Taiwan woos foreign biz to build data centers

Government hopes to attract foreign IT companies to build data centers to help domestic economy--reliant on contract manufacturing--move up tech sector value chain, report says.

Taiwan wants to woo foreign technology companies, including Facebook, with its lower tax and land rates to attract them to build data centers for cloud computing in the country, noted a report.

The government is hoping this will help domestic businesses advance from contract manufacturing to value-added services, and hence move up the tech sector's value chain, said Taiwan's technology minister Simon Chang said, according to The Wall Street Journal Friday.

He said the government hoped that social networking titan Facebook would build a data center in Taiwan.

While homegrown companies such as smartphone maker HTC and PC maker Asustek Computer have grown in prominence globally, Taiwan's economy is still heavily reliant on contract manufacturing and assembly, the report said. But contract manufacturers' profit margins are narrowing because retail prices of computing and mobile devices fall quickly amid fierce competition--and commoditization, it noted.

"It's tough for Taiwan's hardware contract makers because big brands like Apple dominate the profit distribution," Chang said in the report. "We can't change the industry structure overnight, but we encourage local technology manufacturers to develop more high-valued patents and software applications."

The minister observed that foreign companies have been slow to build data centers in Taiwan as compared to the rest of Asia in recent years where mobile Internet traffic is booming thanks to the rise to mobile devices including smartphones and tablets.

Hence, the government will "take the lead" in introducing cloud computing projects, which will help create demand and also nurture local application developers,  said. "Once the successful local application developers grow to a certain scale, they can expand into overseas markets," he added.

Chang declined to reveal what incentives the government was offering potential investors, but stated that Taiwan had a "favorable geographic location" that could give IT companies close proximity to most of the Asian markets, and its price of land is also "relatively lower compared to other developed Asian countries such as Hong Kong".

The government's announcement comes after Internet giant Google last week broke ground on its first data center in Taiwan--and its third in the Asian region--with a US$300 million investment. Incidentally, Chang was Google's head of Asia-Pacific hardware operations before he was appointed technology minister in February this year, WSJ said.