacity in different places, support components or consumables, and provide real-time local technical services. These abilities are key to maintaining the international competitive advantage in midst of major changes. For instance, Fair Friend Group (FGG), a large machine tool manufacturer, has an active global manufacturing footprint with 50 production bases in more than ten countries. In the early stage of the outbreak of the COVID-19 pandemic, production and operation sites all over the world were affected. In addition to launching an epidemic prevention plan which was based on customer needs, there were also relocation of molds or components, local technical service support, before finally gaining better trust from customers, and becoming a model of “Decentralized Manufacturing.”
Using artificial intelligence to assist professional experience, achieve high-speed and accurate decision-making, and give play to the core system command capabilities. In particular, some operational expertise needs to be highly protected. Through the operation of an intelligent decision-making system, it is more effective and information confidential than through purely manual judgment.
"Smart Decision-making" is to integrate the big data from factory production and operation side, and use artificial intelligence tools to assist professional experience, pay attention to information security maintenance, and achieve rapid and accurate decision-making through data collection, analysis and visualization, for early warning or core system command capability. For example: TSMC has factories located in Shanghai Songjiang and Nanjing. Most of the manufacturing processes have been digitized and automated, and the production big data is controlled by the Taiwan headquarters. Through the information security protection mechanism, the exchange of important and key information adopts "non-landing" measures to prevent production secret being stolen, which is the best practice for “Smart Decision-making.”
Traditionally, the definition of resilience is to deal with major disruptive events, such as natural disasters (epidemics, earthquakes, floods, etc.) and human-made disasters (negligence, terrorist attacks, wars, etc.). Typically there are five measures to be taken: Diagnostics - Comprehensive diagnosis in advance; Preparation – Complete preparation work in advance; Forewarning - Early warning before the incident; Response - Rapid to respond during the incident; Recovery - Quick to recover after the impact. But in addition, Taiwan must build an innovative technology application ecosystem with high value-add and international competitiveness. By leveraging Taiwan’s unique strong characteristics, including four strong elements imitating its local creatures: High Survival (earthworm), High Resilience (bamboo), High Agility (cricket), and High Value (Taiwan black bear), Taiwan can build "Resilient Industry Ecochains" and become indispensable key partner for the global industry chains and economic systems.
Like earthworms which can still heal their wounds and even regenerate cells after being severed, in the realistic international competitive environment, Taiwanese companies must be able to survive even in the OEM manufacturing model being controlled brand manufacturers, and still can squeeze out profits for survival.
Take the domestic textile manufacturer Her Min Textile as an example. The founder Mr. Chen founded Her Min Textile in 1976 to produce all kinds of fabrics, while the second-generation successor Mr. FQ Chen insisted on making fabrics with high unit prices and complex processes, which also enabled Heming to succeed in winning orders from international boutique manufacturers such as Burberry and Ralph Lauren. However, with the rise of emerging markets such as China and Vietnam, most of the textile industry has been affected by price wars and moved out production base or changed industries. The apparel industry is also facing the challenge of rapid changes in international fashion. If customers cannot get the products as soon as possible, they cannot fight for winning the premium of fast time to market. Therefore, Her Min Textile cooperated with CloudMile to use AI to rectify the manufacturing process, use machine learning to identify fabrics, and effectively simplify the old operation methods and processes. In the past, the time from inspiration, design, sample inspection to provision of sample fabrics has changed from the original 1.5 to 3 months and reduced to 2 to 3 days. And the average time required for a new design to be brought to the market was also significantly reduced by 25% (12 months was shortened to 9 months). It successfully rewrote the destiny of the textile industry being a sunset industry, to no longer do simple and repetitive tasks which can easily be replaced, and could create added value.
Like bamboo which can swing with the wind without breaking easily, Taiwan's manufacturing supply chain must be able to continue operations continuously when being hit by major disasters.
Take the Taiwanese aerospace industry leader Aerospace Industrial Development Corporation (AIDC) as an example, due to the small and diverse characteristics of aerospace components, in the aerospace industry it is easy to produce insufficient order fulfillment, increased costs, and increased inventory, which are more likely to affect production speed and cause unstable delivery. Therefore, how to simplify mass production components, accelerate development speed, and maintaining production quality have become the key to competitiveness. AIDC cooperates with research institutes such as ITRI to introduce 3D printing to replace the manufacturing procedures of some key components (such as engine parts), and can continue to quickly produce samples based on feedback from the assembly team. Due to the characteristics of digital design and demand-based production of additive manufacturing, it can flexibly respond to the small volume and diverse order needs of the aerospace industry, enhance the autonomy of key aerospace system components, and the "additive" feature of additive manufacturing (use as needed), which also enables AIDC to achieve a cost reduction of 30% and a yield increase of more than 20% under the same manufacturing process. Under the influence of the key component shortage caused by the shock of the supply chain, the key components are pilot-produced by additive manufacturing and remodeling, so that the supply chain can resume production, which can be used as a backup capability for the continuous operation of local manufacturing.
Like a cricket which is good at jumping and can bounce to avoid enemies, as major global customers begin to demand localized production, Taiwanese companies must not only establish short-chain production systems, but also control total costs.
Take the domestic industrial computer company NEXCOM as an example. The smart factory opened in Linkou at the end of 2018. The new factory's production line from parts batching, inventory, circuit component welding, DIP plug-in, assembly, testing to boxing, are all automatically carried out by programed machines. NEXCOM Chairman Lin said, "Compared with the old production line, the new production line has reduced the number of manpower from 300 to 180, but the overall production efficiency is 20% to 30% higher." (Data taken from CommonWealth Magazine Interview). Under the two major trends of US-China technology divide and global pandemic risk control, NEXCOM has integrated sensors and MES systems on the OT (Operation Technology) side of the factory, and IT (Information Technology) such as ERP, order management systems, and QA systems. Integrate other heterogeneous data to help customers achieve a "smart factory." The battle command center built by NEXCOM allows corporate decision makers to grasp the progress of cross-regional/multinational production lines in real time, and flexibly carry out cross-site production scheduling in response to the order status to ensure operations and profits. With multinational manufacturing and short-chain supply becoming the norm, NEXCOM’s solution to “smart factory” is to make the operation process transparent, orders be transferred in different places, management be remotely monitored, and production lines be quickly adjusted, thus providing smarter and stronger manufacturing services.
For example, the black bear in Taiwan with the white V on its chest, as if to represent the unique value of Taiwan. In the global manufacturing competition, Taiwanese companies should not be striving for the first place (such as scale of output value, market share), but for the pursuit of uniqueness (such as key partners, unique technologies). The only reason is that they can create a blue ocean because of the value of innovation and avoid competing in the red sea.
Take Taiwan's most representative foundry manufacturer TSMC as an example. TSMC focuses on the advancement of advanced manufacturing processes. After the launch of the 7-nanometer "Powerful Version" process in 2019, it has gradually surpassed the international semiconductor giant Intel. It is expected to enter the era of mass production of 3-nanometers in 2022. On the other hand, it assisted AMD in manufacturing CPU and graphics chips to challenge the leader Intel. TSMC’s market value increased multiple times within two years and became a key partner of AMD.
Internally, TSMC adopts the "non-landing" measures for key information, which has data be transmitted before use and deleted immediately after use, to strengthen quality control and information security in Taiwan/Nanjing plants. It also builds a data analysis platform to assist cross-plant engineers in process development, thus increasing TSMC's average output by 60% and reducing manpower by 39%.
In summary, the value-add of TSMC’s manufacturing in Taiwan accounts for more than 90%, and Taiwan’s corporate headquarters have key process information, home-based R&D, intellectual property, and high-value production activities in Taiwan. And TSMC strengthens the protection of its own business secrets with high-level information security. TSMC continues to provide global leading technological advantages, grasps the fast-growing market segments (mobile computing, high-performance computing, automotive electronics and IoT platforms) in the future, and becomes an indispensable key partner in the international market, which examplifies a high-value model for Taiwan.
The above story is really thought-provoking. If in response to the “Decentralized Manufacturing” trend in the future, more Taiwanese companies will need to relocate to the US and European markets to produce locally. Then Taiwan’s export output value may be reduced by more than hundreds of billions, which will affect global semiconductor and other high-tech and high-level R&D talents being moved overseas together.
In the legendary history of Mongolia, allegedly one of the primary reasons that Genghis Khan’s army was so fierce in battle, and almost invincible in establishing the Mongolian empire across Asia and Europe, was that each Mongolian cavalry usually carried three horses to the battlefield: Battle horse, back-up horse, and provisions horse. The battle horse was the cavalry’s primary horse for fighting. The back-up horse was for switching when the battle horse was tired. This switch allowed the battle horse to regain strength while still running on the road without rider. The back-up horse also could replace a wounded battle horse. The provisions horse was to carry food supply, and could be killed for food if under extreme starvation cases. Therefore, the Mongolian army could make great advancement or sneak attacks by moving days and nights with high efficiency in combat, delivering the surprised effect of blitz attacks.
However, if the multi-horse strategy of the Mongolian cavalry can be imitated to think about how to use battle horse, back-up horse, provisions horse, plus flying horse (cloud computing and digital transformation), to help Taiwan's manufacturing industry deploy globally, improve industry resilience, and keep high value-add locally, then the new prospects for Taiwan's manufacturing industry can be created.
Cultivate diverse cross-domain talents
As the saying goes, "Before the army marches out, the food and forage must go first." It points out that before the military strike, the food and forage must be prepared. Otherwise, the brave army need to retreat because of insufficient food and forage preparation. In addition to the basic conditions required for the entire ecochain, the food and forage needed by the manufacturing industry include upstream materials, production equipment, environmental factors such as water supply, power supply, land, environmental protection policy, regulations, etc. And the most important thing is talent supply, including R&D, management, marketing and factory operators and others.
For the large-scale manufacturing industry, although the international trend tends to be the big ones get bigger, the talents that large enterprises need most are technical research and development talents. Johnny Shih, the Chairman of ASUS and also the elected Laureate of ITRI, once said that Taiwan’s large enterprises are battling against top competitions in the world. In every target market field, they must strive to become the top-three leaders in order to have a chance to survive in the fierce competition. However, because the talents provided by Taiwan’s top universities are limited, and the universities’ international rankings are not among the top ten, Taiwan’s demand for talent supply, in addition to expanding the quality and quantity of training for domestic students, should also hope to recruit international talents or cooperate with foreign institutions.
The Taiwan AI Academy, established in recent years, has cooperated with companies to help train engineers and applications adopters in many sessions with hands-on methods. Due to Taiwan’s limited population, it is necessary to cultivate more talents in emerging technologies and more generalists in cross-fields in order to enable Taiwan’s talents to link internationally, and strengthen international perspective and experience. In addition, how to attract international talents to Taiwan is also an important strategy.
Moreover, because of the rapid changes in digital technology, AI has become the dominant technology in the world in recent years. And semiconductors, which is the bright spot of Taiwan’s industries, will also integrate with AI, 5G communications and the Internet of Things (IoT) through edge computing. Compared with large-scale enterprises, Taiwan's small and medium-sized manufacturing industries have less financial resources and talents, and have long been limited by the lack of innovation momentum. It is more difficult to attract emerging technology talents. Therefore, the challenges of transformation and upgrading, and value enhancement are higher.
If the government, in the future planning of the “revitalization plan,” can indirectly assist the successful transformation and upgrading of the small and medium-sized manufacturing industries by providing professional consulting, planning, and introducing technological solutions through the “Technology Service Industry” based on emerging technologies, then the establishment of an industrial cooperation ecosystem can be facilitated without relying solely on government resources, but instead with a positive cycle. The "Technology Service Industry" includes five major categories: Software development, system integration, technology platform, R&D testing, and technology consulting. Many startups or accelerator members established in the past few years belonged to these categories which have attracted many young people.
Furthermore, Taiwan’s greatest resource is talented people with diverse cultures as content. If people can be the first priority, then Taiwanese people can promote cross-domain innovation, and make good use of different innovative products and services, to realize the ideals of inclusive society, sustainable environment, and distributed economics. Consequently Taiwan can effectively cultivate the local talents needed by industries and attract adequate international talents to lead domestic enterprises into the international stage.
Finally, with the advent of the digital economy, the speed of innovative technologies and business models continues to accelerate, and the scale advantages of large countries and large companies may become the big ones get bigger and the winners take all. Since Taiwan's industries cannot compete by scale in the future, they should strive for the cross-disciplinary integration of high-level expertise and applied technology to create a competitive advantage in the new blue ocean, thus enhancing their value-add. In the future, we should make good use of Taiwan’s own industrial advantages and emerging digital technologies, accelerate to deploy the "Taiwan Resilient Industry Ecochain," and join the integrated ecosystem of global manufacturing supply chain and consumer applications to make Taiwan’s industries, as a key partner, reliable for global people.
Finally, this wave of pandemic has helped the importance of Taiwan’s technology industries to be noticed by the world. Next, we look forward to Taiwan’s ability to help the world envision the future with diversified innovative applications and services, by using the "Innovative Economics, Inclusive Society, and Sustainable Environment" as the core thinking for "Smart Taiwan Value," and closely integrating Taiwan's transnational supply ecosystem with the global consumer ecosystem, thus becoming a key industry partner for co-innovation and co-prosperity. One day in the future, when we look back at 2020, a year full of black swans and gray rhinos as challenges, we could say with a clear conscience that, “In 2020 we have worked together to help the industries and the country fight this battle with our best, and let our next generation have a better tomorrow.”
This article was translated from two articles published on National Development Council (NDC) Public Governance Quarterly in 2020/12 and Chinese National Federation of Industries Industry Magazine in 2020/10.