Taiwan is not the first country that springs to mind when thinking about the automotive supply chain, except to those companies that deal directly with it. Yet it commands 2.6% of the global auto electronics market, and is the number one country for automotive microchips, with a 43% share of world trade.
However, its position is under threat because of the lack of free trade agreements with other countries and the aggressive trading policies being pursued by some of its neighbours, particularly South Korea.
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Cynthia Kiang, the Deputy Director General at the Bureau of Foreign Trade within Taiwan’s Ministry of Economic Affairs, says that South Korea currently has nine such agreements covering 47 countries – not including the latest with Canada and Australia – while Taiwan has only two affecting five countries. While 36% of South Korea’s export trade attracts zero tariffs, the figure for Taiwan is only 9%.
“The high tariffs faced by Taiwanese makers are a major problem,” she said when just-auto spoke to her at the fourth annual Taiwan EV Show. “We need to be better integrated into the global economy and to increase free trade agreements.”
Yet on the face of it there seems to be little to worry about. Taiwanese auto parts exports totalled US$6.6bn (GBP4.5bn) last year – up by US$1bn on the year before. The country’s auto electronics sector contributed US$4.4bn towards that total – 12% more than in 2012.
But with the ratio of electronics applications per car expected to rise by 40% over the next few years as connectivity and advanced driver aids become more commonplace, Taiwanese companies are anxious not to lose their foothold in the market through uncompetitive trading terms.
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By GlobalDataFu-Hsiong Cheng, the Vice-chairman of the Taiwan Electrical and Electronic Manufacturers’ Association, expects the value of computer chips in cars to rise from around 14% of total production costs now to as much as 30% within the next few years, and the number of chips per vehicle to reach 200 or more.
Electronics is the number one industry in Taiwan and some of its companies are major suppliers to the global auto industry. Fukuta is currently the sole provider of electric motors to Tesla; Chroma makes power electronics for Tesla; Renesas has a 40% share of the world market for automotive microchips and lists BMW as one of its major buyers; Tatung supplies motors to the burgeoning Chinese EV market and has eyes on Europe next, while 70% of Go Tech’s battery trade is in the automotive sector – mainly electric scooters in China and South-East Asia at the moment, but it has ambitions to get into the European electric car market within the next 12 months.
One of the problems for Taiwan, says Kiang, is that it did not join the World Trade Organisation until 2002 and even last year, at the Doha round of talks, was “not fully dedicated to participate”. She explained: “Taiwan did not start until 2002, when we signed our first agreements with countries in Central America, but neighbouring countries have been very aggressive in signing agreements. The most competitive of all is South Korea.
“We have agreements with five countries with which we have diplomatic relations, but that covers only 1% of our total trade. We are now approaching a lot of trading partners. We have signed an agreement with New Zealand, which has been in force since February, and will soon sign with Singapore.”
China is Taiwan’s top trading partner, accounting for 39% of the country’s exports if Hong Kong is included, or 27% if it is not. “We have an economic co-operation framework with China which covers 139 items at zero tariffs and are negotiating a trading services agreement with China, but some people have concerns about that so it has not yet passed the legislative procedure,” says Kiang. “We want to see the passage of that agreement, first for services and afterwards for goods.”
Roger Stansfield
