The WTEC study team found evolving developments in the level of capabilities and strategies of the companies it visited in Taiwan, as shown in Table 5.11. The site report summaries in Appendix E describe each company's strategy and capabilities. Most companies are strong in contract manufacturing (CM) of electronic components and systems, using standard "long-lines" for SMT assembly. Some firms have moved beyond contract manufacturing and are designing original products for their customers. These original design manufacturers (ODM) are growing rapidly. Tatung, one of Taiwan's oldest brands and most established original equipment manufacturers (OEM), also sells products designed for major customers (ODM), and provides contract manufacturing (CM) for high-end notebook computers. The WTEC study team visited the production line for notebook motherboard and final assembly operations. The company was strong in all skills, but had limited sales and distribution capabilities outside of Taiwan.Table 5.11
OEM - original equipment manufacturer; ODM - original design manufacturer; CM - contract manufacturer
Inventec has developed excellent manufacturing skills and is designing most of its customers' products. Inventec has used its capabilities to establish its own BESTA brand for Chinese electronic dictionaries. The BESTA dictionary dominates the Taiwanese market and is growing rapidly in mainland China. In 1996, the company had been producing Apple's Newton-based PDA for nearly four years. The company uses advanced TAB equipment for assembly of its PDAs and daughter cards. Inventec designed and produces Compaq's high-end LTE 5000 series notebook computers. Inventec's SMT production lines are the most advanced visited by the study team. The lines include automated through-hole placement and selective soldering machines.
GVC is becoming heavily involved in the design of multimedia computers for major OEM customers, targeting the top ten brand names in computers and developing new designs for companies like Packard Bell. GVC's long-line SMT assembly was typical of those seen in Taiwan.
OSE was the only fully integrated electronics manufacturer the team visited. OSE packages a full line of semiconductor products and assembles a wide range of motherboards and PCMCIA cards. The company has begun to package BGA and MCM products and is beginning to produce daughter cards for notebook computers. The company is also assembling completed notebooks.
Nan Ya is a fully automated PCB fabricator with world-class production facilities. Operations use CIM technologies for inventory and production control, and major investments have been made to maximize productivity gains. At the time of the WTEC visit, a new factory was being built to double capacity using the most advanced technologies and practices.
Overall, the WTEC team found Taiwanese companies to be well-managed and aggressive competitors. They are moving labor-intensive operation offshore, to China, Malaysia, and the Philippines, while they upgrade their own technologies and capabilities to stay competitive. The overall strategy is to ensure that Taiwanese contract manufacturers (CM) can produce the most advanced products and components, and can stay competitive in costs with offshore production. In addition, many companies are seeking to add increased value by creating original product designs for their customers. By designing "ready to go" products in advance of their customers' needs, Inventec and GVC are growing rapidly, at rates of over 50% annually. More and more companies are looking at developing ODM capabilities, but are restricted by the shortage of design engineers. The National Chip Implementation Center is training 300 professors and 1,000 IC designers each year in an attempt to address this shortage.
The Taiwanese government places heavy emphasis on education, encouraging everyone to get at least a high school degree. A BERI report ranked Taiwan's labor force number one among 17 newly industrialized nations. Much is invested in education, and many students go overseas for degrees in engineering. Due to a shortage of factory workers, the structure of the local labor market is changing. Nearly 25% of the factory workforce is composed of foreign workers. Most companies recruit Philippine employees because of their English language skills, excellent education, and strong work ethic. They earn around $750 per month plus dormitory costs.
In Taiwan, two 12-hour shifts are used instead of three to maximize productivity. Four shifts rotate two days on, for 12 hours per day, and then two days off. For sophisticated equipment like semiconductor equipment, it takes 30 minutes to an hour to make the transition. Three shifts loses significant productivity due to shift changeovers.