New Alliance for Automotive Electronics Development in Taiwan

Four local manufacturing associations-the Taiwan Transportation Vehicle Manufacturers' Association (TTVMA), Taiwan Electrical and Electronic Manufacturers' Association (TEEMA), Taipei Computer Association (TCA), and Taiwan Mold & Die Industry Association (TMDIA)-recently established the Taipei Cartronics Promotion Office (TCPO) to better promote the development of automotive electronics.

TMDIA secretary general and TPCO CEO Johnson Tsai claims that developing Taiwan's automotive electronics sector requires the widest possible cooperation. "With the collaboration of the four major industrial associations, which together have more than 6, 000 corporate members, " Tsai says, "the TCPO is expected to be a cross-industry platform that integrates available resources for the more effective development of automotive electronics in Taiwan."

The TCPO is scheduled to host the Taipei Automotive Electronics Show on Aug. 17-20, 2006, which will focus on automotive entertainment, safety and fuel economy. Theme pavilions will be set up for onboard units (OBUs), engine/transmission systems, automotive body systems, safety, and security. The show will be the first automotive electronics fair on the island.

Chang Li, TCA deputy secretary general, says that there will be a big leap in the integration of 3C (computer, communication, and consumer electronics) and car electronics, which are the new "fourth C." But Chang reminds companies interested in stepping into the field that automotive electronics require high standards of safety, stability, and reliability, as well as long certification processes by automakers.

Beginning this year, the automotive electronics line has become a common focus for both the government and the private sector. Economics Minister Ho Mei-yueh has claimed that the government plans to pour NT$10 billion (US$301.2 million at US$1: NT$33.2) into the promotion of this sector in the coming few years.

The moves in the private sector are also extensive. The Yulon Group, the largest auto-manufacturing conglomerate in Taiwan, has joined with several leading IT and electronics conglomerates, such as Hon Hai, Quanta, and Compal, to form the IA (IT and automotive) electronics development project. The IA participants plan to jointly invest NT$5 billion to NT$10 billion (US$150.6 million to US$301.2 million) in setting up a new company soon.

According to statistics compiled by the local Topology Research Institute (TRI), the global production value of automotive electronics was about US$122.4 billion in 2004, about half the value of the overall semiconductor market, and double the notebook PC production value.

A senior analyst at an electronics firm pointed out that in the early 1980s, electronics equipment on a car accounted for only about 2% to 3% of the total cost of a car, but the ratio is expected to jump to about 40% in 2010 (or much higher on luxury car models). The booming development of the automotive electronics business is extremely attractive to local IT and electronics makers, most of whom are suffering thinning (5% to 6%) profit margins with "traditional" high-tech products.

Auto parts makers in Taiwan, like their counterparts in other Asian nations, are also witnessing an unprecedented opportunity to grab outsourcing orders from international automakers, especially in the U.S. and Europe, which are loosening their traditional supply chains and looking for new ways to control costs.

Pushing Forces

Local subsidiaries of big foreign auto brands also find their roles changing. The first to respond to the burgeoning importance of IA is local automaker Ford Lio Ho Motor Co., a subsidiary of Ford of the U.S.

Jeffery Shen, president of Ford Lio Ho, recently claimed that his company has decided to play a bridge role on the island to help local IT and auto-parts makers develop their automotive electronics business. Shen believes that Taiwan is well-suited for developing auto electronics because of its solid IT industry infrastructure and mature auto-parts manufacturing capability. On the other hand, Ford's American headquarters fully understands the competitiveness and strength of Taiwan's IT and electronics lines and is planning to cooperate with local companies.

According to Shen, Ford Lio Ho now has 89 parts suppliers that have received Ford's Q1 quality certification, making them qualified suppliers in Ford's global supply chain. Ford Lio Ho will more actively persuade its American headquarters to turn its auto-electronic procurement focus to the island in the future, Shen says.

Shen points out that the financial woes of leading global auto-parts suppliers, such as Delphi and Visteon, have brought new opportunities for auto-parts makers in Taiwan.

Ford Group is considering the possibility of setting up a joint venture with local partners, including Hon Hai, to focus on the development and production of auto-interior automotive electronics products.

Shen refuses to comment on Yulon Group's IA automotive-electronics development project, in which the government will have a 30% stake.

Yulon, a local automobile production conglomerate that has been trying to achieve more technical independence from foreign partners, wants to develop its automotive electronics business. To do so, the company recently named a new president for the Yulon-Nissan Motor Co., while the company's former president, Liu Yi-chen, will move over to take control of Yulon's newly formed IA project. (December 2005)