TALKING POINTS FOR FOREIGN INVESTMENT
–Photovoltaic (PV) Industry
I. Investment Niche in Taiwan
A、 PV industry is an emerging and fast-growing industry worldwide
The global output value was NT$ 93.3 billion in 2004, and is expected to
increase to NT$ 181.5 billion till 2010.
B、 Taiwan’s position will become more important in the global market
The market share of Taiwan in the global PV industry will reach 16% in 2010.
a. The output value was NT$ 2.8 billion in 2004, taking 3% of the global market;
b. The output value will reach NT$ 29 billion in 2010, taking 16% of the global
market share.
B、 The investment return of silicon material will be above 30%
According to the estimation by CLSA in 2004, the long-term investment return
of the upstream silicon material will be above 30% due to the rapid growth of the
PV industry.
C、 Taiwanese companies at present do not have the ability to produce poly-silicon
material, the technology barrier of which is comparatively high. Come to invest
in Taiwan will have the advantage of being close to the supply chain. (Fig. 1)
D、 Taiwan has a complete PV supply chain. The Taiwanese companies’ growing
market potentialwill pose a continuously increasing demand for poly-silicon. To
invest in poly-silicon manufacturing in Taiwan will be complementary to the
business of the local companies.
PV Inve rter
Polysilicon Material
Wafe r
Solar Cell
PV Module
Source: ITRI-IEK(2005/08)
Fig. 1
II. Market Analysis
Taiwan PV Industry Supply Chain
PV System
& Application
A、
Market Status & Scope Analyses
a. Demand Analysis of Taiwanese Market: In 2005, the output volume of solar cell
and module of Taiwanese companies is 111.62MW, with a consumption of almost
1,339 kg poly-silicon. However, the major demand for poly-silicon still comes from
the global market.
Table 1 Taiwan Solar Cell & Module Industry Scope
1999 年
2000 年
2001 年
2002 年
2003 年
2004 年
2005 年
Output Value(million NT$)
299
324
396
600
1,200
2,800
5,600
Output Volume(MW)
2.9
3.2
5
10
26
38.14
111.62
Import Value(million NT$)
26
24
32
70
33
71
257
Export Value(million NT$)
43
34
136
366
894
2,579
5,298
Note: The output value is estimated based on the average solar cell price of European and US markets
between January and July, 2005, NT$50.17/watt.
Source: ITRI-IEK(2005/08)
b. Potential global market demand: The global demand for poly-silicon is 30,600 tons,
of which 12,600 tons was consumed by the PV industry.
Source: Annual World PV Market Review
Fig.2
B、
Annual Consumption of Silicon Material
Present and Future Market Opportunities
In 2005, the global supply of PV-used silicon is in serious shortage. It is estimated that
after 2006, the global demand for PV-used silicon will grow significantly.
Source: Annual World PV Market Review
Fig.3
Estimate for Future Consumption of Silicon Material
C、
Manufacturing Process of Poly-silicon
a. The raw material is Silica (SiO2), which first goes through the high-temperature
extraction process to get metal-grade silicon (mg-Si), then goes through the refining
process to get poly-silicon (solar-grade Si) for PV industry.
b. The raw material of poly-silicon is Silica (SiO2), which has a virtually unlimited
worldwide supply. However, mg-Si poses a certain degree of danger. Since it needs
high temperature during the manufacturing process and produces waste, issues such
as material transportation, electricity price and stability, as well as waste handling
should be under consideration while selecting the place to invest. This is also the
entry barrier of poly-silicon industry.
Source: ECN,The PV Roadmap and Prospects for Silicon technology.
Fig.4
Manufacturing Process of Polysilicon
III. Competition Analysis
A、
Major Companies & Activities
Table 2
Major Poly-silicon Companies& Activities
Company
Wacker
Hemlock
MEMC
Country
Germany
USA
USA
2004 Output Capacity
5,000
7,000
2,550
Production goal
At least 500t/year
3,000-5,000t/year
--
Planned Start
Early 2007
Mid-2008
--
Recent activities
Announced in 2004 that
Hemlock is
While the market for silicon
it will continue to move
actively looking
wafers grew 22% last year,
towards solar-grade
for partners to
MEMC outpaced the
silicon. It is expected
expand the output
industry, notching 32%
that the annual output
capacity.
growth in sales, to $1
volume will reach 500
billion. Profits did even
metric tons in 2006, and
better, skyrocketing 93%, to
1,000 metric tons in
$226 million. Why the
2007. After the capacity
superior performance?
expansion, it is predicted
Contributing heavily was
that the annual output
the company's successful
volume will reach 6,500
integration of its 2004
metric tons, and the
acquisition of Taisil, a
investment amount will
Taiwanese manufacturer of
be 75 million Euro;
wafers, opening up the Asia
During 2005, it invested
Pacific region. For the year,
another 200 million
its sales in Asia Pacific
Euro to increase the
jumped 82% to $441 million
output capacity of 4,000
-- now its largest geographic
tons silicon material.
market.On August 30, 2005,
MEMC celebrated the start
of 300mm wafer production
at its Taisil facility in
Hsinshu, Taiwan with a
traditional "Ribbon Cutting"
ceremony. MEMC now
becomes the first producer
of 300mm wafers in
Taiwan.
B、
Competition Strategy Analysis
a. Industry Structure
There are 8 major suppliers of PV-used poly-silicon (Table 3).
Table 3
Market Share of Major Poly-silicon Companies in 2004
Company Name
Country
2004 Market Share(%)
Hemlock
USA
25.50%
Tokuyama
Japan
18.94%
Germany
18.21%
ASiMI
USA
9.47%
MEMC
USA
9.29%
Mitsubishi Material
Japan
8.01%
SGSilicon
USA
7.65%
Sumitomo Titanium
Japan
2.55%
Other
-
0.36%
Total
-
100.00%
Wacker-Chemie
Source: Solarbuzz Inc.(2005/08)
b. Operational Status
The major PV-used poly-silicon companies are located in USA, Germany, and Japan.
It is an oligopoly-type industry. The supply of silicon is in serious shortage in 2005
since the market demand skyrocketed. To ensure the demand after the capacity
expansion, the poly-silicon suppliers signed long-term supply contracts with the
downstream companies. According to the estimation by CLSA in 2004, the short-term
profit enjoyed by poly-silicon companies could be as high as 40-50%, while the
long-term profit still maintains at 30%.
Source: CLSA, 2005, Solar Power
Fig. 5
C、
Long-term Profit Trend of Poly-silicon Manufacturing Companies
The Advantages of investing in Taiwan
a. Taiwan’s solar cell (downstream of Poly-silicon) output volume entered World Top
10 list in 2004. According to the estimation by PV Status Report 2005, the future
output capacity of Mainland China and Taiwan combined will amount to half of
that of the United States.
b. Mainland China has a higher investment risk and unstable electricity supply,
however, Taiwan provides low-priced and stable electricity. Furthermore, Taiwan
also has the strategic value of being a transit point to Mainland China as well as the
whole world.
IV. Production Cost
A、
Land rent Cost
a. Rents at the Hsinchu Science-based Industrial Park
Table 4 Land rent at the Hsinchu Science-based Industrial Park
Unit: NT$
Area (m2)
Category
Rent (per month)
Over 2,000
NT$ 49/ m2
First floor
531.3~1280.4
NT$ 122/ m2
Standard
Second floor
531.3~1227.6
NT$ 115/ m2
plant
Third floor
662.97~1346.4
NT$ 106/ m2
Fourth floor
662.97~798.6
NT$ 99/ m2
1485
NT$ 204~325/ m2
Land
Deluxe plant
80
Incubation center
NT$ 184/ m2
160
240
Dormitories
Single room
15~18
NT$2,250~2,950/unit
Double room
15~21
NT$1,850~3,300/unit
Family home
100~290
NT$10,550~33,300/unit
Note: The above rents are adjusted on the basis of announced rents for the current year.
b. Rents in the Tainan Science-based Industrial Park
Land and plant buildings within the Tainan Science-based Industrial Park are
leased, and will not be sold. The government will set and adjust rents on the
basis of amortized cost at the time of development and subsequent yearly
changes in real estate and land value taxes. Rents withi n the Tainan
Science-based Industrial Park will consequently be lower than those outside
the park. Land shall be leased for periods of 20 years, and plants leased for
periods of one year. The following rents are currently charged:
Units: NT$
Category
Term
Rent (m2/month)
Land
20 years
12.9
Plants
1 year
103~120
Note: Land rents will be adjusted on the basis of announced land prices, public facility development
costs, and laws and regulations.
B、
Labor Cost
Table 5 Average monthly wages for workers in different industries in Taiwan
Unit: NT$
Year
Ave. 2001
Ave. 2002
Ave. 2003
Mining and quarrying
44,264
45,006
47,263
Manufacturing
38,586
38,565
39,583
Electricity, gas & water
93,091
89,591
91,034
Construction
37,746
36,848
37,219
Trade
39,760
39,202
39,799
Accommodation & eating-drinking places
25,991
25,828
25,181
Transportation, storage & communication
53,350
51,564
51,396
Finance & insurance
62,625
65,767
64,693
Real estate& rental & leasing
42,604
40,714
39,872
Professional, scientific & technical services
53,191
49,587
50,990
Health care services
54,701
54,115
55,999
Cultural,, sporting & recreational services
41,242
39,489
40,861
Other servies
31,157
30,525
30,057
Source: Monthly Bulletin of Earnings and Productivity Statistics and Annual Report of Earnings and
Productivity Statistics published by the Directorate-General of Budget, Accounting and
Statistics, Executive Yuan, Jan. 2004
V. Taxation
Table 6 Individual Consolidated Income Tax Rates
Units: NT$
Net consolidated income
Tax
Progressive
rate
differential
Tax payable
0—370,000 ×
6%
–
0
=
370,001—990,000 ×
13%
–
25,900
=
990,001—1,980,000 ×
21%
–
105,100
=
1,980,001—3,720,000 ×
30%
–
283,300
=
3,270,001–– ×
40%
–
655,300
=
Table 7 Profit–Seeking Enterprise Income Tax Rates
Taxable income (P)
bracket
Tax rate
Less than NT$50,000
Progressive
Quick formula
differential
0
–
1. When P is less than NT$71,428: T= (P–
Less than NT$100,000
15%
None
50,000x1/2
2. When P is greater than NT$71,428: T=Px0.15
Over NT$100,000
25%
10,000
T=Px0.25–NT$10,000
Note: T is the amount of tax.
VI. Investment Incentives
A、
Preferential Taxes
The ROC Government enacted the Statute for Upgrading Industries in 1991 to
develop a favorable environment for foreign and overseas Chinese investors in
Taiwan and to encourage investment by foreign companies for the purpose of
upgrading the ROC’s industrial base. On January 1, 2000, the statute was amended to
extend preferential tax measures for another 10 years until December 31, 2009. These
measures are detailed in the chart below:
Incentive Measure
Nature of Incentive
Incentive Measure
Nature of Incentive
Equipment and facilities used exclusively for R&D, experimentation, and
quality control purposes, and equipment, machinery, and facilities that are
Accelerated
depreciation of
equipment and facilities
utilized for energy conservation or that use new and clean energy, are eligible
for an accelerated depreciation period of two years. If there is any residual
post-depreciation service life remaining following the accelerated depreciation
period, depreciation may be continued for one or several years within the
service life of the assets as specified in the Income Tax Law until the assets are
fully depreciated.
Investment in
automation equipment
or technology
Investment in recycling
and pollution control
equipment or
technology
Investment in
equipment or
technology for the use
of new and clean
energy, energy
conservation, and
industrial wastewater
recycling
Investment in
equipment or
technology for reducing
greenhouse gas
emissions and
enhancing energy
efficiency
Companies may deduct 5% to 20% of the amount of investment in these areas
from their profit-seeking-enterprise income tax over a five-year period
beginning with the year in which the investment is incurred.
Incentive Measure
Nature of Incentive
Investment in the
hardware, software
and/or technology that
can promote an
enterprise’s digital
information efficiency,
such as the Internet and
television functions,
enterprise resource
planning,
communication and
telecommunication
products, electronics
and/or audio visual
equipment, and digital
content production
 Companies may deduct 35% of the amount of their investment in R&D or
personnel training from their profit-seeking-enterprise income tax over a
Research and
five-year period beginning with the year in which the investment is
development
incurred.
 Companies may deduct 50% of the amount of their investment in R&D or
personnel training that exceeds the average annual amount of their
investment in R&D or personnel training for the previous two years from
their profit-seeking-enterprise income tax.
Personnel training
 The total amount deducted from tax due per year under the previous two
items may not exceed 50% of the company's profit-seeking-enterprise
income tax due for that year. The amount deducted during the final year,
however, is not subject to this limitation.
Investment in
resource-poor or
Companies that invest a specific amount or employ a specific additional
number of persons in resource-poor or lesser-developed rural areas may deduct
lesser-developed rural 20% of the invested amount from their profit-seeking-enterprise income tax
areas
over a five-year period beginning with the current year.
The investor may choose one of the following:
 Investment tax credits for shareholders:
A company or individual who subscribes to the registered stock issued by
a company in an emerging, important, or strategic industry, and who holds the
Investment in
stock for at least three years, may claim a deduction from the
emerging, important, profit-seeking-enterprise income tax or consolidated income tax due over a
and strategic industries period of five years beginning with the current year:
 A profit-seeking enterprise may deduct up to 20% of the cost of such
stock from its profit-seeking-enterprise income tax for the current year.
 An individual may deduct up to 10% of the cost of such stock from the
consolidated income tax for the current year, provided that the
Incentive Measure
Nature of Incentive
deductible amount within each year is not more than 50% of the
consolidated income tax payable for that year; this limitation will not
apply, however, to the amount deducted in the final year.
 The rate of tax reduction provided above will be reduced by 1
percentage point every two years beginning on Jan. 1, 2000.
 Five-year tax holiday for companies:
A company investing in an important, emerging, or strategic industry may,
within two years from the date at which shareholders begin paying their stock
price and with the approval of its shareholders’ meeting, select exemption from
the profit-seeking-enterprise income tax and waive the right of shareholders to
claim income tax deductions as set forth above. Once the selection is made, no
change will be allowed. The following provisions must be met:
 A newly incorporated company that meets these conditions will be
exempted from the profit-seeking-enterprise income tax for a period of
five consecutive years from the date on which it begins to sell its
products or render its services.
 A company that carries out an expansion project via a capital increase
will be exempted from the profit-seeking-enterprise income tax on the
increased income derived from the expansion for a period of five
consecutive years from the date the newly added equipment begins to
operate or the rendering of services begins. However, this provision is
limited to the expanded construction of independent production or
service units, or the expansion of primary production or service
equipment, via capital increase.
 A company that is eligible for a tax exemption as described above may,
within two years of the date on which it starts to sell its products or
render its services, choose to defer the commencement of the
tax-exemption period. The period of deferment may not be more than
four years, and the date on which the exemption period begins
following deferment must be the first day of a fiscal year.
 A company that carries out a capital increase using undistributed profits
may apply the three items above.
If for the purpose of adjusting its business operations, a company invests
production or service equipment and the land on which such equipment is
Reinvestment
located in a another enterprise in which it holds at least a 40% share, the land
value increment tax on the reinvested land may, with prior government
approval, be deferred based on the ratio of shares held and upon receipt of a
proper guarantee from the company.
 When a non-resident individual or profit-seeking enterprise without a fixed
Investment by
place of business in the Republic of China receives a dividend distributed
foreigners and overseas
by a company or profit distributed by a partnership located in the Republic
Chinese
of China in which that individual or enterprise has invested under the
Statute for Investment by Overseas Chinese or Statute for Investment by
Incentive Measure
Nature of Incentive
Foreign Nationals, 20% of the amount of payment will be withheld as
stipulated in the Income Tax Law and the provisions of the Income Tax
Law regarding tax filing will not apply.
 When a non-resident director, supervisor, or manager of a company in the
ROC who has invested in that companies under the Statute for Investment
by Overseas Chinese or Statute for Investment by Foreign Nationals and
who has resided in the ROC for more than 183 days within a tax year for
the purpose of operating or managing the invested company receives a
dividend from the invested company, 20% of the amount received will be
withheld as stipulated in the Income Tax Law and the dividend income will
not be included in the individual’s tax return for that year.
 Salaries paid abroad to directors, managers, or technicians who are sent to
the ROC temporarily by foreign profit-seeking enterprises that invest in the
ROC under the Statute for Investment by Overseas Chinese or the Statute
for Investment by Foreign Nationals to carry out investment, plant
construction, or market surveys, and who do not stay in the ROC more than
183 days within a tax year, are not treated as income derived in the ROC
and are thus exempt from the income tax.
When foreign profit-seeking enterprises or branch companies which they have
established within the Republic of China set up themselves, or commission
Establishment of
domestic profit-seeking enterprises to set up logistics and distribution centers in
international logistics
Taiwan to engage in the warehousing and simple processing of goods from the
and distribution centers said foreign profit-seeking enterprise which are then delivered to domestic
customers, the income so derived is exempt from the profit-seeking-enterprise
income tax.
Merged companies are exempt from profit-seeking-enterprise income taxes and
securities transaction taxes resulting from their merger, and may apply the
Company mergers
provisions for the deduction of losses. In addition, the land increment tax due
on land that is owned by a company and is transferred along with the merger of
that company may be charged to the account of the surviving enterprise.
For companies that establish operations headquarters in Taiwan that reach a
certain scale and that have a major economic effect, the income that they derive
Establishment of
operations headquarters
from the provision of management services or research and development to the
related companies which they acquire in Taiwan, as well as royalty income,
profit from investment, and gain from the disposition of properties, are exempt
from the profit-seeking-enterprise income tax; in addition, such companies may
procure publicly owned land at preferential prices.

Effective Jan. 1, 2002, machinery and equipment that is imported for a
company's own use and that is not yet manufactured domestically may,
with the approval of the Ministry of Economic Affairs, be exempted from
Science-based
industries
import tariffs and business taxes.

Import tariffs and business taxes will be levied on
imported machinery
or equipment that, within five years of its importation, is sold or its use is
changed so that it no longer meets the conditions for tax exemption or
Incentive Measure
Nature of Incentive
conforms to its original use. Machinery or equipment that is sold to
companies that operate within science-based industrial parks, economic
processing zones, or other science-based industrial companies is not
subject to this limitation.

Raw materials that are imported by bonded factories are exempt from
import tariffs and business taxes. Import tariffs and business taxes will be
levied on such raw materials, however, if they are shipped outside the
bonded area.
B、 R&D Subsidies： Measures for encouraging the development of
leading new products
C、 Contents
In order to encourage new product development by private manufacturers with R&D
potential, and to share some of the burden of risk, the government may provide a
subsidy of up to 40% of the cost of development.
D、
Scope of Eligible Products
a. Products of emerging important strategic industries.
b. Products employing key technologies that surpass current standards of industrial
technology in Taiwan.
c. Products that have a strong linking effect and good market potential, and that can
stimulate the development of related industries.
d. Intellectual property rights revert to the developing company.
E、 Low-interest Loans
To accelerate industrial development and economic growth, a special fund has been
set aside by the Development Fund of the Executive Yuan for cooperation with banks
in providing various kinds of special low-interest loans. These include preferential
loans for small and medium-sized enterprises (SMEs) to upgrade and purchase
automation equipment, and loans to private enterprises for purchasing pollution
control and pollution treatment equipment. In addition, the government has allocated
NT$100 billion from new postal deposit funds for the “Medium-and Long-term
Capital Loan Plan.” Private investors whose projects have a value of NT$ 100 billion
or more may apply for loans under this plan.
F、 Government Participation in Investment
a. Investors can ask the government to participate in their investment projects to a
maximum of 49% of the total capitalization.
The following government agencies represent the government in providing capital:
(a)
The Sci-Tech Development Fund and other development funds
(b)
Chiao Tung Bank
(c)
Management Committee of the Executive Yuan Development Fund
b. Investment Focus
In the past, the focus was on important productive industries included in economic
construction plans, such as petrochemicals and semiconductors.
In recent years the focus has been on Ten Emerging Industries, including
information, communications, aerospace, and biotechnology.