54 Chapter 3 From Farmers to Manufacturers 55 Tatung is one of Taiwan's oldest,largest,and most successful businesses, turing independent,with an emphasis on using technology-rather than but it remains true to its founder's penny-pinching ethic and traditional cheap labor-to create value.To do so,it invested,too,in human capital, approach to business.The current chairman,Mr.W.S.Lin,is the grandson extending free compulsory education to the junior high school level in the of the founder.He welcomes visitors in an old-fashioned reception room mid-1960s. in the company's Taipei headquarters,a green-tiled first-generation office building that looks a little dowdy compared to Taipei 101.A huge,low To accomplish these goals,Taipei unveiled another stage in its industrial upgrading plans.The Ten Major Development Projects used government table covered with trophies,prizes,awards,and gifts from dignitaries fills resources to build capacity in heavy industry.The private sector needed much of the room;Mr.Lin provides a quick tour of the highlights.Tatung steady supplies of strategic inputs.Rather than depending on foreign sup- Boy is everywhere. pliers,the ROC undertook a new phase of import substitution,setting up It is clear from Mr.Lin's comments that Tatung's leaders credit the com- its own facilities in petrochemicals,steel,shipbuilding,automobiles,and pany founder's hands-on leadership and resolute focus on production electronics.The Ten Major Development Projects also aimed at breaking for its success.The company doesn't spend money on fancy buildings for through infrastructure bottlenecks that were limiting growth.Some indus- its executives,but it built a university to train its engineers.During the tries succeeded;others,notably shipbuilding and autos,failed,but the shift import substitution era,the Tatung brand became hugely popular,but as toward high-technology,low-energy industries that began in the 1970s kept the economy shifted toward export-oriented development,Tatung played Taiwan's economy moving forward,toward the information age it safe.It sold Tatung-branded products in Southeast Asia,but its market When the KMT first arrived in Taiwan,its ambition for science and tech- was limited outside Taiwan.Like many smaller companies,it turned to nology was limited.Until the mid-1960s the ROC government was content contract manufacturing.Tatung moved into information technology(IT)in to allow Taiwanese manufacturers to license the technologies they needed; the early 1970s,making television picture tubes.Since then it has tracked developing new products and patents was not a high priority.Taipei's in- technological changes closely,manufacturing computer mother boards, terest in science and technology jumped abruptly when the PRC exploded monitors,televisions,telephones,and other IT items for global companies. a nuclear weapon in 1964.The successful nuclear test was incontrovertible Tatung never established its own high-tech brand,but with profit margins evidence that Taiwan would never conquer the mainland with conven- in high-tech contract manufacturing slim and shrinking,it recently under- tional military force and raised frightening questions about the ROC's very took a new push to internationalize its brand-a move that required break- survival.It prompted a reexamination of science and technology policy. ing with the company's long tradition. In 1969 the ROC government created the high-level Committee for Sci- Tatung's recent history highlights another important dimension of Tai- ence Development.Its members included some of the government's most wan's economic "miracle,"the shift from traditional manufacturing to powerful men:Minister of Economic Affairs K.T.Li,Minister of Educa- high-tech production.Between 1990 and 2000,electrical products'share tion C.H.Yen,and Minister of National Defense (and future president) of Taiwan's exports doubled,to more than 20 percent.Today,Taiwan is a Chiang Ching-kuo.The members recognized that industrial upgrading was global leader in IT manufacturing.Its companies have a huge market share critical to Taiwan's security and economic health.They were charged with in critical IT products,and it is constantly moving forward with cutting- developing a comprehensive,long-term science and technology policy that edge technologies,including nanotechnology and biotechnology.These de- velopments are explored more fully in chapter 6,but the roots of Taiwan's would integrate progress in academic research,industrial development, and military innovation.They were determined to connect manufacturing technological leadership reach all the way back to the era of export-oriented with advances in academic science and develop a full spectrum of technical industrialization. talent-from basic scientists to engineers to technicians.The Committee The shift from import substitution to an export-based economy was not for Science Development invited science and technology experts from the seamless.By the late 1960s,it was becoming clear that Taiwan needed to United States to offer advice.The consultants-who shared their findings keep moving to stay ahead of its competitors.Competition from other low- with President Chiang Kai-shek at the end of their visit-reinforced and cost manufacturers already was cutting into its market share.Trade restric- tions and exchange-rate volatility brought further risk.The oil crisis of 1973 legitimized the committee's efforts.Promoting science and technology be- came a national priority. threw Taiwan's energy-dependent economy into turmoil.The ROC govern- The new emphasis on technology got a boost from the oil crisis.Taiwan's ment decided to shift Taiwan's economy away from low-cost manufactur- economic analysts believed oil prices would continue to climb,and they ing with foreign technology.Instead,it sought to make Taiwan's manufac- were determined to find ways to insulate the island's economy against