TAIPEI -- U.S. technology companies are converging on Taiwan to build regional research and development centers, drawn by the island's relatively low wages and the government's strategy of forging closer ties with Washington.
Industry leaders like Microsoft, Google, Amazon.com, IBM and Oath, the parent company of Yahoo, have all announced plans this year to build their research and development hubs on the island and to initiate large recruitment projects.
"The approach of President Tsai Ing-wen's government to shift away from China and forge closer ties with the U.S. is a strong push behind many U.S. companies' investments over the past one year," said Gordon Sun, director of the Economic Forecasting Center at the Taiwan Institute of Economic Research.
Attracting investments from U.S. tech companies is part of the government's plans to build an artificial intelligence industry. Taiwan has pledged to pour 10 billion New Taiwan dollars ($326 million) each year into AI-related investments over the next three years.
Taiwan is not the only country in Asia that is vying to grow its AI industry. Singapore is accelerating investments in AI and data science to transform the country from a trade hub into a cutting-edge technological center. That includes launching a national program called AI Singapore in 2017 and investing 150 million Singapore dollars ($110 million) over the next five years.
Singapore's strategic location in Southeast Asia is also attractive for tech companies. Google, which has its Asia-Pacific headquarters in Singapore, on Aug. 1 said it will build a third data center in the city to meet rising demand for cloud services in the region. The third facility will bring Google's accumulated investment in local data centers to $850 million. Japan, South Korea, China and India all have ambitions to expand their AI capabilities too.
Yet, Taiwan has thrived in attracting tech investments. This is in large part due to its highly educated, but cheaper, workforce, with around 30,000 graduating from computer and information science-related disciplines annually. The starting monthly salary for a fresh software engineering graduate is just NT$37,412 per month, or $1,218, according to 1111 Job Bank, one of two leading online recruitment agencies in Taiwan.
This can eventually grow to $26,000 annually, data from U.S. recruitment agency Glassdoor showed. But it is still substantially lower than the $123,664 basic salary for a software engineer in San Jose, California, and $50,000 for a Singapore-based counterpart.
Salary aside, Taiwan also has a complete IT supply chain and is home to many market leaders in the semiconductor and electronics sectors, such as Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry.
For other U.S. companies, Taiwan's proximity to China is good reason to set up base there. "Companies like Google or Facebook could not enter the vast Chinese market. Their alternative is to set foot in Taiwan, as the Chinese-speaking island could serve as a gateway and is close to the Chinese market," Sun said.
Microsoft was the first to announce its Taiwan plans. In January, it expanded the remit of the existing R & D team in Taiwan to become the company's AI research hub in Asia -- it already has R & D centers in China and Japan. Under the new Taiwan focus, it plans to invest NT$1 billion there and to hire and train 200 AI experts over the next five years.
The U.S. company said the Taiwanese government's cooperation played an important role in Microsoft's decision. "We would not have made the announcement so quickly if not for the government's support and efficiency," said Jason Tsao, Microsoft AI lead in greater China, and marketing and operating lead in Taiwan.
"The competence of Taiwanese talent is also one of the key reasons Microsoft chose to build a new AI R & D hub here," Tsao said.
He added that Taiwanese engineers are not only good at mathematics, but also culturally and socially sensitive and offer crucial insight to Microsoft in its development of AI products that need to be applicable in real life.
He also said that Taiwanese staff tend to be more loyal and are not only tempted by salary considerations but will also focus on their long-term career paths. "They are not impetuous, which is a trait different from young adults in China," Tsao said.
Google also announced earlier this year that it will build its biggest Asian R & D hub in Taiwan. It plans to hire more than 300 professionals locally in the near term, doubling head count there. It already employs around 2,000 engineers who used to work for HTC after it bought the smartphone maker's design team in 2017.
IBM in March said it plans to hire 100 software developers and data scientists in Taiwan. Oath, a new unit under Verizon after it merged Yahoo and AOL, in late July said it would set up its Asian R & D center in Taiwan and divert around 100 engineers within this year to this operation from the 1,200 staff it hires in Taipei. Amazon Web Services, a cloud-computing division, opened its innovation center in New Taipei City on Aug. 10.
An international social media platform operator, which recently initiated a recruitment project for software engineers in Taiwan, said that one of the reasons it chose Taiwan over China is due to Beijing's censorship over internet companies. "We don't need to worry about additional regulatory scrutiny in Taiwan and the quality of talents is even better," the recruiter of the company told Nikkei.