For Taiwan Business Topics (American Chamber of Commerce in Taiwan)

A global shift in the auto industry toward electric has encouraged a number of Taiwanese startups and traditional electronics makers to seek out new market opportunities by focusing more production on EV components and systems. Some, such as tech hardware giant Foxconn, hope to design and sell complete EVs, competing with established industry players.

Taiwan has played a limited role in the global supply chain for combustion engine-powered cars. Recently, though, it has begun rapidly expanding its foothold in the electric vehicles (EV) market. The island’s prowess in electronics and mechatronics contract manufacturing is viewed by major automobile brands as just what is needed to survive the current key period of transition from gasoline-fueled to electric vehicles.

Nothing illustrates Taiwan’s increasing presence in this area better than a breakdown of a typical Tesla model; its powertrain, body electronics, telematics (e.g., cameras and monitors), battery, and charger rely heavily on Taiwanese suppliers. In fact, Taiwanese companies account for around 75% of Tesla’s component supply chain.

The world’s shift toward EVs and computer-assisted driving means that the cars of the future will rely much more on electronic devices and components than their gasoline-powered precursors, and many conventional auto components are set to be replaced with an array of new parts and materials. To sustain this transformation, more innovative EV-orientated software solutions will be needed and given that carmakers can no longer handle this change by relying solely on Tier 1 suppliers, opportunities for Taiwan’s Tier 2 manufacturers are growing. German automaking circles have recently noted that Tier 2 companies in the connected autotech space are commanding a higher share of value-added manufacturing than their Tier 1 peers in the conventional realm.

“All carmakers are now investing a lot in vehicle data platforms that collect data from their cars,” says Phebe Lu, general manager of Taipei-based ASJade Technology, which develops and supplies vehicle data platforms. This data can, for example, “be used in assisted driving, traffic management, and calculating insurance premiums based on the car owner’s driving behavior.” However, she adds, “different carmakers collect data in different formats, making it hard to integrate and monetize vehicle data for innovative uses.”

Lu notes that Europe and the U.S. are home to vehicle data platform providers that have received investment from large companies, including Dell, GM, and Microsoft. “So we aim to be a leading Asian vehicle data provider [that utilizes] Taiwan’s abundant software talent and geographical advantages,” she says.

ASJade Technology names ASRock Inc, a Taiwan Stock Exchange-listed company that manufactures motherboards, graphic cards, and IPCs, as its sole investor. While ASJade’s current priority applications are optimization of EV charger deployment, integration between EVs and electric grids, smart city planning, and traffic management, the company is one of the few Asian tech partners of Mobility Open Blockchain Initiative (MOBI), an international alliance funded by carmakers such as BMW, Ford, General Motors, Honda, and Hyundai.

Blockchain technology can be employed to guarantee transaction security and efficiency, preventing, for example, the interference by hackers of data transmission between light poles and moving cars. MOBI would also come in handy when connected cars must move safely across national borders, a daily routine for many drivers in the European Union.

“Reliable services can be built upon a trusted network to serve increasing customers and partners, especially the rapidly growing [number of] connected vehicles in the world,” says Lu.

Reliability is also a major focus of XING Mobility, a Taipei-based provider of electric vehicle powertrain and battery technology. Co-founded by a Tesla veteran and a former Panasonic Taiwan executive, XING procures battery cells from Japanese and South Korean suppliers and turns them into battery packs, with superior thermal management as their products’ main selling point. As illustrated by headline-grabbing incidents of electric cars catching fire, EV brands’ desire to cut charging time to an absolute minimum inevitably complicates the heat management systems of batteries, creating an opening for XING. The company supplies battery solutions for the mining sector and commercial vehicles, as well as power storage solutions to support the move toward renewable energy. 

“Similar to many Taiwanese companies in the semiconductor supply chain, we do not own 100% of the upstream patents,” says Sherwood Hochen, XING Mobility’s chief strategy officer. “But we are better than others at making packs …and can therefore support our extremely ambitious end-users, such as vehicle makers in Europe and mining fleets in Australia.”

Hochen cites Taiwan’s efforts to electrify its public bus and delivery vehicle fleets as another factor driving demand. He says the company is working on an optimal-performance battery system for a pilot public transportation project in Taiwan, to be completed by this summer.

Charging ahead

On the higher-profile end of automotive industry production, semiconductor foundries, power electronics companies, printed circuit board providers, and materials companies constitute a strong manufacturing supply chain. International auto chip developers such as Infineon, Bosch, and NXP outsource production to Taiwan-based contract chipmakers like the Taiwan Semiconductor Manufacturing Co. (TSMC), United Microelectronics (UMC), and Powerchip Semiconductor Manufacturing Co. (PSMC). In 2021, TSMC increased its production of auto chips by 60% in response to an unprecedented semiconductor shortage that is still squeezing the global auto industry.

In addition, Taiwan’s tech giants are quickly expanding into the EV space. Hon Hai Precision Industry Co., the world’s largest contract electronics manufacturer, has been transforming itself into a diversified integrator of hardware and software, with EVs and computer-assisted driving a strategic focus. Hon Hai – also known outside of Taiwan as Foxconn – unveiled its “Foxtron” joint venture with Taiwanese carmaker Yulon Motors in 2020 and launched the MIH Open Platform for companies seeking to become part of the EV supply chain. MIH now boasts around 2,000 hardware and software companies from Taiwan and other countries as its members.

Hon Hai is finding other ways to strengthen its foothold in the EV sector, including its recent purchase of a 6-inch wafer fabrication plant in Hsinchu from chipmaker Macronix to produce auto chips. And in November 2021, the company acquired its first EV manufacturing plant in North America under a deal with U.S. electric vehicle startup Lordstown Motors.

These recent endeavors add to Hon Hai’s growing list of auto partnerships, including those with Stellantis (a joint venture between Fiat Chrysler Automobiles and the French PSA Group) and Chinese carmaker Geely. In January, Hon Hai and Taiwanese e-scooter brand Gogoro signed a memorandum of understanding with three Indonesian entities to forge an EV battery supply chain in Indonesia, home to large deposits of nickel and other minerals needed for EV batteries.

Other local electronics powerhouses have also jumped on the EV bandwagon. Pegatron, for instance, has been focusing on Centralized Electronic Control Units (ECU), including all relevant hardware electronics components and telematics systems. Ian Wang, an industry analyst with Taipei-based Market Intelligence & Consulting Institute (MIC), says that Taiwanese electronics makers like Pegatron likely have more familiarity with such systems and components than the average automaker.

Pegatron, along with fellow electronics manufacturers AUO and Wistron and chipmaker PSMC, is a key member of the Advanced Automotive Technology Development Association (TADA) launched in late 2021 with the declared aim of bridging Taiwan’s ICT and semiconductor industries and the global automotive industry. According to the Hsinchu-based Industrial Technology Research Institute (ITRI), TADA’s establishment indicates that joining MIH is not an option for certain companies that compete fiercely with Hon Hai for R&D personnel, technicians, and skilled workers. Also, by joining MIH, these companies could risk being forced to side with Hon Hai at the expense of other customers.

“EVs will represent a very positive driver for Taiwan’s industrial clusters, as our ICT prowess will facilitate the moving up from components to bigger sub-systems,” says Stephen Su, Vice President and General Director at ITRI’s Industry, Science and Technology International Strategy Center. Such technologies could include LADAR (Laser Detection and Ranging) systems that use light to determine the distance between the car and other objects.

“However, in contrast to Taiwan’s ICT sector, which produces many finished notebooks and smartphones, the Taiwan-based EV supply chain will not be focusing on the production of complete cars,” Su added.

Nevertheless, Foxtron in October 2021 unveiled its first three EV prototypes under the same brand name – an SUV, a sedan, and a city bus. The company hopes to use the MIH platform to ultimately make Foxtron a major industry player. The Foxtron sedan, dubbed “Model E,” was designed by Italy’s Pininfarina to compete head-on with Tesla’s Model S and Mercedes’ EQS.

However, a Shanghai-based auto industry consultancy, Sino Auto Insights, stresses the high hurdles for building an internationally successful EV brand. The firm notes that EVs are a capital-intensive, low-margin business requiring millions of units of sales just to start breaking even.

“Building an iPhone, however impressive, is not the same as building an electric vehicle – just ask Elon Musk,” says Sino Auto Insights founder and managing director Tu Le.

“The risk of exporting Foxtron to Western foreign markets is that Foxtron’s products could be competing directly with Hon Hai’s contract manufacturing customers, like American EV-maker Fisker,” he adds. “So I could see it being a decent Taiwanese brand that mostly sells to the local market and perhaps into parts of Southeast Asia.”

In terms of regional competition, Taiwan has a long road ahead if it intends to become a challenger of China, the world’s largest producer of EVs. However, Tu points out that Taiwan’s EV industry is not necessarily at a greater disadvantage vis-à-vis China than are Japan and South Korea since those two countries do not have much experience with manufacturing EVs either. In fact, Tu says, the dozens of years of experience Japan and South Korea have in manufacturing combustion-engine vehicles will likely present other challenges. “They have to ‘unlearn’ a lot of things, get good at a number of things, and generally move much faster while taking more risk, and automakers are notoriously risk-averse, with the exception of Tesla,” Tu says.