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June 26, 2017

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Solar, LED, electric car: Taiwan's three bright spots amid trend of eco-friendly business

The world is facing its third industrial revolution, with a shift towards sustainable renewable energies — the energy revolution.

Governments and corporations around the world are jockeying to get a good starting position in the burgeoning renewable energy sector. Entering the green energy market at an early stage is a matter of national prestige and corporate competitiveness.

In the new green energy industry chain that is gradually taking shape, where are the "bright spots" in which Taiwan should focus its efforts? And what strategies should Taiwan adopt to secure a favorable position?

Bright Spot No. 1: Solar Goes Global

The Industrial Economics Knowledge Center (IEK) under Taiwan's Industrial Technology Research Institute (ITRI) forecasts that the annual output of the global photovoltaic industry, which totaled US$28 billion in 2009, will have tripled by the year 2015. During the same period newly installed capacity will jump worldwide from 6GW to 20GW, roughly equaling the capacity of six nuclear power plants. There is already concern that there will be an excess supply due to the rapid expansion of solar power generation.

When prices for silicon and silicon wafers toppled in the first half of last year, Taiwan's leading electronics manufacturers developed an appetite for the island's fledgling solar energy industry. This year they will become key players in an industry that they previously shunned for its unprofitability. Through vertical integration of upstream and downstream products, they expect to boost their chances of finding buyers overseas and to secure a good position in the global solar energy market.

Up to now, Taiwan's strengths in the global industry chain have been midstream products such as silicon wafers, batteries, and modules. The island boasts the world's fourth largest output of solar cells alone. But it has lacked strong players in the more profitable upstream and downstream areas. Taiwanese companies have been struggling as lone fighters, selling their products to foreign photovoltaic (PV) system manufacturers. When the system makers set up their own module factories or when a certain national government has adjusted its solar energy incentives, the Taiwanese manufacturers have found themselves out in the cold.

Taiwan's domestic market is not big enough to support its photovoltaic industry. On top of their dependency on imported raw materials, Taiwanese manufacturers now also face stiff competition from large Chinese manufacturers that, thanks to vertical integration and government support, can export their modules at low prices. On the other hand, South Korea's large conglomerates Hyundai, Samsung and LG are scrambling to enter the entire industry chain.

"The big will still keep getting bigger," declares S.J. Ho, executive vice president of Taiwanese PV company DelSolar. He predicts that the wave of mergers and acquisitions within Taiwan's PV industry and the founding of new solar joint ventures will continue this year.

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