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The Key Role Taiwan Will Play in Industry 4.0 According to a World Economic Forum report Taiwan is in the midst of an innovation-driven economy, but these findings are unsurprising

By Dr. Peter Hsieh

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Despite its relatively small population of 23.5 million citizens, Taiwan continues to strengthen its position as a technological powerhouse. Since the 1980s, Taiwan has taken a proactive approach to the development of emerging technologies. And while this history of manufacturing prowess still accurately defines the island, economic revolution is underway.

According to a World Economic Forum report Taiwan is in the midst of an innovation-driven economy. These findings are unsurprising given its position as a future-thinking hub of technology and engineering.

Hints of this high-tech excellence are prevalent throughout the Taiwanese economy. In 2017, Taiwan ranked third out of 159 nations for broadband download speeds. Further reflecting its robust manufacturing industry, the country produces 70 per cent of the world's integrated circuits and 90 per cent of laptops sold around the globe.

Although these figures represent what many already know, the emergence of intelligent technologies has begun to influence Taiwan's industrial trajectory. Here's a look at the impact of these new technologies, and the development of Industry 4.0 in Taiwan.

The Industry 4.0 Ecosystem

Industry 4.0 has come to represent how industrial processes leverage smart technologies such as AI, the Internet of Things (IoT), and big data. The interconnectivity that results from integrating these technologies forms the foundation of this ecosystem. For many solutions, IoT serves as the framework on which other technologies are deployed. According to IDC analysts, IoT investment will reach $745 billion in 2019. This figure represents a growth rate of 15.4 per cent over 2018 spending.

With much of this growth forecast to occur in the manufacturing industry, industrial applications are an evident source of innovation. The emerging industrial Internet of Things (IIoT) has already proven to be a big business. According to IDC forecasts, manufacturers will spend $197 billion on it this year, transport companies $71 billion, and utilities $61 billion. In contrast, consumer IoT spending will reach $108 billion. Such consumer IoT remains focused on devices enabling smart home, personal wellness, and connected vehicle infotainment functionality.

Industry 4.0 is the culmination of many different technologies. To understand Taiwan's ability to leverage these technologies, it's important to explore the independent initiatives in core industry segments.

Internet of Things (IoT)

Companies like Microsoft continue to invest heavily in Taiwan's IoT industry. Taiwan's ample supply of engineering talents and reasonable wages makes it a desirable tech hub. In response to this growth, the government's Asia Silicon Valley Development Agency (ASVDA) endeavours to raise Taiwan's global market share in IoT from 3.8 per cent in 2015, to 4.2 per cent by 2020, and 5 per cent by 2025.

IoT and Smart Medical Devices

Within the IoT ecosystem, smart medical devices are poised to make a big impact in Taiwan and subsequently, around the globe. With a medically inclined workforce falling between the ages of 40 and 70, Taiwan can draw on its human capital to drive healthcare innovation. This educated, key demographic knows what the market needs now, not sometime in the future. Against the backdrop of declining global birthrates and an ageing population, the country is well-positioned to capitalize on the growth of smart medical devices.

According to Medical Taiwan, in 2017 there were 962 million people around the world over the age of 62. This figure represents 13 per cent of the total global population. If forecasts are correct, this number will grow to 2.1 billion people by 2050. By combining its natural hardware and software talents with the knowledge of its medical community, Taiwan can leverage its unique position to emerge as a major market player.

Artificial Intelligence (AI)

Global companies such as Google, IBM, and Microsoft continue to invest in Taiwan's AI sector. Each of these companies has expressed their intentions of developing AI-centric initiatives in Taiwanese cities or has already implemented the first steps.

AI and Smart Medical Devices

Taiwan has also seen significant investments in the integration of AI and smart medical devices. With 24 million inhabitants, fewer hospitals, and an ageing population, there has been a strain on the country's healthcare system. According to a MOHW report, the Taiwan National Health Expenditure amounted to $33.6 billion in 2016, equating to 6.3 per cent of the nation's GDP. With these costs forecast to grow at a rate of 4.7 per cent annually, the pressure of limited resources is set to intensify.

In order to tackle this problem, Taiwan's current president Tsai Ing-wen is investing substantially in smart technology initiatives. In a bid to support AI startups, the country established an "AI Innovation Hub" that will help develop approximately 100 companies. In addition, tax credits are encouraging an influx of foreign talent. By leveraging the strength of its manufacturing and IT capabilities, Taiwan is poised to deliver valuable AI integrations in the medical device industry.

Supporting Industry 4.0 in Taiwan

Beyond the specific initiatives underway in various Industry 4.0 segments, there are also critical economic conditions that will enable ongoing innovation in Taiwan.

Smart Machinery Development

Taiwan is home to the highest density of machinery plants in the world with more than 13,000 factories. A majority of the manufacturing activity is located in Taiwan's "Golden Valley" in Taichung City, and the government is making efforts to support smart manufacturing development. For instance, it launched a smart automation initiative in 2011, proposed a Productivity 4.0 plan in 2015, and promoted the 5+2 Industrial Transformation Plan in 2016.

All of these initiatives are part of the larger Smart Machinery Industry Promotion Project with the goal of turning Taiwan into a hub for smart machinery development.

A High-Tech Workforce

According to the Organization for Economic Development, Taiwan has a 98.5 per cent literacy rate and the fourth highest standardized math test scores in the world. Further, over 25 per cent of all university degrees are in engineering. As a result, many continue to see Taiwan as a desirable hub for further investment.

The Startup Ecosystem

In February of 2018, the National Development Council of Taiwan introduced the Action Plan for Enhancing Taiwan's Startup Ecosystem. This initiative represents five strategies and 40 measures to better support the high-tech startup ecosystem in Taiwan. To make Taiwan an Asian startup funding hub, the government intends to scale fundraising by NT$5 billion ($160 million) annually, until 2023. Having a robust ecosystem of startups that can develop accessible and affordable technology will help drive the Industry 4.0 revolution.

Transitioning to the Future

Taiwan is well-positioned to become a leader in Industry 4.0 development and implementation. As the transition to intelligent industrial technologies persists, the nation can draw from its many strengths. With government initiatives spanning AI, IoT, and other industries, Taiwan is proving it's ready to take a leading role in industrial innovation. Armed with a highly educated, high-tech workforce and an emerging startup environment, Taiwan also possesses immensely valuable human capital. As the integration of intelligent technologies continues to evolve within the context of Industry 4.0, the island is poised to become a key global player.

Dr. Peter Hsieh

General Partner, Acorn Pacific Ventures

Dr. Peter Hsieh is a General Partner at Acorn Pacific Ventures, an early stage venture capital firm with a focus on global technology strategies in North America and Asia. Peter is one of the few venture capitalists that has about 10 years of direct living and venture capital experience in Silicon Valley, and another 10 years of the same in Greater China.
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