Taiwan Integral to China’s Internationalization
Kibiing Group President Ge Wenyao stresses that, even if Taiwan refused investment from Chinese enterprises, his Group would team up with Western corporations to face off against Taiwanese businesses.
Taiwan Integral to China’s InternationalizationBy Kuo-chen Lu, Kwangyin Liu
From CommonWealth Magazine (vol. 594 )
Are Chinese enterprises interested in investing in Taiwan for the technology, the market, or to help them become more international? CommonWealth reporters went to Dongshan Island in Fujian province’s Zhangzhou, a two-and-one-half hour journey by car from Xiamen, to look into this question.
There, in a large plant facility operated by the Kibing Glass Group, China’s largest producer of glass for tablet devices, we saw just a few workers involved in a production process that has largely been automated. Cranes swooshed overhead as robotic arms imported from Germany, their movements quick and precise, moved three square-meter raw glass panels onto shelves. The scale of the operation can be gleaned from size of the temporary storage area, which occupies an area as large as three basketball courts.
On March 30th, 2015, the Ministry of Economic Affairs’ Investment Commission approved the Chinese Kibing Glass Group’s application to transfer approximately NT$100 million in capital to invest in a Taiwanese smart glass research and development firm to engage in R&D and manufacturing related to smart glass with applications in automobiles, outdoor sports and recreation, and energy-efficient glass for residential homes.
Just who is this Chinese enterprise and what is its background? For starters, it is Fujian’s largest privately operated industrial operation, with an investment of 14 billion Renminbi (RMB) in the Dongshan Island facility in Zhangzhou alone. The Dongshan Island’s eight production lines are part of a total of 23 throughout China, capable of producing 14,000 tons of glass per day, or several times the production capacity of Taiwan Glass Group’s Lukang facility.
And what sort of technology is it investing in? At present the broadest application of smart glass technology is found in anti-glare rearview mirrors for high-end automobiles. The world’s two largest suppliers are both located in the United States, namely Gentex, which enjoys a market share exceeding 90 percent, and Magna, owning an 8.5 percent share, with Taiwan emerging from behind.
What, then, drove the Kibing Glass Group to spend nearly a year in waiting and endure a lengthy approval process to move over the Taiwan Strait and become a major shareholder in a Taiwanese startup team? CommonWealth reporters talked to group president Ge Wenyao, and following is our exclusive interview with him:
CommonWealth: Why is Kibing Glass interested in investing in Taiwan?
Ge Wenyao: Kibing Glass has long been looking for technology breakthroughs to give regular glass smart functionality. Smart glass is a major aspect of smart buildings, which is also a key area of our country’s thirteenth five-year plan. China’s production capacity for conventional glass is already quite extensive. Beyond this, in the future we should be producing green, smart glass, moving development towards the realm of green, environmentally friendly technology.
Electrochromic glass (EG glass) technology uses electrical currents sent through coatings on the glass to control how much light is transmitted by the glass, thereby adjusting the amount of sunlight allowed inside. The cabin windows of the Boeing 787 Dreamliner passenger aircraft use electrochromic glass.
We have been researching electrochromic glass for years. A while back we learned from a friend that Taiwanese smart glass R&D firms were researching this technology, and after two years of discussions, we decided to invest.
A Shield Against Vulnerability
Taiwan and China are two parts of one family. Taiwanese technology is several decades ahead of China’s, and Taiwan’s technological standards are undeniably higher. The two founders of this Taiwanese smart glass R&D firm are intellectuals with Doctoral degrees. But mass production of goods requires an industrial foundation, which is precisely our strength.
Last summer on a visit to Taiwan I was amazed to find that Tainan is hotter than it is here. With the summer sun so strong, if glass could actively adjust the amount of light let in, so that 80 percent of the light would not penetrate inside, it would obviate the need for curtains to shield sunlight.
CW: How does this collaboration between the Kibing Glass Group and this Taiwanese smart glass R&D firm benefit both sides?
Ge: The internationalization of Chinese enterprises is inextricably linked to Taiwan. First, we are all Chinese. Second, Taiwan’s small-scale industrial R&D innovation is stronger than that of China. For instance, in displays, glass re-processing, and mobile phone display panels, Taiwan is ahead of China. Accordingly, many Taiwanese companies have manufacturing bases in China, with research and development in Taiwan.
CW: Opponents in Taiwan to Chinese investment are afraid that Taiwanese corporations will be swallowed up by mainlanders. What is your take on this?
Ge: The issue is not one of Taiwan versus China, but of the market. There are Japanese-owned factories all over the world, but it is very difficult to swallow up a Japanese enterprise. With their triple assets of technology, skilled people, and capital strength, not even China’s biggest factory could gobble them up.
Taiwanese enterprises with core technology should learn from the Japanese and Koreans, keeping economic power and core technology in Taiwan, and setting up industrial production bases abroad. Whether or not someone can eat you up depends on how strong you are.
We are definitely going to hit the market together with our Taiwanese partner. If Taiwan had not partnered with us, Kibing Glass would probably have joined forces with an American, Japanese, or German company, because I am intent on seizing the market. I would like to see Taiwanese hold a more open attitude in this respect.
A lot of people think that China is stealing Taiwan’s livelihood, but I see it as matching complementary strengths. Kibing does not lack financial might, but without corporate support, the Taiwanese smart glass R&D firm would have technology and no means to enlarge it.
We Assume the Risk
CW: The Taiwanese smart glass firm’s research and development efforts will take some time. Does it have Kibing’s full backing?
Ge: Enterprises like this Taiwanese smart glass R&D firm have technology but lack capital. It would be a great shame if, lacking corporate funding, they had to sell all the rights to the technology for five million RMB and cease all research efforts.
You can’t be too anxious in research and development. Kibing is prepared to expend considerable energy and resources to support them. There are only two possible outcomes to investment: The first is success, and we hope to see tangible results within two years. The second possibility is failure, which we are prepared to own up to; if at first your research does not produce results, keep researching, and we will assume the risks. At present, they have successfully developed a small pair of snow goggles, demonstrating the viability of this technology. We are quite confident in this team.
CW: What role will the Taiwanese smart glass R&D firm play for the Kibing Glass Group in the future?
Ge: In our cooperation, we complement each other. In the future, we hope that this Taiwanese firm will play the role of conducting R&D, facilitating Kibing’s ascent to the high end of the technology realm. Taiwan is suited for front-end R&D, but large-scale production should be done in China, as the consumer market, raw materials, and labor are all located in China. It would not be economical to transport the raw glass materials to Taiwan for processing, and then transport it back to China, so it is always wise to keep the production base close to the market.
On our last visit to Taiwan we saw that Taiwan has neither the land nor enough labor to build and sustain large plant facilities. But the final direction depends on what they think over in Taiwan.
Taiwan Must Reduce Barriers
CW: The bilateral cooperative model is complementary. So is the market mostly in China?
Ge: China has a large market, but the market is not limited to China. Southeast Asia, which gets ample sunlight, is especially suited for such a product.
CW: Is this mutual trust sustainable? Can it become a model for cross-strait enterprise cooperation?
Ge: There are no barriers to business-to-business cooperation, so it depends on whether Taiwan’s government provides opportunities. We hope to see the reduction of barriers to cross-strait capital and private enterprise cooperation. Right now it is not that easy for us to invest in Taiwan, as capital remittance and investment approvals are fairly time-consuming, unlike someplace like Malaysia where there are no such controls. When it comes to private economic cooperation, it is a win-win situation for both China and Taiwan.
We hope that within the next five years this company can be listed on China’s stock exchange, with a production base (in China). This does not mean that Kibing will swallow them up, but that they are able to develop in China, make money on Shanghai and Shenzhen A-Shares, and reinvest their money in Taiwan.
Cooperation with Taiwan gives us technical support. For Taiwan, working with us gives them access to the entire industry and opportunity. We are eager to share the fruits of China’s opening and reform with our Taiwanese brethren.
Translated from the Chinese by David Toman