Cloud Computing Industry - Recommended Industries for Foreign Investment in Taiwan
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
!
Recommended Industries for Foreign Investment in Taiwan
( Cloud Computing Industry
ITRI IEK WEI, Yi-ling | 2010 0 12 / 31!
Tel：+886-3-5917288
E-mail：norr.wei@itri.org.tw
Client: Contractor:Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
8 Cloud Computing Industry
1-1 Industry Definition
• Industry size: The international research firm Gartner predicts that the most important strategic
technology in 2010 will be cloud computing with the market to grow to US$150 billion by
2013.
• Business take-up: Up to 80% of Fortune 1000 companies will adopt cloud computing services
by 2012. The immense market potential as well as the entry of major international vendors
such as Microsoft, Google and IBM means that everyone is now starting to pay attention to the
potential economic benefits of cloud, as well as how it will affect the ICT industry in the
future.
• Scope of applications: Cloud computing is a concept rather than a specific technology. The
concept can be applied to software applications, operating systems and even hardware
architecture.
• Cloud computing concept and features: There is currently no standard definition for cloud
computing as it is a novel concept that is still developing along with the Internet and related
technologies. Cloud incorporates existing technologies and concepts such as grid computing,
parallel computing, virtualization and SOA (Service-Oriented Architecture), allowing it to be
used in a wide range of applications. Despite the different definitions, some key features of
cloud computing include Internet delivery of services as well as the on-demand allocation of
resources and payment method.
1-2 Market analysis
• Size of the cloud services market: The market began growing rapidly in 2008 and will reach
US$50 billion in size by 2013. SaaS services are expected to account for over 60% of the
overall market due to user familiarity, the maturity of applications and compatibility with
existing systems and architectures during implementation.
• Industry growth factors and trends: Cloud computing will initially be introduced through SaaS
services due to user familiarity, its relative maturity and data security. SaaS will therefore
provide the main source of growth in the cloud services market within the short term. Due to
concerns over service stability and data security, most of the growth in the IaaS and PaaS
services market between 2008 and 2010 came from new startups and small users. Medium and
large-sized enterprises still have concerns with the introduction of cloud services, so overall
growth has slowed in 2010.
．1．New Opportunities. Invest in Taiwan
USD$
Billions
60.00
50.70
50.00
42.14
40.00
31.42
SaaS
26.54
30.00 PaaS
17.66 IaaS
20.00 13.13
10.00
0.00
2008 2009 2010(e) 2011(f) 2012(f) 2013(f)
Note: Here the output of the cloud computing services industry only covers those from IaaS, PaaS
and SaaS services.
Source: ITRI IEK (2010/04)
Figure 1 Projected output of the global cloud computing services industry, 2008 - 2013
• Business concerns: Enterprise users of different sizes exhibit different concerns during
introduction. For small and medium enterprises, cost is the primary concern. For large
enterprises, system compatibility, cloud service stability and the maturity of information
security technologies are the most important considerations.
Main customers: The immaturity of information security technologies will delay the entrance
of large users, so the main market for cloud services will continue to be small and medium
enterprises in the short term.
(1) Size of the Taiwanese market and current demand
Local industry background: DGBAS statistics for 2006 indicated that in Taiwan the industrial
and commercial services sector consisted mainly of small and medium enterprises (SME) of under
200 people. SMEs accounted for 99.7% of the overall industrial/commercial services industry. The
nature off SMEs meant that local enterprises have significant experience with using hosting and
remote backup services provided by data centers.
• Cloud take-up rate among local enterprises: A survey conducted by the III MIC indicated that
35% out of a sample of 500 SMEs have adopted cloud services. IaaS was used by 32.8% of the
companies, 6.0% used SaaS services, while 3.8% used both IaaS and SaaS at the same time.
．2．Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
From this we can see that in the local cloud services market IaaS is now entering its growth
phase, while SaaS is only beginning to take root.
• Market size: Overall, the Taiwanese cloud market was estimated to be worth NT$5.56 Billion
in 2009, an increase of 12.8% on 2008. By 2010 the market is expected to grow to NT$6.21
billion in size.
• Main market segments: The IaaS market will be the largest segment in the Taiwanese cloud
services market and should account for over 90% of the industry output. The main reason for
this is the high-level of acceptance to hosting and related services among local enterprises. As
well-known enterprises continue to adopt SaaS services however, the SaaS market is expected
to gradually increase its share among the local industry.
(2) Future market prospects
• The services provided by the SaaS services market matches the needs of businesses. As there
is also strong interest in its introduction among enterprises it is expected to provide the main
source of growth in the cloud services market.
• As the small size of the market and IT security concerns will affect the growth of the PaaS and
IaaS market, most growth between 2008 and 2010 will come from new startups and small
enterprise users.
• As IT security and virtualization technologies continue to be refined, however, they should
drive the growth of the overall cloud market after 2011.
• The cost benefits of cloud services means that many SMEs will continue to cut back on
hardware expenditure and adopt cloud services instead. The cloud services market is therefore
expected to grow at a faster rate than the global IT spending market.
1-3 Analysis of Foreign/Compatriot Companies and Local Industry Synergies
(1) Current state of the global and Taiwanese industry supply chain
• Industry scope: The cloud industry chain can be divided into three areas: data center, system
platform and software. Data center includes the low-level hardware equipment vendor,
virtualization technology vendor, system integrator, hardware system management vendor
(software) and the data center operator; Platform covers the operating platform and the
software development platform. Here, software mainly refers to commercial business
software.
• Data center: Includes hardware such as servers, network communications products and power
supply. Leading international server equipment vendors including IBM, HP and Dell have
maintained excellent OEM relations and close cooperation with Taiwanese hardware makers,
so Taiwanese vendors excel in hardware manufacturing. Above the hardware level we have
．3．New Opportunities. Invest in Taiwan
system integration and software. This includes system integration, virtualization software and
virtual system management tools. Leading foreign international virtualization technology
vendors include VMware, Microsoft and Citrix; In system integration the leading vendors are
IBM, HP and VMware; For virtualization system management tools, this area is dominated by
VMware and the software management tools provided by proprietary virtualization
technology.
• System platform: In the system platform segment, apart from the virtual Windows monopoly
on PC operating systems, top foreign vendors include Oracle with Solaris, Google with
Chrome and even the open-source Linux. The key vendors are therefore Microsoft, IBM,
Oracle and Google.
• Software: In commercial software, IBM, Microsoft and Oracle have remained the leaders in
e-mail, word processing and database software. The coming of cloud has also seen Google and
Salesforce.com rise to the fore, further consolidating the hold of foreign vendors in
commercial software.
• Current state of the Taiwanese industry: In the past, most local software vendors targeted the
domestic market as well as providing system integration services and product sales for
software products developed by foreign vendors. As a result, while the Taiwanese cloud
industry chain excels at hardware manufacturing, as previously mentioned, there has been little
local development in software technology and commercial software. Taiwan is therefore
poorly equipped to compete against large foreign vendors in virtualization technology, virtual
system management tools, operating system platforms or commercial software.
• Current state of system integration in Taiwan: The industry consists mainly of SMEs and is
relatively small. In 2009, only 3 companies had revenues of over NT$5 billion. In addition,
most vendors service specific industries and so are unable to offer cross-industry IT consulting.
Local system integration vendors also tend to be weak in business know-how so they can only
help their customers connect hardware systems. They lack the ability to go a step further and
help their customers set up systems that integrate software and business processes.
(2) Analysis of gap in industry chain
• General analysis: Local vendors enjoy a distinct advantage in hardware equipment but are
weak in system software, applications software and system platforms. The extreme deficiency
in virtualization and system management software technologies in particular constitutes the
largest gap in the Taiwanese industry chain.
• Capability gap: Due to a shortage of R&D capacity for virtualization technology, even if local
vendors use open source for developing virtualization technology they will still find it hard to
compete against top international vendors. For system integration, the biggest obstacles to
．4．Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
entering the international market are local vendors' small size and deficiency in business
know-how. More experience or an expansion in the scale of services is required to boost
competitiveness.
• Suggested entry strategy: Given the commanding lead in software of international vendors,
local vendors are not ready to compete with international vendors in the cloud services market.
Instead, the industry should leverage its hardware advantages into partnerships with top cloud
vendors; System integration ability should also be strengthened to gain a foothold in industries
with potential for a boost to competitive advantage.
(3) Areas suitable for overseas/compatriot investment in Taiwan
• R&D center: A complete hardware industry cluster and outstanding hardware manufacturing
capability makes Taiwan the perfect OEM option for large cloud vendors building data centers.
As cloud service vendors will need to customize the hardware based on the nature and
requirements of the application services to achieve optimal performance, the leading vendors
and their OEM partners will need to establish a strong R&D partnership.
• Joint R&D center: Rapid growth in the cloud services market has seen cloud services vendors
gradually shift their business focus from the US/European region to other regional markets in
recent years. The Asia-Pacific in particular is considered by cloud services vendors to be a key
future market. With large vendors setting up regional data centers in order to provide each
region with a good quality of service, top international vendors will very probably set up data
centers in the Asia-Pacific region as well. The high cost of building a data center makes it a
very large investment, even for large international vendors. A partnership with local vendors
in each region will not only help reduce the cost of investment but will also help them bypass
foreign investment restrictions in each country. The complete IT hardware supply chain and
liberal investment environment in Taiwan makes the island a particularly attractive investment
destination for foreign businesses.
(4) Suggested investment recruitment targets
• VMware: VMware's server software must be developed and tested with hardware vendor's
support before release. Confirming that the hardware and software will run together smoothly
will help boost sales. VMware also hopes to partner with software, hardware and IT consulting
companies in the future to provide enterprise users with a total solution for converting their
internal IT architecture over to a cloud architecture. To this end, a partnership with local
hardware makers will play an important role.
• IBM： IBM customers span different industries and there is also strong interest in introducing
cloud among the enterprise customers in the healthcare and financial industries. IBM will
therefore need to set up more applications-oriented R&D centers. IBM has also set up the
．5．New Opportunities. Invest in Taiwan
"Smart Living Pioneering Research Center" in Taiwan in collaboration with the MOEA. In the
future, the research center will combine IBM's cloud computing & data management analysis
technologies with local research resources and manpower to develop cloud healthcare service
models. The experience from demonstration applications in Taiwan will also be replicated for
the Chinese market in the future.
• Microsoft: In addition to offering the Windows Azure platform to its partners, Microsoft is
also developing the Hyper-V virtualization technology as its spearhead for the cloud market.
Microsoft wants to provide its customers with a complete solution, so that in addition to its
virtualization technology, it is also helping data center operators accelerate data center
construction by conducting R&D of data center hardware systems (e.g. cooling). Such a
strategy for virtualization technology and data centers means that Microsoft will require
hardware partners in R&D in the future.
1-4 Analysis of Investment Incentives for Overseas/Compatriot Businesses
R&D centers and data centers can be set as the main areas to target for attracting
overseas/compatriot investment. Key investment factors include:
(1)Cloud R&D center:
• Industry cluster: A hardware and software industry cluster of sufficient size can help large
vendors accelerate their joint R&D and product testing platform.
• People: Includes experts in virtualization, parallel computing and mass storage technologies as
well as local manpower costs.
(2)Cloud data center:
• Political/regulatory environment: Local IT security regulations and political stability affect the
data processing operations of data centers.
• Data center setup costs: Cost of industrial land, utility and manpower
• Network infrastructure: Number of international undersea cables and local broadband
penetration
• Local vendor capability: The ability of local vendors to setup and operate data centers
A. Current local availability
a.Cloud R&D center:
• Industry cluster:
– A complete IT hardware and computer industry supply chain exists. Vendors have
extensive manufacturing experience and technology, so a joint R&D center can be set up
．6．Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
for "product and application development".
– The local software market is relatively small and comprises mainly small companies. The
only software vendors capable of partnering with international vendors on software
technology R&D are Trend-Micro and Cyberlink.
• People: There is a shortage of domestic software expertise, though in terms of quality and
cost, the people are very competitive.
b.Cloud data center:
• Political/regulatory environment: SACE rates the political risk of investing in Taiwan at 3
(scored from 1 - 9, with higher score equaling higher risk). This indicates a good political
environment for investment, though there is room for improvement in IT security-related
legislation.
• Data center setup costs: There are 7 major industrial parks with 1,535 ha of land available for
sale or lease. Utility and manpower costs are far cheaper than Western nations.
• Network infrastructure: Chunghwa Telecom alone has 16 undersea cables with 9 connected
directly to Taiwan; Local broadband penetration has now reached 78%.
• Local vendor capability: Local vendors such as ISPs and Acer have experience with running
data centers, though the capability to setup and run data centers is critically low.
B. Comparison with other neighboring countries
a. Cloud R&D center:
• Industry cluster: Hong Kong < Singapore < China < Korea < Taiwan
• People: Hong Kong < Singapore < Taiwan < South Korea < China
b. Cloud data center:
• Political/regulatory environment: China < Korea < Taiwan < Singapore < Hong Kong
• Data center setup costs: Hong Kong < Singapore < Korea < Taiwan < China (with China
being cheapest)
• Network infrastructure: China < Hong Kong < Singapore < Taiwan < Korea
• Local vendor capability: Hong Kong < Taiwan < China < Singapore/Korea
．7．New Opportunities. Invest in Taiwan
1-5 Production Costs, Taxations, and Investment Incentives
(1) Production Costs
¾Currently, there are 181 industrial parks, 9 export processing zones, 3 science parks, 6 free
trade zones, 5 agricultural industrial parks and 4 environmental protection science parks in
Taiwan. Also, the government provides quality and low cost business environment.
¾EPZs, SIPs, FTZs, Pingtung ABP, and bonded factories(warehouses) are all considered
bonded areas(i.e., tariff-free areas), meaning that raw materials, fuel , articles, semi-processed
goods or machinery imported from abroad are all exempt from imported from abroad are all
exempt from import duties, Commodity Tax, and Sales Tax. Zero-rate Sales Tax is applied on
commodities and labor services exported abroad and on raw materials, fuel, articles,
semi-processed goods or machinery purchased from a tax zone.
Types of Industrial
Descriptions
Parks
¾ Competent Authorities: National Science Council.
¾ Main Location: Hsinchu Science Park, Central Taiwan Science Park, and
Science Parks Southern Taiwan Science Park.
¾ Characteristics: Locations for development of high-tech industries. Promote
Taiwan industry upgrade.
¾ Competent Authorities: Export Processing Zone Administration.
Export Processing ¾ Main Location: Taichung, Kaohsiung and Pingtung.
Zones ¾ Characteristics: Develop the “cluster effects” of the key industries and the
cooperation of international marketing industry.
¾ Competent Authorities: Council of Agriculture, Executive Yuan, R.O.C.
Agricultural ¾ Main Location: Taichung, Kaohsiung and Pingtung.
Biotechnology ¾ Characteristics: Speed the development of industrial clusters in agricultural
Parks biotechnology. Expand production of high value-added goods for export.
Become centers of high-tech agricultural industry.
¾ Competent Authorities: Environmental Protection Administration, Executive
Yuan, R.O.C.
Environmental ¾ Main Location: Taoyuan, Tainan, Kaohsiung and Hualien.
Protection Science ¾ Characteristics: Seek out partners in the area of advanced environmental
Parks protection technology from around the world for creating model zones of
low-polluting, high value-added industries that promote productivity livelihood,
and the ecology.
¾ Competent Authorities: Ministry of Transportation and Communication
¾ Main Location: Keelung, Kaohsiung, Taichung, Taipei, and Taoyuan.
Free Trade Ports ¾ Characteristics: Eliminate the barriers to the flow of goods, capital and people
in international trade. It is hoped that with the integration of the supply chain and
the convenience of harbors, enterprises can be more competitive.
¾ Competent Authorities: Industrial Development Bureau, Ministry of Economic
Affairs.
¾ Main Location: Most Main cities
Industrial Parks ¾ Characteristics: Provides manufacturers with sufficient lands, avoiding the
disturbances from the surrounding environment, boosting local economic
development with industrial clusters economic effect and creating high add value
production environment.
．8．Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
A. Land Rental Costs
a. Hsinchu Science Park Rental Costs:
Rental Cost Monthly
Location Building Type/Floor
m2 Ping(3.3m2)
1F 126 416
2F 119 390
1. Standard Factory Building 3F 110 363
4F 103 340
5F 98 323
2. Intellectual Property Center 188 620
Main Building 197
1F 650，600
Hsinchu 3. High-Rise Factory Building Public Facility 182
Science Park 2F-7F 182 600
4. Si-Soft Factory Building 182 600
1F 125 413
5. Du-Xing Factory Building
2-5F 114 376
1F 147 485
2F 142 469
6.Service Building
3F 138 455
4F 133 439
Chunan Standard Factory Building(First Phase) 1F-5F 125 413
Science Park Standard Factory Building(Second Phase) 1F-5F 125 413
b. Southern Taiwan Science Park Rental Cost:
y Land
Tainan Science Park Each month 23.49 NT$/m2 and additional 5% business tax.
Kaohsiung Science Park Each month 11.21 NT$/m2 and additional 5% business tax.
y Building
Five phases. Each floor area ranges from 750m2 to 946m2. The rental cost is
Tainan Science Park
94-142 NT$/m2 monthly.
Two phases. Each floor area ranges from 960m2 to 2040m2. The rental cost is
Kaohsiung Science Park
91-120 NT$/m2 monthly
c. Central Taiwan Science Park Rental Cost:
Location Item Rental Cost (NT$/m2) Monthly
Land Only Public Facility Total
Land
Taichung Science Park 4.40 14.65 19.05
Building 88
Huwei Science Park Land 2.67 12.91 15.58
Houli Science Park Land 2.11 5.96 8.07
Erlin Science Park Land 0.88 0 0.88
B. Labor Costs
¾Taiwan has a high-quality labor force of approximately 10 million people, of whom 35% have
college or university degrees or higher. Each year around 320,000 students graduate from its
．9．New Opportunities. Invest in Taiwan
colleges and universities, filling the human resource needs of commerce and industry.
¾For person paid by the month, the minimum monthly wage required by law is NT$17,880; For
person paid by the hour, the minimum hourly wage as set by law is NT$98/hr.
Industry Average Salary(NT$)
Mining and quarrying 49,674
Manufacturing 39,152
Electric power and gas supply 95,996
Water supply and remediation services 44,234
Construction 40,930
Wholesale and retail 40,154
Transportation and storage 48,068
Lodging, foods and beverages 27,171
Information and communications 62,013
Finance and insurance 67,513
Real estate 38,720
Professional, scientific, and technical services 49,969
Support services 31,596
Education services 22,195
Human health and social work services 54,072
Arts, entertainment, and recreation services 31,257
Other services 29,731
Source: Directorate-General of Budget, Accounting, and Statistics, Executive Yuan
(2) Taxation
A. Individual Income Tax Rate
Income Tax Bracket (NT$) Tax Rate Progressive Different (NT$)
0-500,000 5% 0
500,001-1,090,000 12% 35,000
1,090,001-2,180,000 20% 122,200
2,180,001-4,090,000 30% 340,200
4,090,001 40% 749,200
Source: Ministry of Finance
B. Business Income Tax Rate
Income Tax Bracket (NT$) Tax Rate
120,000 and less Exempt from tax.
120,000 and higher 17% on the total taxable profit.
Source: Ministry of Finance
(3) Investment Incentives & Administrative Support
A. Tax incentives
a. Industrial Innovation Act
¾ According to the「Industrial Innovation Act」, which was practiced in 2010, 15 percent of a
．10．Recommended Industries for Foreign Investment in Taiwan—Cloud Computing Industry
business' R&D spending would be deductible from its business income tax, but capped at no
more than 30 percent of its business income tax. At the same time, the corporate income tax
rate is reduced to 17%.
b. Incentives
Item Content
15% of a company's R&D expenditures may be claimed as a deductable
R&D subsidies
expense against the current fiscal year's payable business income tax.
For biotech and pharmaceutical industries, 35% of R&D and employee
Biotech and Pharmaceutical
training expenditures may be claimed as a deductable expense against the
Industry
current year's payable business income tax.
Importing machinery not Imported machinery of a kind not yet manufactured domestically may
manufactured domestically enjoy tariff-free treatment.
A company that imports new production technology or products from
abroad that also uses the patent, trademark, or other special right owned by
Income tax exemption on
a foreign profit-seeking business may, with special approval by the Industry
licensee fees paid overseas
Development Bureau of the Ministry of Economic Affairs, enjoy tax
exemption on the licensee fees paid to the foreign profit-seeking business
If offshore for-profit enterprises which operate international transport
services are contracted for construction projects, offer tech services, or are
1.7% or 2.25% preferential
engaged in the rental of machinery and equipment within Taiwan
tax rate will be used when
experience difficulty in shouldering operating costs, such enterprises may
issuing remuneration for
apply for permission to be listed under a preferential tax rate bracket
foreign tech services
regardless if they have a branch or an agent in Taiwan. For industries
rendered
engaged in international transport the preferential tax rate shall be 1.7%;
For other industries the rate shall be 2.25%.
Private sector companies that participate in major public construction
projects may enjoy a five-year Business Income Tax exemption, investment
Private sector participation tax credits, and exemption of tariff on imported construction machinery as
in major public construction well as deductions in House Tax, Land Value Tax, and Deed Tax.
projects Profit-seeking businesses that invest in private-sector organizations that
participate in major public construction projects also receive deductions on
their Business Income Tax.
B. Investment with government participation
Item content
¾Primary targets are the information, telecommunications, aerospace,
Scope of investment by biotechnology, agricultural technology, digital content, and cultural creative
Development Fund industry sectors.
¾Investment plans for domestic SMEs.
Investment ceiling ¾Publicly-held shares are not to exceed 49%.
．11．You can also read
