Taiwan Business in Brief – August 2020

A TSMC factory in Hsinchu, Taiwan

Ørsted & TSMC Ink Wind Deal

Danish wind power company Ørsted and TSMC on July 8 signed a major renewables agreement, under which the Taiwan company would purchase the entire production of Ørsted’s third wind farm project in Taiwan. It is the world’s largest corporate power purchase agreement thus far.

The deal indicates that industries could soon start getting on board with the Taiwan government’s goal to diversify Taiwan’s energy portfolio by 2025, with renewables to constitute 20% of the mix. In addition, TSMC is the first large company to meet the government’s requirement that heavy energy-users in certain industrial sectors generate or purchase renewable energy equal to 10% of chartered capacity, something which other companies have expressed skepticism over.

Later in July, Ørsted, one of the largest offshore wind developers in the market, announced the launch of its NT$60 million (US$2 million) Offshore Wind Industrial Development Fund for Taiwan. The fund is intended to secure resources for the local supply chain, cultivate talent, and drive overall development of the wind power industry in Taiwan.

Foxconn Eyes Chips with New Plant

Taiwanese multinational contract electronics manufacturer Hon Hai Precision Industry Co., also known as Foxconn, broke ground this July for an integrated circuit testing and packaging plant in Qingdao, China. Production at the plant is expected to begin in 2021, reaching full capacity by 2025.

The US$8.6 billion investment will provide high-end packaging and testing services for chips involved in 5G development and AI-related device applications. It is the first step in diversifying Foxconn’s technology development capabilities, including semiconductors, AI, and next-generation communications. The company also plans to become involved in developing electric cars and digital healthcare.

This latest development also reflects Foxconn Chairman Young Liu’s goal to transition the company from a hardware manufacturer to an innovative integrator of hardware and software in order to increase profitability. Foxconn’s gross margin is expected to increase 10% by 2025, when the plant is fully operational. Investment in the plant, which was approved by Taiwan’s Investment Commission, also represents a pivot by Foxconn back to China after the outbreak of COVID-19 forced it to shut down some of its operations there earlier in the year.

Tatung Election Draws Scrutiny

Taiwanese conglomerate Tatung Company sparked controversy with its most recent board director election, in which 27 shareholders who own a 53% stake in the company were blocked from participating by members of Tatung’s founding Lin family. Tatung thus became the first publicly listed company to attempt to deprive shareholders of their voting rights.

At the June 30 meeting, candidates were selected for all nine seats on the board of directors, and four directors who were backed by investors advocating change within the company were dismissed. Multiple government agencies are investigating the matter, and the Ministry of Economic Affairs has rejected the registration of the new board members.

Meanwhile, the Financial Supervisory Commission has reported Tatung chairwoman Lin Kuo Wen-yen to prosecutors for breach of trust, and the Taiwan Stock Exchange has asked Tatung to explain its decisions. If found to be in violation of relevant regulations, Tatung could be fined, delisted, or deprived of the ability to hold board elections independently.

In its defense, Tatung said the blocked shareholders had contravened the Business Mergers and Acquisitions Act and the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area, stating that some had received financial backing from Chinese investors.