New smart-city digital technologies involving the Internet of Things are being adopted by the nation’s largest cities and could help spur economic development through industrial transformation. Some of the leading examples so far are the eTag electronic toll collection system, the EasyCard payment platform, and the Wi-Fi system on the Taoyuan Metro. Under planning is a smart-machinery center in Taichung.
The Taiwan economy is performing respectably this year on the back of ascendant global demand for electronics products. In the January-March period, exports jumped 15.1% year-on-year, the fastest growth in six years. Economists say gross domestic product should expand 2% this year, the best performance since 2014.
It was not long ago that 2% growth would have been considered disappointing. But the Taiwan economy has stalled. Taiwanese firms cling to a dated contract-manufacturing business model that focuses on cost reduction and fails to produce high value-added products. “Our companies make many key components for the iPhone, but the finished product – what’s really valuable – belongs to Apple,” says Zack Lee, a manager at the Taipei Computer Association (TCA), one of Taiwan’s largest industrial organizations. “This is a recurring problem for Taiwanese industry.”
The Taiwanese government has long urged industry to boost spending on research and development to create “an innovation-driven economy,” but has done little to ease burdensome regulations which hinder that objective. As a result, Taiwan missed most of the opportunities of the internet and mobile-internet eras.
Policymakers and business leaders are now pinning their hopes of industrial transformation on the emerging Internet of Things (IoT), a network of devices – everything from smartphones to vehicles – connected to one another. One of the preeminent applications for IoT devices is “smart cities,” which use connected devices including lights, sensors, and meters to gather data for analysis. Cities are able to use the data to improve their living environments.
Smart cities have the potential to become a major global industry with Asia as an innovation hub. Asia is the region where urban needs, technological readiness, and government support for smart cities are most closely aligned, according to a white paper published in March by United Parcel Service (UPS) and the United States’ Consumer Technology Association. The white paper found that smart-city projects increased 38% from 170 in late 2013 to 235 in 2016. The report forecasts that smart-cities projects will rise in terms of market value from US$14.85 billion in 2015 to more than $34.35 billion by 2020.
Taiwan has implemented smart cities technology most effectively so far in the area of transportation. It has established a nationwide electronic toll collection system (ETC), introduced a cash reloadable smart transportation card (EasyCard), and increasingly monitors parking spaces electronically. In the healthcare field, Taiwan has installed an embedded chip in its national health card containing the cardholder’s full medical history.
Those types of technologically advanced solutions will be integral to Taiwan moving up the global value chain. “To be globally competitive, Taiwanese industry has to upgrade itself from contract manufacturer to digital solution provider – or even an innovative application service provider,” says Gan Dai-You, an industry analyst at the state-backed Market Intelligence & Consulting Institute (MIC). “Taiwanese firms need to provide higher value to customers.”
By serving as a test bed for smart cities, Taiwan can spur industrial transformation, Gan says, noting that digital products and solutions like smart streetlights, motion-sensing technology, and drones are already in wide use. As it “smartens up” its cities, Taiwan will be able to conduct big data analytics for the IT industry, creating new business opportunities. “This will benefit Taiwan’s strategic industries and key upstream components in the future,” she says.
In February at Taipei’s annual Smart City Expo, TCA chairman Tung Tzu-hsien said that Taiwan could become a global hub for smart city development. Tung suggested that local governments could offer pilot spaces for global firms or cities to experiment with smart-city applications.
TCA has also collaborated with the Industrial Technology Research Institute (ITRI), the Institute for Information Industry (Triple I), and such enterprises as Advantech, Asus Cloud, Chunghwa Telecom, IBM Taiwan, Tatung, and Mitac to establish the Taiwan Smart City Solution Alliance to promote the development of IoT and smart cities.
“Taiwan itself is a small market, but if it commits itself to being a smart city test bed, it can do product development for the global market here,” says Ryan Engen, an economic officer at the American Institute in Taiwan (AIT).
The smartest cities
Several cities in Taiwan have been early smart-city adopters. Taichung is among the most successful, observes MIC’s Gan. Drawing on telecom operators’ resources, Taichung has vastly improved broadband coverage in its outlying areas, she explains. Leveraging IT technology, the government has made it possible for children in remote areas to borrow books from cloud-based libraries, for teachers living in those areas to conduct video conferences, and for farmers to monitor their crops digitally to increase production.
Meanwhile, the government is moving to tap Taichung’s traditional industrial strength to build the city into a smart-machinery hub. Smart machinery applies IoT and artificial intelligence technology to automated production lines and precision machinery.
In April, the Cabinet proposed to set up a dedicated smart-machinery industrial park and R&D center in Taichung by 2019. The Taichung City government expects the 50-hectare park to attract 50 companies and NT$70 billion in investment.
During a visit to France in April, the Taichung city government signed an agreement on smart-machinery cooperation with French software maker Dassault Systemes SA and the Paris branch of ITRI. Taichung needs Dassault Systemes’ modeling and calculation software technology to develop its smart machinery industry, Taichung Mayor Lin Chia-lung said at the signing ceremony.
The government has struck a bullish tone on Taichung’s smart-machinery initiative, setting a goal to export entire smart-machine factories and production lines to Southeast Asia, focusing on machinery for the aerospace, automotive, printed circuit board, and textile industries. During the Cabinet meeting in April, Premier Lin Chuan noted that Germany and Japan are today’s leaders in machinery production. Yet as Taiwan develops its smart machinery capabilities, “it is envisioned [that] Taiwanese products can outcompete Japanese and German products to carve out a niche in the market,” Lin was quoted as saying in the English-language Taipei Times.
Taichung will also build an NT$60 billion Smart City Demonstration Zone with an Intelligent Operation Center (IOC). A key part of this initiative will be the implementation of a traffic monitoring system to collect data about traffic patterns that will be analyzed to enable the city to better control traffic, air quality, and emergency responses, according to an April report by the Netherlands Trade and Investment Office in Taiwan.
Taipei has also implemented effective smart-cities solutions. The best known of these is the bicycle-sharing program YouBike, which began in 2012 and has become so popular it is now a way of life in Taipei.
YouBike has grown increasingly “smart” thanks to the Taipei city government’s partnerships with tech vendors and research institutes. For instance, the National Taiwan University of Science and Technology and ITRI developed the RunKeeper smartphone app for YouBike, which both tracks fitness information and helps users locate restaurants. RunKeeper works together with the EasyCard transportation card. When a user rents a YouBike with an EasyCard, it gathers data on the person’s journey and stores it in the cloud. The RunKeeper app can then send information about restaurants and events of interest to users based on analysis of that data.
In June, Taipei City rolled out its own mobile payment platform: pay.taipei. It can be used to pay utility bills and parking fees, as well as medical bills at Taipei City Hospital’s eight branches. “With the establishment of the new payment system, previous limitations on when and where bills could be paid will be overcome,” Taipei Mayor Ko Wen-je was quoted as saying in the Taipei Times.
As part of a smart city field-testing initiative, the Taipei city government will launch a three-month trial of self-driving buses in the city’s Xinyi district this year. The autonomous buses will be tested in the bus lanes on XinYi and RenAi Roads after midnight. Remotely controlled from an operations center, the buses can travel at speeds of 20-50 kilometers per hour and are fitted with GPS, radar, and navigation computers.
The Taipei government hopes the buses can provide an alternative form of late-night transportation to reduce bus drivers’ workload. The central government will need to amend regulations to allow the self-driving buses to be licensed, however, before they can go into service.
In a few cases, Taiwan has been able to implement smart cities programs across metropolitan borders. For instance, under a NT$5 billion 4G (fourth-generation mobile network) technology-based program, free Wi-Fi was installed on the Taoyuan Metro, which connects Taipei City, Taoyuan International Airport, and Taoyuan’s Zhongli District. It is Taiwan’s first comprehensive free Wi-Fi system on a metro line.
The initiative is also boosting Wi-Fi access on Taiwan’s high-speed rail (HSR) network. From August, passengers using an iTaiwan account (a free Wi-Fi service) will be able to access the internet with Wi-Fi on all HSR trains. While it is already possible to use a 4G mobile internet connection to go online during an HSR trip, the connection is unstable because of the several tunnels on the northern end of the line.
Meanwhile, the Tainan city government has expanded free outdoor Wi-Fi access by placing 4G hotspots in 1,200 traffic light control boxes. It intends to install similar devices on its city buses in the near future.
The most successful national smart cities initiative thus far has been the eTag electronic toll system developed by Far Eastern Electronic Toll Collection Co. (FETC). The system has revolutionized toll collection in Taiwan by allowing cars to cruise through toll stations at normal highway speed. Electronic gantries overhead use RFID (radio frequency identification) technology to automatically deduct tolls from user accounts linked to eTag stickers on vehicle windshields. The cost per toll is based on distance traveled, with the first 20 kilometers of the day free. Drivers can add value to their eTag account at 11,000 different outlets nationwide.
Research by MIC has found that eTag has been a success in Taiwan for four main reasons. First, Taiwanese citizens welcome new technology when it is simple to install and free of charge. Second, the level of highway usage is high, which has driven demand for the service. Third, eTag’s technology is excellent, with a tolling success rate exceeding 99.95%. Finally, Taiwanese consumers prefer to make small payments in cash, and eTag enables them to add value to their cards easily at convenience stores.
Covering more than 1,000 kilometers of highway, eTag is the largest electronic toll collection system in the world. FETC executives say it has helped drivers reduce fuel costs as their travel time is now anywhere from five to 30 minutes shorter. Overall annual savings from the eTag system are estimated at roughly NT$2 billion.
Crucially, Taiwan was able to implement the eTag system nationally, which gives it global potential. “Smart cities initiatives need to be successful at the national level to be credible as exports,” says Stephen Su, general director of ITRI’s Industrial Economics and Knowledge Center (IEK). “If it’s just a local program, it can seem unproven to other countries who want to buy something they can implement nationwide themselves.”
In 2014, FETC inked a deal with Vietnam under which it will advise the Southeast Asian country on the installation and operation of an ETC system. Vietnamese officials lauded Taiwan’s ability to execute a “multiple-lane free-ﬂow mechanism” on freeways, the company says. FETC says it is also “making arrangements” to develop ETC systems in the Philippines, Malaysia, and Thailand.
Industry experts say that there is just one thing likely to crimp Taiwan’s smart-cities ambitions: bureaucratic intransigence. They point to the obstacles faced by ride-hailing app Uber, which had created high-paying jobs by Taiwan standards and provided transportation service that was usually better than local taxis. “Taiwan’s treatment of Uber wasn’t helpful for its ambitions in the overall digital economy,” says IEK’s Su.
In an interview with ICRT last year, Uber’s Taiwan general manager Gu Li-kai warned that Uber’s experience in Taiwan could harm the startup ecosystem here. Promising young companies may decide to focus on other markets which they feel are more hospitable, he said.
Industry observers have long urged the government to foster a more dynamic start-up environment, which they say would be beneficial for the development of smart-cities initiatives. At present, certain regulations constrain the ability of young companies to be listed on local stock exchanges. For instance, “the regulations for a company to go public require that it show two years of profit, which is rare for a startup,” notes the AIT’s Engen.
To become a leading smart cities hub, Taiwan needs to be more willing to encourage disruptive technology, says MIC’s Gan. She notes that many types of new technology and business models are incompatible with existing laws and regulations, such as unmanned aerial vehicles (UAV), autonomous vehicles, and home-sharing service Airbnb. Taiwan has been slow to accommodate all these developments.
“If Taiwan cannot modify laws and regulations accordingly, it will be difficult for emerging applications to achieve widespread adoption,” Gan says. “This will hinder the development of smart cities, while the general public will be unable to enjoy the technological innovations brought by those emerging applications.”
Yet Taiwan’s regulators can move swiftly to embrace new technology when it is something they support. Indeed, MIC notes that the Taiwan Area National Freeway Bureau helped FETC to consolidate its ETC system, which put the system on the fast track to implementation. Neither Europe nor the United States has been able to move as expeditiously as Taiwan in the field of electronic toll collection.
Taiwan’s smart cities initiatives may also help raise its global profile. A number of Taiwanese cities, for example, last year participated in the United States’ Global Cities Team Challenge, a collaborative platform sponsored by the U.S. Department of Commerce for the development of smart cities. At the 2017 event being held this month in Washington, D.C., a Taiwan delegation of about 30 members is scheduled to attend.
IEK’s Su notes that a smart cities regulatory sandbox may be forthcoming to provide more room for innovation. The government is currently accepting bids for a new round of smart-city project applications, with the winners to receive government funding for their initiatives. The bidders might influence the government to introduce the regulatory sandbox, he says, which “would certainly allow more flexibility for experimentation with innovative business models.”