It often comes as a surprise to visitors that U-Tech Media Corporation's facility, located in the Hwa Ya Technology Park in Taoyuan's Kuei-shan Township, contains a multi-million-dollar sound- and video-editing studio. When we dropped in, an editor was hard at work on a Discovery Channel program featuring scenes of Russia. His eyes never leaving the monitor, he froze a frame, enlarged it and aligned the image, all the while making sure the musical accompaniment kept pace with the images.
Joining culture and technology
U-Tech Media is one of Taiwan's leading manufacturers of DVDs, but few people realize that it also provides professional video mastering services.
Jason Wu, an employee in U-Tech's pre-mastering department, points out, "DVDs store enormous amounts of data, and have a lot of interactive options." Wu says, "A film or video producer need only give us the master tape, and we can take care of everything else, from the titles, menu design and editing to the burning of a master and the pressing of the disks."
Assisted by brand new digital technology, the much older art of filmmaking has become one of the rising stars of the high-tech industry, and thus represents an opportunity that Taiwan cannot afford to miss.
"We have been urging the development of digital content since the National Information Infrastructure (NII) plan was put forward years ago," says Huang Ho-ming, chairman of the Institute for Information Industry. He notes that multimedia presentations, online newspapers, e-book readers, e-books, online learning and game software all fall under the rubric of digital content.
Similarly, to Acer chairman Stan Shih, computer networks, cellphones and home electronics are all merely data storage devices. What really matters is the data (digital content) that they hold. He anticipates that the digital revolution in the home will be much more complete in a few years when television makes the switch from analog to digital, and the volume of data and the speed at which it is transmitted increase still further.
As the commoditization of electronics hardware continues to bring prices down, the idea that "knowledge has value" is catching on. Industry analysts look for digital content to become an important industry unto itself, a fourth "C" that will join the "3Cs" that dominate high-tech today-computers, communications and consumer electronics.
Cultural treasures
In May of this year, the government formally declared "digital content" to be one of the "twin star" industries. It plans to pour NT$5 billion into the industry over the next four years, establish a "digital content college" that will cultivate IT skills among artists and writers, and encourage venture capitalists to invest also in the hope of growing the industry's annual production value to more than NT$200 billion, four times its current value, in five years.
Although digital content comes in many forms, a consistent thread is that the industry caters to the masses, and that its products must therefore be both hip and accessible.
Film, for example, has become a variety of digital content. When a local optical disk manufacturer became an agent for the eight major Hollywood studios several years ago, people realized that there was money to be made in the digitalization of films. But Huang Ho-ming wonders, "If they could act as an agent for foreign films, pressing those movies onto disks and distributing them, why couldn't they do the same for domestic films? Why couldn't they simply have started by making good films in Taiwan?" Huang cites Disney's Hua Mulan as a case in point, noting that the writing and art direction reflected the hard work of ethnic Chinese, and that it took a 2000-year-old Chinese legend and turned it into a Hollywood property that can be issued and reissued at minimal cost as a film, a VCD and a DVD.
The Oscar-winning Crouching Tiger, Hidden Dragon is another case in point. Huang says, "What was exciting was that everyone who worked on this film, even the producers, who included director Lee Ang, was ethnic Chinese. That was a real breakthrough." Huang contrasts the Taiwanese film industry with that of Hollywood. In Hollywood, the creators of a work start by looking for seed money to get things going, then hire an insurance company to bear the risks of production. Once there is a professional assessment of the project, they can approach the banks for funding. When the financing has been arranged, they can seek out an independent production company to shoot the film and even hire a high-profile director. Once production wraps, they choose an agent to release the film. . . . This division of labor among professionals helps the Hollywood industry generate enormous profits. In Taiwan, on the other hand, would-be filmmakers do not have the support of professionals at every level of their project's development. They must instead scramble to find whatever funding and assistance they can lay their hands on, and have a difficult time making any money with their work.
A "great leap forward" in the arts
But there is more to the issue of digital content than profit. Steven Chang, chairman of U-Tech Media and Catalyst Logic, notes a different issue: "Look at people in Taiwan today. They start watching American cartoons and reading Japanese comic books as kids. When they hit puberty, they begin watching Korean soap operas and playing Korean video games. Once they reach middle age, they move on to watching the Japanese soaps, and take in Hollywood action flicks to kill time when they are bored." The situation saddens Chang, who wonders why the work of Taiwan's content producers has found no audience.
Catalyst Logic has utilized its alliances with firms in Japan, South Korea, Singapore, Hong Kong and China to forge links between Taiwan's cultural producers, modern technology and business organizations. The company has jointly produced and distributed films and even hired well known director Hou Hsiao-hsien to film the second season of the popular television series Meteor Garden.
"Why is digital content so important?" Huang explains that Taiwan was always a follower in the electronics industry. Citing the television as an example, he notes that Taiwan did not produce its first television until 30 years after the TV was invented. But digital content, such as online education, has only existed for 10 years or so. Moreover, the digital-content market is divided into very distinct segments, such as the Chinese-language segment where Taiwan can shine.
Huang notes, "Right now, more than 80% of the information on the Internet is in English. Chinese-language content (both in simplified and complex characters) accounts for less than 5%. This percentage is completely out of proportion to the world's Chinese-speaking population, and lags even the percentage of content available in Spanish and Japanese." Of course, Chinese-language content is targeted at the Greater China market, and there are enormous problems with pirating in China right now. But Huang feels that as copy protection and anti-counterfeiting technologies continue to improve, this problem can be resolved.
While there is no question that the market for Chinese-language content is quite large, what advantages does Taiwan have over China given the latter's billion-plus population and abundant cultural assets?
"Digital content is a creative industry. The production of such content requires an open, vibrant environment, in which creators can devote themselves to their work." Huang Ho-ming feels that in this respect, not even Singapore is a match for Taiwan, much less China. Moreover, Taiwan doesn't have to outdo China in every segment of the content market. If Taiwan can, for example, just sell the pop music it excels at producing to every corner of the Chinese world, it will make a killing.
Whenever Huang sees the tremendous number and variety of works available through Internet portals, he can't help but exclaim: "If only people had a portal on which to freely display content and a responsive audience, many would be willing to show their work." Huang says it would be like the days when folk music was all the rage on school campuses. And if the government were to offer some incentives, "Taiwan would make a great leap forward in the arts."
One throw of the dice?
And what of the second of the "twin stars," biotechnology?
Biotechnology is an even broader, more disparate field than digital content. It encompasses everything from biomedicine, tissue engineering (biomaterials) for transplants, biochips, biological reagents, traditional Chinese medicines, genetically engineered foods, and transgenic plants and animals to anti-counterfeiting techniques such as DNA tagging. Confronted by such a myriad of possibilities, how does one determine which areas Taiwan would be best served by pursuing?
Chang Tse-wen, president of the Development Center for Biotechnology (DCB), says simply, "Different people in different situations offer different answers."
Chang says many people believe that because Taiwan has few resources, it should focus its efforts on just one field. However, his extensive dealings with the businesspeople establishing biotech ventures in Taiwan have shown him that they come from very different backgrounds, have disparate interests and are all unfamiliar with biotechnology. Therefore, it makes little sense for the government to dictate a single direction, essentially risking everything on one throw of the dice. Chang feels that establishing a sound infrastructure that benefits everyone with an interest in entering the field is a better approach.
The DCB therefore began work on its BioFronts project a year and a half ago. BioFronts gathers and evaluates research from both Taiwan and abroad. Based on these evaluations, BioFronts assembles strategic alliances that import the technologies necessary to develop mid-stream production processes and acquire the Asian rights to these technologies.
To date, the DCB has acquired four new technologies with medical applications, including a platform to generate human monoclonal antibodies against entrovirus type 71, and drugs with the potential to treat complications resulting from chronic heart failure and diabetes. The center is also beginning to get its hands on very promising technologies used to modify genes and proteins.
It's who you know
But why would the foreign firms who own these technologies choose Taiwan as their base in the Asian market?
According to Chang, most of these technologies are controlled by relatively small companies that grew out of university research departments; they simply don't have the means to develop the distant Asian market themselves.
When they do look at Asia, they see Taiwan, which is highly internationalized and was the first country in the region to apply the US Food and Drug Admin-istration's testing standards. Experience with adhering to these standards is very helpful when participating in international research and development.
In addition, Taiwan has a well-developed venture-capital industry; its medical centers are first-rate; its ethnic-Chinese genetic database provides a solid foundation for research; and Chinese researchers have well-developed networks of contacts among other Chinese. Such networks become particularly important when biotechnologies enter their second or third round of clinical trials, which require the participation of dozens of medical centers around the world.
Given these particular strengths, Chang predicts that acting as an Asian agent for technologies that are already partially developed will become the Taiwanese biotechnology industry's principal business model over the next 10-15 years. Firms such as the recently listed Phytohealth Corporation and the recently established TaiGen Biotechnology are already utilizing this approach, which is relatively low risk and quickly recoups investments.
According to Lee Cheng-chia, chairman of Phytohealth, the many variables involved in undertaking biotechnology research from scratch make this approach unfeasible for Taiwan. Meanwhile, Hsu Ming-chu, president of TaiGen, stresses how valuable imported technologies can be, noting that TaiGen has introduced techniques for activating receptor genes from the United States-techniques which can be used to develop new drugs for treating cancer and chronic infections such as hepatitis.
Preston Chen, chairman of Ho Tung Chemical and Vita Genomics, is a recent entrant into the biotech field. He comments that over the years, he has gone from making garments to petrochemicals to optical semiconductors without any trouble, but it wasn't until he entered the biotech field that he appreciated just how "different" an industry it was.
Chen laughs, "People say that biochemistry is the kind of industry in which you burn money. It's true; in biotech you can burn money all day and still not have a product." Even Viagra, which has been an enormous money-maker, was something of a fortuitous research and development accident. For Chen, running a biochemical venture has been a real headache when compared to a more traditional manufacturing venture in which "you can begin production as soon as you install your equipment."
Biotech foundries on the way?
In addition to obstacles represented by R&D and clinical trials, the local biotech industry must contend with another problem-while there are more than 200 firms in Taiwan that meet GMP standards, most are traditional pharmaceuticals companies that produce capsules or pills from powdered medications. They simply do not have the skills necessary to compete in the biotech industry. This raises serious questions about whether Taiwanese firms will be able to manufacture the products generated by the "mid-stream" R&D they are undertaking.
Chang says, "Taiwan just doesn't have the resources: not people, not experience, not even capital." He points out the expense of running a biotech business by relating a story about a company he worked for in the US: The company wanted to build a reaction tank for the production of antibodies from mammalian cells. Construction alone cost nearly NT$10 billion, and once the plant was finished, it required a six-month verification process just to produce one product. Chang says that in the case of products manufactured on an OEM basis, the contract negotiations alone take a minimum of five years. "Forget Taiwan. Even Japan can't invest on this scale."
Chang says that it's no wonder many people are anticipating the creation of a biotech equivalent to chip foundry Taiwan Semiconductor. From the Taiwanese perspective, the biotech business model itself presents a potential problem. Biotech businesses manufacture one product for an extended period. Such a business model will challenge the quality control regimes and adaptability of Taiwanese firms, which typically excel at producing small volumes of multiple products and adapting very quickly to changing market demands.
For Preston Chen, on the other hand, the biggest problem confronting Taiwanese biotech ventures is a lack of skilled personnel. Most ethnic Chinese with biotech expertise are in the US. While about half of those over 50 years of age are from Taiwan, about 80% of those under 50 are either from mainland China or grew up in the US. Enticing these younger experts to come here to work, and revising the laws to allow ethnic Chinese from other countries to do so, will be crucial to the success of the local biotech industry.
On your mark. . .
Getting back to the government's national development plan, between 1997 and the end of last year, 110 new biotechnology ventures were established in Taiwan. Last year the value of these firms' production reached something over NT$18 billion. Given these figures, is the government being too optimistic in its plans to create a local biotech industry consisting of more than 500 firms and generating production value of NT$200 billion annually within six years?
Preston Chen doesn't think so. He says that the government's aggressive promotion of the petrochemicals industry in the 1970s created the explosive growth that industry saw in the mid 1980s. In the 1980s, the government gave the electronics industry a big push, which led to a similar boom in the mid 1990s.
"The biochemicals industry is already gaining steam. I can feel it." Chen, who made money on both previous booms, avers that Taiwan's biotech industry will flower within 10 years.
Taiwan's "twin stars" have already been identified. Now it's up to industry to make these "stars" really shine. The road may be long, but every step brings us closer to our goal.
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With broadband network access becoming more common, new advances in VCD and DVD technology coming almost daily, and even home appliances going digital, businesspeople are very positive on the outlook for "digital content."
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The Ritek Group, which began life as a recording studio, made a name for itself in the optical media business, and is now moving "upstream" into the movie business. The photo shows U-Tech Media chairman Steven Chang, who avers, "the digital content industry is the dream of the second half of my life."
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Chang Tse-wen, president of the Development Center for Biotechnology, believes Taiwan should import partially developed technologies rather than attempting to conduct research from scratch. Such an appraoch minimizes risk and generates returns more quickly.
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DNA repair, gene modification, the cloning of embryos. . . . The miracles taking place in test tubes hold out the prospect of huge profits.
