What are foreign investors after when they establish factories in Taiwan? Are they looking for cheap labor? Undeveloped markets?

What are foreign companies’ 'commitments' worth once land and labor are no longer cheap and markets turn sour?

Japanese multinational conglomerate Hitachi Ltd. established an air conditioner factory in Taiwan in 1965. But although Taiwanese wages have since gone up considerably and the import of air conditioners has led to fierce competition following the island’s market liberalization, this traditional Japanese brand manufacturer continues to expand production in Taiwan and increase its local workforce.

During the past six years, the company’s workforce grew by an average of 10 percent. 'We want to take a different road,' Taiwan Hitachi Aircondition Co. president Chang Chien Min-chieh states unequivocally. This year, Taiwan Hitachi took sixth place in CommonWealth Magazine’s Corporate Citizenship Awards in the foreign enterprise category.

Witnessing Three Decades of Industrial Exodus

The 57-year-old Chang Chien grew up in Kaohsiung City’s Ta Fa Industrial District. As a result, he saw the exodus of Taiwan’s industry and the ensuing unemployment problem more clearly than others.

Whenever the conversation touches this topic, Chang Chien jumps out of his chair in agitation.

In the 1980s Chang Chien served as general manager at the Taiwan Hitachi plant in Taoyuan. Back then he observed first-hand the relocation of Taiwan’s conventional industries to cheaper locations. Every year the number of potential customers who came to see him to talk business became smaller.

In the 1990s, even the electronics industry began to leave Taiwan. Factory closures and protests by laid-off workers were constantly making the headlines.

After the turn of the century, Taiwan’s entry into the World Trade Organization (WTO) and most recently the signing of the Economic Cooperation Framework Agreement (ECFA) with China dealt local industry further blows. As he witnessed these developments, Chang Chien became utterly desperate and frustrated. 'I was really sad, asking myself, ‘Where are the jobs for the next generation? Where is the coming industry?’'

After Chang Chien was promoted to president in 2006, he drew up a new mission statement for the company: Cherishing Taiwan, Cultivating Taiwan. 'I’m a stalwart localist. I want to create local happiness,' remarks Chang Chien in explaining his corporate philosophy.

Chen Shih-hung, Taiwan representative for Hitachi Ltd., believes that the Japanese parent company is also very supportive of this approach. 'As long as we integrate local resources, stand out from the crowd and make money, the parent company basically won’t interfere,' notes Chen, who hails from Tainan.

By emphasizing 'Made in Taiwan,' it is still possible to be profitable. Chang Chien’s strategy is to cultivate autonomous R&D teams in Taiwan as well as indispensable technologies.

Most of the employees that are newly hired every year are involved in the research and development of inverter technology. Chang Chien insists that Hitachi pay better salaries and offer better social benefits than industry peers. Graduate school graduates can expect to earn an annual salary of up to NT$700,000 with guaranteed periodic increases.

Employee Turnover less than 1%

Making air conditioners? Are young people willing to launch a career in this industry?

'In the high-tech industry the bonus system has changed, and it’s such hard work that more and more young people are ready to come to us,' he replies with a smile.

Taiwan Hitachi also keeps with the Japanese tradition of not firing people during commercially difficult times. Chang Jen-chang, a labor union representative at the Taoyuan factory, relates that he has never seen people forcibly laid off during his 24-year-long career with Taiwan Hitachi. Instead, the company’s workforce has steadily increased from 1,100 employees six years ago to around 1,800 people today.

Aside from hiring interns under industry-academia cooperation schemes during seasonal highs, Taiwan Hitachi does not use temporary workers. 'What we want to do is to increase added value, not hold down costs,' notes Chang Chien.

Given that it is not easy to find good talent, Taiwan Hitachi offers a wide range of social benefits to make sure that employees feel happy and stay.

Employees at all levels are given an opportunity to pursue further education abroad. When they face legal, financial, or mental or physical health problems, they can seek external counseling and assistance free of charge without having to give extensive explanations to management for their needs.

Kao Chuan-chang, section manager at the public relations department, reveals that the company enjoys an employee turnover rate of less than 1 percent and an average seniority of 17 years. He attributes this to the fact that the company also looks after employees’ needs outside work.

As a result, Taiwan Hitachi’s employees shine with an outstanding performance. In 2005 Hitachi inverter air conditioners had a market share of 10.2 percent, ranking fourth in Taiwan. Today, they have become the leading brand with a market share of 45.7 percent.

Chang Chien is confident that the company’s superior 'Made in Taiwan' products exert pressure on competitors to use parts and components made in Taiwan, too. This will mean that more jobs will be created locally, so that all Taiwanese can enjoy a happier life, he suggests.

'No matter whether you are a foreign or a domestic enterprise, you definitely need to regard all matters in the local community as your own responsibility,' Chang Chien asserts.

Translated from the Chinese by Susanne Ganz

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Taiwan Hitachi Co. Ltd.

Corporate Citizenship Ranking: 6

(Foreign Enterprises)

Average score: 8.39

Corporate commitments (8.5):

Creating 'Made in Taiwan' household appliances, actively nurturing local talent

Community involvement (7.9):

Donating money for disaster relief, providing scholarships, organizing charity golf competitions

Environmental protection (8.7):

Promoting an in-house energy conservation plan, mobilizing employees for beach cleaning and tree planting campaigns