The Taiwanese dollar has appreciated almost 60 percent since 1988.
Taiwan must export because of its very small domestic market.
Rising land and labor costs, coupled with currency appreciation, have forced Taiwan to move toward more technologically sophisticated industrial manufacturing.
Taiwan has 700 computer firms, which employ 80,000 workers and produce U.S. $5.5 billion of computers a year, of which U.S. $5.2 billion is exported. In 1989, North America was the leading importer, with a 42 percent share of Taiwan's exports; Western Europe followed at 38 percent and Asia, primarily Hong Kong and Singapore, at 15 percent. Because of the changes in Eastern Europe, Taiwan plans to increase its exports to those nations over the next five years.
The types of computer exports shifted dramatically throughout the 1980s. Beginning in the early 1980s with simple monitors and terminals, Taiwan exported unsophisticated personal computers from 1985 to 1988. Since then, there has been a shift toward the export of more sophisticated items, such as PC 386s and 486s. It is expected that Taiwan will be exporting complete work stations as early as 1991.
Like Taiwan's computer industry, the machine tool industry has grown at a dramatic rate. Three hundred manufacturers produced over U.S. $1 billion of machine tools in 1989, 65 percent of which were exported. Taiwan expects these numbers to double by the year 2000.
The IDB staff noted that 95 percent of all the machine tools manufactured were of low precision but highly durable. The industry is now shifting toward the production of more sophisticated machine tools. All of Taiwan's exports of machine tools are regulated under CoCom-like rules, and the IDB staff said that the policy will continue even though Taiwan is not a member of CoCom.
The government, industry, and universities have cooperated to build Taiwan's advanced materials industry. Recent economic trends indicate that Taiwan has chosen to focus on a few materials, such as fine ceramics, polymer composites, and alloy steel, as areas of major emphasis. For each of these advanced materials, Taiwan was experiencing annual growth rates of from 20 percent (polymer composites) to over 100 percent (alloy steels).