US embassy cable - 05TAIPEI3048

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003048 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 07/14/2015 
TAGS: ECON, ECPS, EINV, ETRD, PREL, CH, TW, Cross Strait Economics, Cross Strait Politics, Trade 
SUBJECT: TAIWAN IT INDUSTRY DISCUSSES STANDARDS WITH PRC 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.4 d 
 
Summary 
------- 
 
1. (C) A delegation led by opposition politicians but 
composed mainly of Taiwan information technology (IT) 
manufacturing executives visited Beijing July 5-6 to 
discuss industry standards with PRC officials and 
executives.  The discussions yielded few concrete results. 
However, Taiwan firms agreed to help the PRC test its third 
generation mobile telecommunications (3G) standard.  The 
group traveled under the auspices of the Sinocon Industrial 
Standards Foundation (SISF), a new industry organization 
with close ties to the opposition Kuomintang (KMT) and 
whose goal is to enable Taiwan high- tech firms to 
participate in the PRC's efforts to develop its own 
industrial standards.  To date the Taiwan government has 
not objected to these discussions.  Although the results of 
these discussions have only minor implications for U.S. 
security and commercial interests, the formation of a new 
Taiwan industry organization with the mission of 
cooperating with the PRC on industry standards is an 
important development.  This trip also highlights the 
continuing efforts of the KMT to erode support for the 
ruling Democratic Progressive Party (DPP) by portraying 
itself as the party that can do business with the PRC.  End 
summary. 
 
Standards Discussions Yield Few Concrete Results 
--------------------------------------------- --- 
 
2. (U) A delegation composed mainly of Taiwan information 
technology (IT) manufacturing executives visited Beijing 
for the July 5-6 "Cross-Strait Technology Standards Forum 
for the IT Industry."  The delegation traveled under the 
auspices of the Taiwan-based Sinocon Industrial Standards 
Foundation (SISF), a Taiwan industry organization whose 
chairman is Kuomintang (KMT) Vice Chairman Chiang 
Ping-kun.  As part of the visit, Chiang and other 
delegation members met with PRC Vice Premier Wu Yi and 
Vice Minister of Information Industry Jiang Yaoping. 
 
3. (C) In the forum, Taiwan executives discussed four 
different types of IT industry standards with Mainland 
business and government representatives.  Most press 
attention has focused on discussion of third generation 
(3G) mobile telecommunications standards.  The PRC is 
trying to promote its own 3G standard -- TD-SCDMA -- which 
would compete with CDMA2000 (developed by U.S. firm 
Qualcomm) and W-CDMA (the standard supported by Europe and 
Japan).  Some Taiwan media reports portrayed the forum as 
having reached a consensus whereby Taiwan firms would 
assist the PRC in promoting TD-SCDMA.  However, Taiwan 
Electrical and Electronic Manufacturers' Association 
(TEEMA) Executive Director Luo Huai-jia, who attended the 
forum and whose organization played a leading role in 
organizing the visit, described the results to AIT/T as an 
agreement that Taiwan firms would assist in testing the TD- 
SCDMA standard. 
 
4. (C) The forum also addressed industry standards for the 
compression, decompression and manipulation of audio and 
video digital data.  The PRC is developing an audio visual 
coding standard (AVS) in this field.  However, according to 
Luo, development has not advanced as far as development of 
the 3G TD-SCDMA standard and the discussions in Beijing 
were less conclusive.  He told AIT/T that the discussion 
amounted to little more than an exchange of information 
about the potential for standard development.  He also 
described discussions on thin-film transistor liquid 
crystal display (TFT-LCD) flat panel display testing 
standards and memory card standards as mainly information 
exchanges. 
 
KMT Capitalizing on Economic Concerns of IT Industry 
--------------------------------------------- ------- 
 
5. (SBU) The Sinocon Industrial Standards Foundation 
(SISF), which sponsored the trip to Beijing, was first 
proposed in August 2004 with the goal of allowing Taiwan IT 
firms to participate in the PRC's efforts to develop its 
own industrial standards.  SISF formally began operations 
in February 2004, and this trip to China is its first major 
activity.  It has close links to the Pan-Blue coalition. 
The Chairman of SISF is KMT Vice Chairman P.K.  Chiang. 
Former People First Party (PFP) legislator Pang Chien-kuo is 
also an active member of SISF. 
 
6. (SBU) Because of strong economic interests in closer 
ties with the Mainland, Taiwan's IT firms are generally 
more supportive of Pan-Blue positions on cross-Strait 
issues, regardless of the personal political preferences 
of  executives in the industry.  Taiwan's IT sector relies 
heavily on the PRC as a production base for hardware 
manufacturing.  TEEMA currently estimates that 72 percent 
of IT equipment produced by Taiwan firms is manufactured in 
the PRC.  Recent moves by prominent IT executives to 
distance themselves from the Chen Shui-bian administration 
have underscored the political effect of cross-Strait 
economic interests on leaders in the industry.  Chi-Mei 
founder Hsu Wen-lung and Acer founder Stan Shih have both 
within the last six months chosen to decline additional 
terms as Senior Presidential Advisors.  (Note: United 
Microelectronics Corporation (UMC) Chairman Robert Tsao 
made a similar announcement last month.  However, he 
claimed that the reason he would decline another term as a 
Senior Presidential Advisor was to reduce the effect of 
political influence on the handling of the investigation of 
UMC's relationship with PRC semiconductor manufacturer He 
Jian.  End Note.) 
 
MAC's Silence 
------------- 
 
7. (C) Although the Mainland Affairs Council has called on 
the KMT-dominated Taiwan Provincial Farmers Association to 
explain its discussions with PRC officials on fruit 
exports, the Taiwan government has not yet condemned or 
questioned the appropriateness of the SISF sponsored 
visit.   According to Mainland Affairs Council (MAC) Senior 
Secretary Lee Li-Jane, MAC has no objections to the 
 
SIPDIS 
discussions.  TEEMA representatives briefed MAC officials 
before the trip.  According to Lee, TEEMA explained the 
visit as focusing on discussions of "commercial 
specifications" not national standards.  As a result, MAC 
does not believe that the discussions involved issues of 
national sovereignty. 
 
Comment - Standards and Cross-Strait Politics Intersect 
--------------------------------------------- ---------- 
 
8. (C) The actual results of these latest discussions 
appear to have few implications for U.S. commercial and 
security interests.  Only the TD-SCDMA discussions led to 
any sort of concrete results.  It does not appear that the 
agreement by Taiwan firms to assist in testing the TD-SCDMA 
standard will be decisive in helping it compete with W-CDMA 
and CDMA2000, which have much broader support at this 
time.  However, the formation of a new organization with 
the mission of including Taiwan's powerful IT firms in the 
PRC's efforts to develop industry standards is an important 
development.  If SISF shows the ability to mobilize Taiwan 
industry in effective support of PRC standards and to shape 
those standards to the advantage of Taiwan manufacturers, 
it could have a significant effect on U.S. interests. 
 
9. (C) KMT involvement in this initiative is another 
example of the opposition party attempting to use the PRC's 
willingness to discuss economic issues with KMT 
representatives to appeal to different segments of Taiwan 
society.  The SISF trip has drawn less criticism from the 
Taiwan government and the media than KMT efforts related to 
fruit exports.  This is probably because the IT industry 
does not represent a source of traditional Pan-Green 
support like southern Taiwan's farmers.  In addition, high 
levels of investment in the Mainland have made Taiwan's IT 
manufacturing firms subject to PRC economic pressure for 
several years now.  The efforts of SISF may not yield new 
political controversy, but they do illustrate the 
continuing efforts of the KMT to portray itself as the 
party that can do business with the PRC on more than one 
front.  End comment. 
PAAL