Last Waltz

Taiwan's president gets even weaker

Jonathan Adams

Newsweek International, June 12, 2006

It was a bad week for Taiwan's embattled President Chen Shui-bian. Facing a series of corruption scandals involving his relatives that have driven his poll numbers to record lows, the president announced on Wednesday that he would delegate some of his powers. He'll retain nominal control over national security and foreign affairs, but has handed over the reins of day-to-day power to his prime minister—and possible 2008 presidential candidate—Su Tseng-chang. Chen also vowed to drop out of all campaign activities for his Democratic Progressive Party.

Facing an uphill battle to retain power in the 2008 election against the Kuomintang, the DPP is happy to distance itself from the unpopular Chen. How Beijing will react is another matter. Although Su will pursue a more moderate cross-Strait policy, any changes he makes will likely be modest, according to Lo Chih-cheng, a political scientist at Taipei's Soochow University. Expect minor adjustments like economic measures allowing in more Chinese tourists, he says. Beijing's distaste for the independence-leaning DPP will likely stymie anything more. "Su won't be able to jump-start political talks with China," Lo says. "It takes two to tango."

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Hooked on Taiwan's food

Japanese foodies take Taipei

Jonathan Adams

Newsweek Japan, July 2006

(untranslated draft)

Kuniko Mita misses the snow of Nagano. Before her engineer husband came to Taiwan four years ago to work on the island’s high-speed rail project, the two would drive out of Yokohama every weekend, heading for the great outdoors. But in Taipei, where they now live, they’ve no car -- and this subtropical city cannot offer snow.

Luckily, in place of outdoor activities they’ve a new passion: food. The Mita’s have become smitten with the island’s culinary delights -- show-cased in Ang Lee’s 1994 film `Eat Drink Man Woman`. Kuniko carries a notebook with a wish list of restaurants to visit, and 43-year-old Kosuke writes a blog to record their gastronomical adventures. Says Kuniko: “on weekends in Japan, we went camping and skiing. Here, our sport is eating.”

At one of their favorite restaurants, Jiu Fan Ken (Changan Rd. East, Section 2, #172, 2F), the two display their eating skills while knocking back Taiwan Beer served in small bowls. The scrumptious meal includes Taiwanese specialties: ton rou, a chunk of fatty pork cooked to custard-like consistency, wu wei yu, crispy fish in mild red sauce, and abalone soup, bao yu gao zhan. “In Japan, we eat abalone raw,” notes Mita. “Here they dry it first, and then soak it in water to make it softer.”

Finishing their soup, they are careful not to slurp — a Japanese habit considered rude in Taiwan. It’s one of the small cultural differences that took getting used to. Another was the pedestrian’s slow pace. But that dawdling reflects a laid-back attitude that’s been easy to adopt. Rents are cheaper than Japan and apartments typically more spacious -- and although Taipei is generally safe, the Mitas live in a building with 24-hour security for extra peace of mind. Food isn’t their only recreational pursuit: Kuniko has made Taiwanese friends while studying kiko, a martial art similar to taichi, and Chinese meditation. And on weekends, the two escape the noise of the scooter-mad city and head for their favorite hot springs resort -- Wulai, in mountains just south of the city.

Now, with the rail line due to be completed later this year, they know they will miss Taipei – especially, its food. But at least returning home will be easier on their waistlines. “We’ve both gained so much weight,” says Kuniko with a laugh. “The clothes we wore before don’t fit anymore.”

The fine culinary traditions of this mountain-ringed metropolis of 2.6 million go back hundreds of years. When the Kuomintang fled to Taiwan from China in the 1940s, some of China’s best chefs came too. But there are plenty of local specialties, often found in Taipei’s cheap night markets. Though the city boasts trendy, ultra-modern malls with food courts, islanders still love to crowd cheek-by-jowl into narrow alleys for a late-night snack, amid the clatter of steaming, brightly lit food stands and the pungent aroma of a Taiwanese favourite: stinky tofu.

Takahiko Ishikawa fell for Taiwanese food on a business trip ten years ago. The 54-year-old Tokyo native, now president of Taiwan Toshiba International Procurement Corp, wandered into the city’s Shihlin night market—and became hooked forever on shui jian bao (fried dumplings). “I was surprised at how good they were,” he says. “We don’t have this kind of dumpling in Japan—just steamed.” Ishikawa’s enthusiasm led to a Taiwanese cookery class to learn the secret. How are his dumplings? “Sometimes they’re OK, sometimes they’re no good,” he says ruefully. It’s obviously easier to consume the local specialities than create them.

Taipei’s relatively small size (the central part of the city covers just about 67 square kilometers) makes it easy for Ishikawa to pop into his favorite food spots. And if he misses good ramen noodles, he’s more than compensated by the island’s oyster noodles -- oamisua. Taipei’s vibrant food culture – as well as regular golf outings – make it easier for Ishikawa to live alone in Taipei; his wife and family are back in Tokyo. He even muses about opening a Taiwanese-style restaurant when he retires in Japan.

Ryotaka Izawa has similar ambitions—and he’s in Taipei to chase his dream. The 27-year-old from Nikko is learning to make Shanghainese food at Taipei’s ritzy Grand Formosa Regent Hotel. Why isn’t he in studying in Shanghai? “In China, [some] people don’t like Japanese because of the historical background,” said Izawa. “But Taiwanese like Japanese people and culture—it’s easy to live here.” His only complaint is different attitudes toward cleanliness: He was shocked when Taiwanese friends walked, in their shoes, on a bathmat in his apartment. Says Izawa: “In Japan, this doesn’t happen.”

But cultural clashes are rare, and Izawa has thrown himself into his busy new life: Chinese classes in the mornings, the hotel in the afternoon and evenings. Right now, he’s doing prep work and learning to use the industrial-sized steamers. And on days off he likes to take Taiwanese friends out to dinner – drunken chicken is a favorite dish. When he’s mastered Shanghai-style cooking, Izawa will return to Nikko and add that regional flavor to his father’s Cantonese restaurant. Eventually, he hopes to take over the business. So what does his dad think of Izawa’s adventure? “He said, gambare.” And that’s exactly what his son is doing.

Wireless Utopia?

Taipei is leading the way in going wireless -- and in wireless hype
Jonathan Adams
Newsweek International, March 6, 2006

Taipei is dreaming big: it wants to be the world's first completely wireless metropolis. Other cities boast a patchwork of hotspots at hotels, coffee shops and colleges, and tiny towns in the United States and elsewhere have already been blanketed with anywhere, anytime Wi-Fi. But the Taiwanese capital (population: 2.6 million) is on track to become the first major world city to attain geek nirvana. Its ambitious Wifly project will stretch a single wireless network over the city's 272 square kilometers. Beginning in 2003, the city has so far installed 2,400 access points in the central part of town. If all goes well, by the end of June, 5,000 access points will provide a seamless network available outdoors and in, covering some 90 percent of Taipei. In a year, that number is expected to double to 10,000.

Taipei won't stay at the top for long. Philadelphia, San Francisco and a 3,800-square-kilometer patch of Silicon Valley have Wi-Fi projects in the works. So do Bangalore and cities in the U.K., Sweden, Germany and Spain.

Beyond bragging rights, what do these cities expect to gain by blanketing their environs with Wi-Fi networks? Proponents point to a bevy of new services. Sheng Chang, vice president of Q-Ware, which is spending $93 million on Taipei's network, says customers can now move around the city but stay connected to one network, with one password—rather than have to hop between hotspots on different networks. For $12 a month, a Taipei resident can tote a laptop computer to the park and watch cable TV. Or he can print documents and photos while riding the subway or chowing at a noodle stand. "We're going to change people's lives in Taipei city," says Chang.

Wi-Fi has some tough competition. Cell phones already do a pretty good job of keeping people connected, and the latest 3G models boast a range of multimedia bells and whistles. Reliable broadband is widely used already in Taipei (by more than 60 percent of the population), and few people will want to chuck that for a wireless service that's still patchy in places. Sam Lucero, senior analyst of wireless connectivity research at ABI Research, questions whether the benefits of Wi-Fi will be enough to get people to use it. "How often are you wandering around outside needing Wi-Fi access?" he says. "Typically, if you need it, you're going to be in a place that has a hotspot anyway."

The real beneficiaries may not be the average citizen so much as municipalities, says Lucero. For instance, San Mateo, California's police have access to Wi-Fi on laptops in their squad cars and on PDAs on their bicycles and motorcycles. They can remotely gain access to databases and distribute photos of suspects via the network to every other cop on the grid. Police and fire inspectors in Granbury, Texas, can pull up a detailed 3-D map of all the properties and hydrants in the county.

There's no reason such systems couldn't be adopted by cities. In Taipei, police are now experimenting with using the networks to stay in touch with headquarters, rather than keeping paper-and-pen logs, Chang says. The city has also hooked up traffic-monitoring devices to Wifly, so they can transmit traffic-flow data to a central database. Taipei wants to use Wifly to make all kinds of city services more convenient to residents. "It's much more of an incremental impact on people's lives than a paradigm shift such as the introduction of e-mail," Lucero says. Citywide Wi-Fi may not quite live up to its hype, but it's pretty cool all the same.

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Ma Ying-jeou interview

"Conditions aren't ripe" for unification: Taiwanese opposition leader Ma Ying-jeou on cross-strait relations

Newsweek International, Dec. 26, 2005 - Jan 2, 2006

The next presidential election in Taiwan is more than two years away, but there's already a front runner. Ma Ying-jeou, the 55-year-old mayor of Taipei, is seen as a shoo-in to be the candidate for the opposition Kuomintang (KMT), which favors closer ties with China and eventual unification. Admired for his clean image and movie-star good looks, Ma led his party in trouncing the pro-independence Democratic Progressive Party (DPP) in local elections earlier this month, making him the man to beat in 2008. The mayor and KMT chairman spoke to NEWSWEEK's Jonathan Adams about what his party would do to nudge Taiwan closer to China, and why conditions aren't yet "ripe" for unification. Excerpts:

ADAMS: The DPP lost a lot of ground to your party in the recent elections. Are you pleased?

MA: We did well, but not because the KMT has really improved itself. Rather, the DPP has become so corrupt, and so inept, that people have lost confidence in them.

Under your leadership, the KMT seems well positioned to reclaim the presidency in 2008. How would your party change Taiwan's relations with China?

The DPP is somewhat handicapped by their ideology. They have to keep a distance from mainland China. They have been very timid, very conservative and very reserved in pushing ahead a productive policy toward the Chinese mainland. If the KMT is able to get back in power, we will open up direct flights with the mainland in two years. That's critical to Taiwan's economy.

Why is it so critical?

Taiwan is located very close to the mainland, but we haven't really used this geographical advantage. By keeping a distance, we have actually moved Taipei [as far away from China as] Jakarta. A direct flight from Taipei to Shanghai takes only 80 minutes. But now [because travelers must take an indirect route], it takes seven hours. It's just so unwise, if not stupid, to do this. If we could shorten the travel time, then companies wouldn't have to move their headquarters to the mainland; they could stay in Taiwan.

Beyond economic links, what is needed for unification talks with China to begin?

Actually, the mainland is not pushing unification anymore. They don't want to see de jure independence for Taiwan, but they are not talking about [unification]. Their hands are full. But if Taiwan makes a provocative move, they would be left with no choice but to use force. So the most important thing for Taiwan is to maintain the status quo, not to provoke the mainland, but increase trade and investment and to relax cross-Strait relations.

What is your time frame, then, for unification?

For our party, the eventual goal is reunification, but we don't have a timetable. At the moment, we don't believe that either side is prepared to have unification... The conditions are really not ripe yet.

Do you see unification happening in your lifetime?

If you had asked me the question 10 years ago, I would have said no. But things are changing rapidly on the Chinese mainland, and we don't know how far they will go with democratization. Ten years ago, I wouldn't have thought that they were ready to have local elections. But they are doing it now. Of course, the nature of communism is to [hold] power for as long as possible. So it would be very naive to think that they will become as democratic as Taiwan in the near future... I think we may not be able to solve the sovereignty issue in our lifetimes—whether it's one China or two, or whatever.

Can you imagine a future in which Taiwan and China exist side by side as fully independent states, recognized as such by the world?

It would be very unlikely. Some of us here would like to see that happen. But for the mainland, they have similar problems with Xinjiang, with Tibet. So they feel that if they loosen up for Taiwan, they might encounter difficulties elsewhere. On the other hand, Taiwan is very different from the provinces in mainland China that have independence or autonomy [aspirations] because our situation is very much linked with the rest of the world. Any military move against Taiwan would certainly involve the United States.

Some in Taiwan and the United States see the KMT and its allies in the legislature blocking the purchase of U.S. arms, and fear that the KMT is endangering Taiwan's sovereignty.

We think that if we want to have very stable relations [with China], arms purchases are only one of the things that we have to pay attention to. Certainly we also have to negotiate some kind of arrangement to reduce the tensions.

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Taiwan v. the Koreans

The island's small firms are neck and neck with South Korea's in the hot flat panel sector. But can they keep up?
Jonathan Adams
Newsweek International, Oct. 31, 2005

The numbers look like a victory for Taiwan. In recent years, Taiwanese manufacturers watched and worried as Korean rivals rose to the top of the consumer-electronics world, with Samsung and LG Electronics becoming global household names in everything from washing machines to televisions. Now a group of five Taiwanese companies—none with recognizable brands—are on pace to outship the Koreans in a booming sector, liquid-crystal-display screens. These are the skinny screens that go into everything from iPods to new flat-panel TVs. They make up the lion's share of an overall display market expected to reach $100 billion in 2010, up from $62 billion last year. But while their prowess may provide a boost to national pride, the success of the Taiwanese companies may not be sustainable.

These are troubling times for Taiwan, which for decades has held the lead over South Korea as Asia's second richest nation after Japan. In international markets, the two nations were once commonly mentioned as a pair, but now South Korea occupies a spotlight of its own. The Seoul stock market is rising, lifted by foreign investors, as the Taipei market falls. Once the leading foreign investor in China, where it has obvious advantages of proximity and cultural affinity, Taiwan has been surpassed there, too, by South Korea, at least in the official numbers. (Much of the investment from Taiwan goes through back channels, to avoid Taipei's campaign to prevent overdependence on the mainland.) For the first time last year, South Korea's nominal per capita income ($14,150) passed Taiwan's ($13,450).

The Korean model has clear advantages in the LCD-screen industry, too. Production takes place in hulking factories that cost $2 billion or more, a steep price tag for smaller Taiwan firms that have trouble raising that kind of capital. Yet Taiwan has found ways to get in the game.

Taiwanese companies, which entered the business only in the late 1990s, have drawn on local expertise in the chip industry, which uses a process similar to etching features on a glass panel for an LCD screen. The Taiwanese economy is dominated by contract manufacturers, which make goods like flat-panel TVs for big brands, and are major customers for such screens. Budding manufacturers received an early boost from government tax breaks, research support and help in securing factory space. By last year, the five Taiwanese firms accounted for 40 percent of the industry's whopping $13 billion spending spree on new plants and equipment, compared with South Korea's 37 percent.

That set the stage for Taiwan's emergence as unit-sales leader this year. But despite the strong showing, the South Koreans are still making more money. Korea dominates the most profitable, large-size screens and can keep costs lower through economies of scale. Taiwanese company AUO earned a respectable $5 billion last year, but that lags far behind the $8.25 billion produced by Samsung's LCD business. The profit problem has the Taiwan government virtually tearing its hair out: earlier this year, Minister of Economic Affairs Ho Mei-yueh urged flat-panel makers to avoid "dominating the world market but making no money."

Ironically, this is exactly the criticism (booming market share, no profits) that used to be leveled at leading companies in South Korea, which now has a dozen Korean corporations in the "billion profit club." Its chaebol were once viewed as slow-moving behemoths next to Taiwan's smaller, more flexible firms. But now, as materials costs rise while product prices continue to go down, the crunch threatens the viability of Taiwan firms that have traditionally competed mainly on price, says Morgan Stanley economist Andy Xie. Reviewing recent earnings reports, Xie went so far as to ask: "Is the Korean model winning finally?"

AUO's strategy is to marry the agility and independence of Taiwanese firms with a size approaching that of a Korean chaebol. "Only the large companies can survive," says AUO chairman K. Y. Lee. "We've got to be a tiger to be sustainable. But that doesn't mean we'll be slow; we'll still be flexible, fast-moving and active." AUO, the biggest Taiwanese LCD maker by revenue, bulked up to its current size with the 2001 merger of two smaller firms that made different size screens, giving it the scale to ride out market downturns.

Lee thinks he's found a sweet spot—not too big and not too fast. "It's not necessary for us to become the first mover in the industry," says Lee. The cutting edge is sometimes known as the "bleeding edge," because of the cost and risk of developing new technology, and the need to burn through glass as new manufacturing techniques are perfected. "The Koreans are absorbing a lot of the technological uncertainty," says Tom Murtha, a professor of management at the University of Illinois at Chicago, and co-author of a book on the flat-panel industry. AUO was once about two years behind the Koreans in LCD technology and has closed that gap to about six months, which is right where it wants to be.

The Taiwan government has been urging the industry to consolidate for years, but so far the only major merger is the one that created AUO. Its global market share reached 14 percent in the second quarter, ahead of Taiwanese compatriot Chi Mei at 11 percent, but still well behind LG. Philips's 23.5 percent and Samsung's 20 percent, according to the U.S.-based market research firm DisplaySearch. How much longer the other Taiwan firms can stay competitive remains to be seen. Taiwan and South Korea are "neck and neck," says David Hsieh, an analyst with DisplaySearch in Taipei. "Taiwanese makers are more flexible in terms of getting orders, but the basic feature of the industry is still economic scale."

The implications of that contest go beyond the flat-panel sector. Analysts say some small Taiwanese firms can survive by specializing in niche markets, such as displays for portable DVD players. But Taiwan's flat-screen makers are learning the same painful lesson as its contract chip- and gadget makers: in the jungle of global competition, smaller animals end up as breakfast. Giant electronics manufacturers like Hon Hai and Inventec have bought up smaller component companies and now dominate the contract business. AUO's evolving model—moderate scale and near-cutting-edge technology—may provide a survival plan for Taiwan's flat-screen makers, whose demise analysts have been predicting for years. "But they're still there, and they're succeeding," says Murtha. Now, they just need to start turning a bigger profit.

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