First Came Google and Microsoft – Now Intel Plans To Invest More In Taiwan

A who’s who of global tech firms said over the past 18 months that they would expand their operations in Taiwan. Google, Microsoft and IBM—to name just a few—led 2018 with announcements of plans to add staffing for R&D in new technologies. This month, Intel, the largest chipmaker in the U.S. by revenue, indicated that it would invest more in Taiwan to work better with its partners on the island long known for making tech hardware.

Intel probably hopes the investment will align it more with Taiwanese PC makers that already buy Intel processors but could potentially do a lot more if relations were tighter, tech analysts say. Intel may be examining Taiwan’s talent and proximity to the China market as well, they add, while scoping out a potential Taiwanese contractor.

“There’s a lot of R&D coming into Taiwan, and anyone who’s anybody seems to be here,” says John Brebeck, senior adviser at the Quantum International Corp. investment consultancy in Taiwan. “We have so many semiconductor engineers, so it makes sense.”

Taking chips, and profits, to higher levels

Taiwan ranks No. 4 in the world among regions that generate income for Intel, and the island produced about 16% of the company’s overall profits from 2016 to 2018, market research firm TrendForce in Taipei believes. Taiwan is home to the PC giants Acer, Asustek, Compal and Quanta. So many Intel chips lurk inside these brands that last year’s CPU shortage took aim at some of their revenues.

The world PC market grew 4.7% in the third quarter this year to 70.9 million units, the strongest quarterly gain since the first three months of 2012, market research firm Canalys says.

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But the Taiwan formula isn’t just about pure chip sales. Intel earned those profits on Taiwan’s “longstanding competency in the global notebook-desktop computer and server supply chains” including making components and assembling products, TrendForce analyst C.Y. Yao says. “These product lines account for a significant proportion of Intel’s current revenue-generating model, making Taiwan strategically indispensable to the company.”

Intel reported $70.8 billion in 2018 revenue and net income of $21.1 billion, both stronger than a year earlier. The company employs more than 107,000 people and ranks second after Samsung as the world’s top maker of microprocessors.

Intel CEO met partners in Taipei

Intel Chief Executive Officer Bob Swan visited Taiwan in early October for a dinner with 80 local partners to learn more about what they’re making, a company spokesperson in Taipei confirmed for this report.

“Taiwan plays an important role with its technology ecosystem,” Intel says in a statement for this report. The firm eventually expects “breakthrough innovations beyond delivering CPUs”, the statement says.

Although Intel wouldn’t confirm any specific details, TrendForce’s Yao says Intel will probably use Taiwan’s supply chain and tech ecosystem to work with local partners on co-developing products that are natural spinoffs from chip manufacturing. The new inventions would cover accelerator cards and modules that hold CPUs, for example, the analyst says.

Intel may want to learn more about Taiwan-based TSMC, a giant factory complex that makes chips on contract, Brebeck says. Intel has explored outsourcing its chip production to TSMC, per this local news report.

The usual list of Taiwan advantages

Analysts who follow Taiwan’s tech industry believe Intel is looking at the Asian island for the same reasons that motivated expansions of other tech companies, including Qualcomm and the American memory chip maker Micron Technology. A lot those investors bulked up here to hire relatively inexpensive engineering talent and inventions backed up by intellectual property laws stronger than found in mainland China, a possible end-market for microprocessors.

Based on what Intel already does in Taiwan, it’s likely to “focus more” on sales, marketing and localized tech support, Yao adds.

“I believe Intel is also part of the trend,” says Liang Kuo-yuan, president of the Taipei-based economic think tank Yuanta-Polaris Research Institute. “Taiwan after all has scientific and technical universities.” Intel might hope to sell in China, but would rather get the products ready in Taiwan, Liang says. In Taiwan, he says, “The real knowledge content won’t slip out.”