Taiwan to Develop Local Software Industry

By Gwynne, Peter | Research-Technology Management, January/February 1993 | Go to article overview

Taiwan to Develop Local Software Industry


Gwynne, Peter, Research-Technology Management


In a departure from its traditional emphasis on computer hardware development, the Taiwanese government is encouraging the growth of an indigenous software industry.

This could provide a powerful source of competition for American firms which have dominated this critical industry since its inception.

Taiwan has long encouraged the development of high-tech products through its network of science and technology parks. But most of the start-ups and other occupants of the parks that have concentrated on the computer business have restricted themselves to hardware. Taiwanese government agencies, which are ultimately responsible for administering the parks, have also done little to encourage an indigenous software industry in the past.

Now, that's changing. Taiwan's Industrial Development Bureau (IDB), part of the island nation's Ministry of Economic Affairs, has recently announced plans for three technology parks that will focus on software. In addition to encouraging engineering of software products, the parks will create the necessary environment for marketing the results.

PIRACY UNDER ATTACK

The lack of a software tradition in the island republic is attributed by David Hoffmann, an analyst at Taiwan-based management consulting company Investec, to "the long legacy of software piracy in this country that, in effect, stymied all investment in software development."

Piracy is now under attack by Taiwanese authorities, following several years in which they largely ignored it. The stimulus has come in the form of several threats from the United States, which include the possibility of imposing super-301 legislative penalties. In response, the Taiwanese government has set up a complex inspection system designed to stamp out the export of goods containing pirated components, including software.

In addition, the thrust toward software development recognizes both the intense pace of development and competitiveness within Taiwan's computer industry and the growing threat from other Asian nations, such as South Korea. "Software is now recognized by government and industrial leaders as being a key 'value-added' component in both products and processes," declares Hoffmann, who has worked as an analyst for Taiwan's quasi-governmental Institute for Information Industry. "Embedded software is needed to add value to Taiwan's key export products, for example machine tools, appliances, computers and telecom products. Process software is seen as necessary to automate Taiwan's industries--textiles, auto parts, chemicals--in the face of rising labor and overhead costs."

Encouraging local software skills, rather than setting up in competition with U.S. and Japanese software companies, is the major goal of Taiwan's software initiative. As Hoffmann sees it, the aim of the initial park is "to foster the development of software expertise in this country--expertise that can later be leveraged to enhance the competitiveness of Taiwan's manufacturing industries (via process automation) and Taiwan's higher value-added export products (via embedded or bundled software)."

In part, the announcement of the new software facilities recognizes the fact that a small native software industry has started to emerge in Taiwan. …

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