Reiko Nebashi, Deputy Director,
Trade and Economy Department, Interchange Association Japan
According to a FY2007 report by Taiwan Department of Investment Services (DOIS),MOEA, Taiwanese companies have made a cumulative total of 1,014 investments in Japan as of December 2005, corresponding to a total investment of US$987.55 million. In terms of industry, the investments were made in trading firms, mechanical industries, real estate, the textile industry, and other service industries. The most recent investment trends from Taiwan to Japan show a drop from US$74 million in 2004 to US$26 million in 2005, but an increase to US$110 million in 2006. A survey conducted by Recof Corporation, an investigation company specializing in M&A services, reveals that 19 Taiwanese companies have invested in Japan between 2004 and 2006, and have accounted for 2.3% of total investment in Japan (*1).
As though to support these figures, local governments in particular are increasingly seeking investments by Taiwanese companies, and there is growing demand for investments especially in the semiconductor and IT industries, which are areas where Taiwanese companies enjoy a strong presence in the global economy. Interchange Association Japan (IAJ) holds the Invest Japan Seminar every year in Taipei, and has invited Mr. Bob Sen, President of Acer Inc. (Japan), and Mr. Tsai Shin Lin, President of Global Unichip Corp. to give a lecture on best practices in their advancement to Japan, at the FY2005 seminar. Amid such follow-up activities on Taiwanese companies by IAJ, three contracts for investment in Japan were concluded in FY2005, and five were concluded in FY2006. The majority involved the establishment of a sales company in or around Tokyo. There was one regional investment, but the Taiwanese promoter, who resided in a rural part of Japan, simply established a company in the locale of his residency to clear visa requirements, and later transferred his company registration to Tokyo.
Given this situation, I wish to facilitate regional investment in Japan, by introducing trends and keys to the success of Taiwanese companiesfinvestment in Japan, as well as methods of inviting regional investments, based on recent examples of best practices by Taiwanese companies.
Acer Inc. began selling its products in Japan in 1994 through a Japanese sales agent, and was incorporated as a Japanese corporation in 1998. Since its founding, the company had been maintaining a chronic state of deficit, due to the particularity of the Japanese market and the difficulty of marketing Taiwan-brand products in Japan. In July 2002, Mr. Bob Sen, present chairman of the company, became president. Mr. Sen graduated from a Japanese university and has worked at a Taiwanese subsidiary of a large Japanese manufacturer. He is not only fluent in Japanese, but is also well-versed in Japanese culture. Since joining Acer Inc. in November 1998, he has consistently built up a satisfactory record in the company's marketing department, and was promoted to Marketing Director in just several years. After assuming the position of president in 2002, he put the company in the black from the FY2003 settlement, and has achieved increasing earnings and profits in FY2004 and 2005 over previous years, respectively.
The key to Acer's success in investing in Japan lies in the company's thorough cost reduction policies through the use of Japan's abundant outsourcing services. The Japanese operation has 18 employees today, including 4 directors from Taiwan, who handle the management, marketing, and planning of Acer-brand products in Japan, but outsource all other tasks. The manufacturing, after-sales service, and repair of products are subcontracted to a Japanese company that operates near the city of Kawaguchi, the original locale of the company. This outsourcing strategy is also contributing to revitalizing the regional economy in Kawaguchi. In 2002, the company had more than 60 employees who directly engaged in all aspects of the company's business, including product manufacturing, marketing, services, physical distribution, and warehouse management. However, upon his appointment as president, Mr. Sen cut down the size of his staff to reduce costs, outsourced physical distribution and repair services, and succeeded in turning the company around in his first year.
Acer also implements marketing strategies that are extremely effective in the Japanese market. While adopting thorough cost reduction measures as mentioned above, the company has transferred its Japan branch office from Kawaguchi, Saitama, to Akasaka, Minato-ku, to increase public awareness of the Acer brand, which also deserves attention as an official sponsor of the Ferrari F1 team. The Akasaka office engages in marketing, branding, and sales activities only. Particularly since 2006, it has been employing marketing strategies that are extremely novel for an Asian manufacturer. For example, it has begun launching new product press releases and PR information via magazines, TV, and the Internet. It has also approved an interview between an F1 racer and President Sen for a specialized magazine, as well as has provided Acer products for use in a popular TV series. Today, Acer has successfully established its image as a high-class, stylish brand in the Japanese market.
King Yuan Electronics Co., Ltd. was established in Hsin-Chu, Taiwan, in 1987, with a capital of 4.2 billion yuan, and was listed on the Taiwan Stock Exchange on May 9, 2001. Today, it has two production bases, including a factory in Myaoli-shen,zhunan-zhen,Taiwan, and sales offices in the USA, Europe, and Japan.
Aldete Corporation is a Fukuoka-based technical venture company specializing in LSI testing. It boasts technical expertise particularly in semiconductor test solutions. Acknowledged for its excellent technology and future potential, the company has received investments from five to six venture capital firms in 2003, but eventually entered into a business capital tie-up with King Yuan Electronics on February 6, 2006. King Yuan Electronics acquired 85% of Aldete's shares at 100 million yuan, and Aldete founder and chairman Hiroshi Kuchii stepped aside and ceded the position of chairman to Gauss Chang, Director of King Yuan Electronics. The reorganization strengthened the Aldete management and accelerated the speed of decision making, and King Yuan Electronics' abundant information and resources helped the company achieve efficient cost reduction, so that within less than three months of the change in management, Aldete's deficit balance since its founding turned to profit on a monthly basis. During this time, there was no downsizing of personnel or facilities whatsoever. In fact, by May 2007, Aldete had already grown enough to pay dividends to King Yuan Electronics. It increased its staff from 13 to 40 employees in June 2007, and has contributed to creating new employment in the region.
Siward Crystal Technology Co., Ltd. manufactures crystals and crystal oscillators that are used in clocks, personal computers, cell phones, watches, and measuring equipment. In FY2005, it posted a profit of approx. 1.25 billion yuan (approx. 4.5 billion yen) (*4). The company was founded in 1988, with a capital of US$52 million. In April 2000, it acquired Meidensha Corporation's unprofitable crystal business by purchasing Meiden Tsushin Kogyo Co., Ltd., a Meidensha subsidiary specializing in the manufacture of crystal devices, and established Siward Crystal Technology Co., Ltd. (Japan). Today, the company designs, develops, manufactures, and sells mainly high-precision devices such as crystals and crystal oscillators. Since its change to a new management framework, the company has achieved a gross profit of 29%, and is marking profit rates that far surpass those of other companies in its field (*5).
Meiden Tsushin Industry was founded in 1963 and began operations as Yonezawa Meidensha Corporation. Since its founding, the company has engaged in the production of crystal oscillators for color TVs, and thereafter expanded its business to include the manufacture of crystal oscillators for radios, quartz crystals for clocks, and TCXO for cordless telephones. However, with the trend of the times, integrated production in the relevant field became difficult to pursue in Japan, in terms of cost. After its buyout by Siward Crystal Technology, the company aimed to establish an efficient international specialization framework, and in 2001, the following year, it constructed a production base in Wuxi, China and began R&D activities in Japan. The realization of global specialization through Taiwan-Japan alliance can be considered the key to achieving high profits in mature industries.
Up until now, most regional investments by Taiwanese companies took the form of M&A, with Taiwanese companies taking over unprofitable businesses or plant facilities of Japan's major companies. Some examples are the acquisition of IBM Japan, Ltd.'s Yasu Plant by Chi Mei Optoelectronics Corporation and the acquisition of NEC Corporation's Yamagata Plant by Advanced Semiconductor Engineering, Inc. (ASE). In recent years, given the close relationship between Taiwanese and Japanese companies, small and medium enterprises (SME) and micro enterprises in Japan are seeking M&A by Taiwanese companies due to the lack of successors or capital, and Taiwanese companies are gradually beginning to succeed businesses in Japan.
