digital transformation: opportunities and challenges for ... · on digitalization,...

Copyright 2017

All Rights Reserved

Stephen Su

General Director

ITRI Industrial Economics and Knowledge Center (IEK)

22 August 2017

Digital Transformation:

Opportunities and Challenges for Taiwan

Copyright 2017

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Outline

• Future Trends of Industry Development

• Opportunities and Challenges for Taiwan

• Directions for Taiwan Policy/Strategy

• Conclusion

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New Trends in Digital Economy

Digital Economy

Social Media

Blockchain

Deep Learning

Ecosystem

Industry 4.0 Digital Platform Autonomous Driving

Smart City

Social Innovation

AI

Big Data VR

Agile Digital Journey

Talents

AR

Sharing Multi-ecosystems

Platform Business

Digital Twin

Frenimies

Algorithmic Intelligence

Bimodal

User-centric

Customer Experience

Digital to the Core Interdisciplinary HMI

Digital Ecosystem

Transformation

Crowd Sourcing Partnership

System Integration

New DNA

Soft Power

Asset Efficiency Bots

Cyber Security

Cyber Physical System

Mass Customization

Value Creation

Adjacencies

Social Media

Blockchain

Deep Learning

Ecosystem

Industry 4.0 Digital Platform Autonomous Driving

Smart City

Social Innovation

AI

Big Data VR

Agile Digital Journey

Talents

AR

Sharing

Digital Twin

User-centric

Customer Experience

Interdisciplinary HMI

Digital Ecosystem

Transformation

Crowd Sourcing Partnership

System Integration

New DNA

Soft Power

Bots

Cyber Security

Cyber Physical System

Mass Customization

Value Creation

Digital to the Core

New Emerging Trends

Adjacencies

Partnership with

friends + enemies

Leverage on

existing operational

competencies

Intelligence without

human intervention

Business models

with multiple

ecosystems

Extension from

core competencies

Platform with

business models Mode 1: Operation

Mode 2: Innovation

Source: ITRI/IEK(2017/08)

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Six Pillars of Digital Economy

• High Speed Broadband/ Mobile

Device/Cyber Security • Civil

participation/Digital

human rights • Innovated digital

Service

• Traditional industry

digitalization

• H/W & S/W integration

• Cross discipline

cooperation

• Data Analytics

• AI

Infra-

structure

Service

Model

Digital

Talents

Regulation

Ecosystem

Digital

Economy

• Digital/Virtual World

Regulation

Digital

Rights


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New Paradigm Shifts under Digital Economy

Past Now Digitalization

Service-based

Applications

Production &

Sales

Data Sensing,

connection and

analyzing

Connection, Sensing

Cyber

Security Virus

Detection

Blockchain

security framework Security & Privacy

Total

Solution Hardware

Cost Down

Customization and

integration by s/w

& h/w integration

H/W & S/W integration

User-centric Branding-

defined Spec.

User scenarios and

feedback, sharing

economy

User-needs

Ecosystem

Platform Supply Chain

Stakeholders’

benefits

Value web


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Control Apex of User-centric Ecosystems More than Branding

Supply

Chain

User

System

Note: Only listed selected companies


6 of Top 10

Market Cap

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New Biz Model in User-centric Ecosystems Wool out in dogs, pigs to pay (羊毛出在狗身上，豬來買單)

User-centric Ecosystem

Brand R&D

Manufacturing

Financial

Stakeholder

User

Service

Provider

Data

$$$

Services

Advertising,

Insurance

companies


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Outline




• Conclusion

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Taiwan Manufacturing Industry Portfolio (1/2)

(2015) Value Add Ratio %

Capex/Revenue %

Size of the bubble equals

revenue and US$40b.

IC Design (22.1 %)

IC P&T (54.1%)

Foundry (70.2%)

Memory (8.7%)

Large Size Display(21.1%)

PC (68.8%)

Cell Phone (4.4%)

PV (8.0%)

LED(19.0%)

Machine Tool (5.3%)

High Tech Manuf. Equipment

(8.4%) Auto (0.4%)

Petrochemical (3.9%)

Med. Device (0.9%)

Automation (6.4%)

Robot (0.8%)

Mid. & Small Size Display (20.3%)

-10

0

10

20

30

40

50

60

70

80

-5 0 5 10 15 20 25 30 35 40

Manufacturing Industries Value Add

Ratio in 2015: 24.9%


Note 1: x-axle (Capex/Revenue Ratio %) and y-axle (Value Add Ratio %) @2015

Note 2：( ) 2015 Taiwan industry market share worldwide

Note 3：Manufacturing Industries Value Add Ratio in 2015 calculated based on GDP/gross sum of manufacturing value

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IC Design

(22.1%)

IC P&T

(54.1%) Foundry

(70.2%)

Memory

(8.7%)

Large Size Display

(21.1%)

PC

(68.8%)

Cell Phone

(4.4%)

PV

(8.0%)

LED

(19.0%)

Machine Tool

(5.3%)

High Tech Manuf.

Equipment

(8.4%) Auto

(0.4%) Petrochemical

(3.9%)

Med. Device

(0.9%) Automation

(6.4%)

Robot

(0.8%)

Mid. & Small Size

Display

(20.3%)

-1000

0

1000

2000

3000

4000

5000

-10,000 - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Personnel Expenses

(US$M)

Taiwan Industry Revenue

(US$M)

Size of the bubble equals

value add and US$50b.

Taiwan Manufacturing Industry Portfolio (2/2)

(2015)


Note 1: x-axle (Taiwan Industry Revenue US$M) and y-axle (Value Add Ratio %) @2015

Note 2：( ) 2015 Taiwan industry market share worldwide

Note 3：Manufacturing Industries Value Add Ratio in 2015 calculated based on GDP/gross sum of manufacturing value

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0

10

20

30

40

50

60

70

80

90

0.00 5.00 10.00 15.00 20.00 25.00 30.00

Controlling User-centric Ecosystem to

Accelerate Innovation Scale-up

Note: Bubble size is market cap. Except for market cap which is as of 2016/09/06, all other financial indicators are 2015 data

Value-Add

(%)

R&D Brand Manufacturing

User-centric

Ecosystem


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Challenges for Taiwan: From 0 to 1, and 1 to N

Horizontal Progress

(Success duplication)

Vertical Progress

(Innovation breakthrough)

0

1

N

• Advanced technology

• Innovated invention

• New business model

• User ecosystem

• Global market

• 1n => 1 Consistency

• 1x1… = 1 Immutableness

• User-oriented technology

• Young start-ups

• Contract manufacturing

1 => 0 (Cost Down)

Challenges of Taiwan

Source: Peter Thiel; ITRI/IEK (2016/09)

• Speed

• Economic Scale

• Globalization

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From “Manufacturing” to “Infofacturing”

Potential

Players:

Terminals & Components

Network

Cloud

System Integration

Model 2:

Original

System

Manufacturing

Quanta,

Hon Hai,

etc.

ODM

OSM (Original System

Manufacturing)

Model 1:

Service-based

Solution

Provider

Advantech,

Delta,

etc.

Solution Provider

Service-based

Solution Provider

Model 4:

Service

Integrator

7-11,

YouBike,

etc.

Service Provider

Service System

Integrator

Applications & Services

Model 3:

Service-based

Brand

Acer, ASUS,

HTC,

etc.

Service-based Brand

Brand


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Outline




• Conclusion

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• Leverage existing strengths in innovation and R&D to develop

cutting-edge new product applications and services with global

potential

• Utilize innovative design to market Taiwan

• Promote cross-industry technology integration, with an emphasis

on digitalization, Internet-enablement, smart technology and

environmentally-friendly technology

Taiwan Industry Innovation for Next Stage

Linkage

with the

Future

Linkage

with the

Global

Resources

Linkage

with Local

Communi-

ties

Strengthen the Industrial Competitiveness through Innovation

Focus on Industry Innovation Initiatives

Smart Machinery

Asia． Silicon Valley

Green Energy

Circular Economy

IC Design & Semiconductor

Biotech & Pharmaceutical

National Defense

New Agriculture

Digital Economy

Technology for Culture +1 +2 +2

5

Source: IDB of MOEA；IEK of ITRI (2017/03)

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Digital Nation Strategy: DIGI+ (2017-2025) 6 Key Strategies:

1. Infrastructure for digital innovation (DIGI+Infrastructure)

2. Talents and skills for innovation (DIGI+Talent)

3. Digital transformation for industries (DIGI+Industry)

4. Human rights in open internet and digital society (DIGI+Right)

5. Smart cities with public-private sectors (DIGI+Cities)

6. Digital services and globalization (DIGI+Globalization)

Infrastructure for digital innovation

Regulatory Digital Tech Digital Talent

Environment

Digital Economy Internet Society Digital Government

Ecosystem

Smart Cities

AR/VR/MR &

User Experience

Sustainable Society

Circular Economy

5+N industries New Agriculture

Healthy Food

Open Society

Data Economy

Digital Commerce

Fintech

Application and Services

Source: BOST; ITRI/IEK(2017/08)

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Goals for Asia ● Silicon Valley Development Agency (ASVDA) on IoT & Entrepreneurship

Source: ASVDA(2017/03)

• Connect to Silicon Valley and other global tech clusters

• Develop industries for the next generation

• Become an innovative startup destination for young Asians

Capitals

Talents Research

institutes

Universities

Startups

4. Strategies

3. Links

2. Core Elements

1. Ecosystem

5. Goals

Legal & accounting

services

Enterprises

Testbeds

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Post-IoT era with Artificial Intelligence Integration of Big Data, Computing Power, and User

Experience(Algorithm)

Mainframe

PC

Internet

Mobile Social Cloud Data

IOT (Ubiquitous)

Artificial

Intelligence

1970s 1980s 1990s 2000s 2015s 2020s

Communication-oriented

• Number of Connected Devices

• Amount of Data Generated

(Smart Machine)

Computation-oriented Cognition-oriented


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AI as “X factor” to Enable Digital

Transformation for Taiwan Taiwan publishing Digital Nation Initiatives「數位國家・創新經濟發展方案（DIGI+）」

• “Artificial Intelligence” as the Key Driving Factor for cultivating the

Enabling Technology and Digital Talent

AI as “x factor” to scale-up Taiwan’s strength and to drive the

innovation with S/W & H/W integration by domain knowledge:

• “AI X Smart Transportation”: Smart City application

• “AI X Smart Services”: Converging ICT and service interoperation

• “AI X Smart Manufacturing”: Value-added the manufacturing

intelligence

• “AI-PU Chip”: Enabling AI semiconductor ecosystem

• Others: ”AI X Smart Retail”, “AI X Smart Healthcare”, “AI X Smart

Travel”…etc.

“AI X” would be the key success factor for Taiwan

in the era of digital economy


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Targeting AI-powered Service Sectors

10

20

30

40

50

60

70

80

90

-1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

Va

lue

ad

d ra

tion

%

Labor Productivity (Million)

Service Sector Avg. 65.9

Se

rvic

e S

ec

tor

Av

g. 2

.2

Finance & Insurance

Circle Size: Revenue

Retail

Textile

Medical Equip.

Auto & Parts

Medical & Pharmacy

Machinery

Expert Science and technology

Healthcare services

Plastic

Ma

nu

factu

ring

S

ec

tor A

vg

. 5.8

Manuf. Sector Avg. 28.5

Food

Chemicals

Computer & Opticals

: Service

: Manufacturing

Public Services & Military

Transportation & Logistics

Electronic Components

Note: Value add ration=value add/revenue; Labor productivity= Revenue/# of Labor

• AI “Supply”: Electronic components, Computer and Electronics, Machinery

• AI “Demand”: Retail, Financial & Insurance, Medical and Healthcare, Expert

Services

* Listed of AI related service and manufacturing sectors

Source: DGB; ITRI/IEK(2017/08)

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AI-related Ecosystem in Taiwan

Infra.

Tech.

Applica

-tion

Big Data

Computing

Processing

Algorithm

Solution

Platform

• The dominant OEM/ODMs incl.

computer, electronic components,

machinery, mobile devices, IoT etc. OEM/ODM

globalized

supply chain

• Computing system industry incl.

embedded system, x86 computing

system, cloud computing etc.

• Computing semiconductor ecosystem

incl. design and fabrication for

processing, GPUs, MCUs etc. Computing

supply chain

• Open Data: eCom(Elect. Invoice,

Housing price), Biotech(National

health care DB, Biobank), City(ETC、Street Cam, City open data)……etc

• Local features: Traffic behavior,

geographic location, epidemic, Health

care service system…

• Policy: 5+2, Sandbox regulatory, Open

data…

Localized

domain

knowledge

• Leveraging the strengths on OEM/ODMs, localized domain DB(biobank,

Cybersecurity..) and semiconductor for AI-enabled economic transformation


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Solve Local Problem, Happy City, Healthy Economy

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Intelligent Transportation Cases in Taiwan

Today: • 1.5M/day cars

• 14M/day transactions

• 99.97% accuracy

• 2015 ITS World

Congress Industry

Award

Future development • Integrated Smart

Transportation Services

• Customized Business

Model and Services

• Enabling Smart City

• Export Integrated systems

ETC/eTag

4G traffic detector

CHT data management

and analysis

Real-time traffic control

• Other traffic information

• Accident information

(Public sector) Real-time traffic

information App

Complete monitor equipment Analyze traffic flow

Traffic control cloud

Traffic information cloud

4G Traffic Control Initiative


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ITRI Case: Smart Traffic Project for

Intersection Movement Assist (IMA)

Source: ITRI/ICL(2016/09)

Alert Signage Alert HMI

IMA V2V Alert - WAVE/DSRC Wireless

Comm.

- Follow U.S. V2V Mandate

IMA: Warns the driver when it is not safe to enter an intersection, ex. when something

is blocking the driver’s view of opposing or crossing traffic.

IMA R2V Alert - Integrate mmWave Radar

- Integrate traffic controller to

alleviate congestion

IMA Signage Alert - Allow the car without

OBU to access the alert

from outside

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Xiluo, Yunlin: Biggest fruit and vegetable wholesale market with 1/3 share in

Taiwan but serious air pollution and noises from hundreds of diesel trucks.

EVs and services system to solve the local issues with testing and

verification, and to build self-sustain components and maintenance supply

chain.

Export to overseas market with local references(over 800 EVs in Taiwan)

and assembly factory in Philippines

Diesel truck

Electrified truck

Low-speed EV

Southeast Asia- Philippines Central Taiwan-

Xiluo Yunlin

ITRI Case: Green Fleet Solution for Local

Wholesale Market

Source: ITRI/MSL(2016/09)

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• Southeast Asia as the target for Smart City innovation system and service

– Demand survey and market intelligence

– Linkage Taiwan industry to fulfill the local needs by technology

cooperation

• ITRI as the platform to link the overseas government and Taiwan industry by

innovated system and services integration

– ITRI/IEK and GEL built the reference cases in Philippines, Laos and

Vietnam

Demand: Cost of

energy generated by

Diesel engine due to

transportation problem

Solution: Micro-grid

investment and

business model

Demand: Application

Solar demo project

by APO

Solution: MOU

between Taiwan

industry and Power

Corp. solar project

ITRI Case: Smart Energy Solution for

Southeast Asia


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Taiwan Needs to be Part of Global Team Only US Can Feature an Entire Team by Itself

Team USA

U.S. Team

Team Europe

International Team vs.

vs.

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Connecting User-centric Ecosystem Meet User Needs & Create Value by System Integration

User

System

Supply

Chain

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Conclusion

• “AI X” as the key driver for new economy

– Data-driven and AI-enabled for value-added service and

manufacturing sectors

– Digital innovation infrastructure and newly start-ups ecosystem

• “User-centric Ecosystem” to create value with system

integration

− Control user-centric ecosystem, open innovation by public-private

sectors, local test-beds for solution trials, service and operational

system verification

• “Smart city” reference cases based on local pain

points and citizens’ participation

– Team-up to solve the local issues, testing/verification and export

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http://ieknet.iek.org.tw/

IEK 2020 Vision: World-class Think Tank to Lead Taiwan Industries in Value Creation

Given the rapid pace of change in cutting-edge technology and industry development, the timeliness and comprehensiveness of the information included in this presentation cannot be guaranteed by ITRI. Users of this presentation shall bear full liability for any injury or loss that may be sustained as a result. The Copyright of this presentation belongs to ITRI and none of this presentation, either in part or in whole, in any form, may be reproduced, publicly transmitted, modified or distributed or used by other means without permission from ITRI.

Thank You

Stephen Su

IEK General Director

[email protected]

+886-3-591-2548

Tsu-Yu Chao

IEK Division Director

[email protected]

+886-3-5914586

Copyright 2017


Stephen Su General Director

Industrial Economics & Knowledge Center (IEK)

of Industrial Technology Research Institute (ITRI)

Professional Experiences:

Principal, Roland Berger Strategy Consultants, Shanghai

Sr. Director, Consumer Electronics BU, Primax Electronics Ltd., Taipei

Sr. Director, Corporate Development, Primax Electronics Ltd., Taipei

Case Leader, Boston Consulting Group (BCG), Hong Kong

Applications Engineer, Semiconductor Group, Motorola, Phoenix

Professional Specialty:

Strategy, operations Improvement, organization change management, business

process redesign, new product development and marketing, investment due diligence,

manufacturing management

Chairman of Committee on Policy and Legal, Cloud Computing & IOT Association in

Taiwan (CCAT) (2010-Present)

President, Asia Pacific Industrial Analysts Association (APIAA) (2017-Present)

Consultant Committee of Science & Technology Policy Research and Information

Center (2015-Present)

Taiwan Food and Drug Administration(TFDA) Food Safety Technology Project

Performance Evaluation Committee

Ministry of Economic Affairs(MOEA) Industrial Development Advisory Council

Multiple patents in power switching control and mobile phone applications

digital transformation: opportunities and challenges for ... · on digitalization,...

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