TSMC's Chang Shares Views on National Industry Development

Taiwan should target service and Internet technology to direct the future development of its industry, said Taiwan Semiconductor Manufacturing Co. (TSMC) Chairman Morris Chang when he addressed an audience in Taipei on the nation's industry policy.

When asked if Taiwan can create another mega-firm like TSMC, currently the world's biggest pure silicon foundry with market revenue exceeding NT$3 trillion (US$100 billion), Chang said that Taiwan's tech industry is shifting from manufacturing to service, in line with such global changing trend.

He cited China's Internet service providers Alibaba and Tencent to substantiate his stance, saying that online shopping has grown into a huge industry in China, and that Taiwan's businesses of the future will not develop towards manufacturing like TSMC, but instead will  stress technology and Internet services.

As for the island's financial industry, Chang said that Taiwan lacks one that is well developed, a scenario that could have been different should the banks have opened branches overseas, especially in China. He also stressed that such move is too late now.

Chang said that in the United States and the United Kingdom, the financial industry contributes around 20-35% of gross domestic product (GDP), adding that as high as 40% of American university graduates work for the financial sector.

Some 20 years ago Taiwan led China in both the development of the financial and service industries, but now lags far behind, confirmed by the global dominance by Alibaba and Tencent in online services, according to Chang.

The next most profitable companies will not be semiconductor companies, but ones capable of integrating, using, and connecting Internet technology, such as Google, Apple, Amazon, Cisco, Alibaba, Tencent, and Huawei, Chang predicted.

He said that official policies to target industries for focused development do not work, citing Taiwan's DRAM industry as case-in-point. Also, in the 1990s many countries targeted the biotechnology industry for development only to breed vicious competition.

Also citing the United States as a successful example in creating an unmatched semiconductor industry globally, Chang said the American government opened the country's semiconductor industry to the world by cautioning manufacturers to license patents worldwide.

A government only needs to set up a healthy environment for industry or face financial losses or chaos, Chang said.

On whether Taiwan is ready to set up a sovereign fund, Chang responded negatively, pointing out the rampant influence peddling among the island's banks not to mention the shortage of sovereign fund specialists and the modest size of the national coffer.

Taiwan's economy in the second half will improve over the first half as well as that in H2, 2013, said Chang.

Government leaders must have a firm grasp of the directions for the nation, said Chang regarding the role to be played by senior officials.  (KL)