1. Taiwan Medical Device
Industry Analysis &
Investment Opportunities
Department of Investment Services,
Ministry of Economic Affairs

2. Table of Contents
I. Global Trends of the Medical Device Industry ............... 1
II. The Status Quo of Taiwan’s Medical Devices
Industry ................................................................................... 5
(I) Supply & Demand of the Medical Devices Industry .................... 5
(II) Gap in Industry Supply Chain, Investment Niche and Prospective
Foreign Investors ........................................................................ 6
(III) Major Suppliers in Taiwan ........................................................... 7
III. Optimal Choices for Foreign Investors ................... 11
IV. Successful Examples of Cross-national Strategic
Alliances and Foreign Investments in Taiwan.................... 13
(I) Foreign Investors in Taiwan ...................................................... 13
(II) SHL Healthcare and Medical, Taiwan ....................................... 16
V. Industry Investment Incentives................................ 18
VI. Industry-Academia Collaborations in Taiwan ....... 25

3. I. Global Trends of the Medical Device Industry
The medical device industry is an industry that is closely linked to the
diagnosis, relief and prevention of human diseases and illnesses. Major
medical device products in this industry may vary depending upon the types
of illnesses and the progress of medical technology. However, economic
conditions have a very small impact on the demand for medical devices, and
the cost of medical devices only contributes to a small portion of the cost of
medical cares. Since medical devices are closely applied to human body, a
permit has to be obtained before the product may be distributed in the market.
In the United States and Europe, the laws require product related injuries
to be reported to the relevant government agency. Because many types of
medical devices exist, they generally involve various scientific and technical
fields, including plastics, industrial chemistry, textiles, machinery, electronics,
telecommunications, material science and biomedical technology.
Moreover, since medical devices generally result from the combined efforts
of different fields, and the medical device industry is technology-intensive
rather than labor-intensive, companies in this industry must invest more of
their revenue and efforts in R&D. In addition, since existing medical device
products are being replaced by new products with better performance,
pharmaceutical companies have to constantly pursue improvement in
technological innovation in order to achieve success.
The global medical device market is highly centralized. The market
share of the top 10 medical devices was up to 82.8% of the global market in
2003, and is expected to grow up to 83.6% in 2008. The United States
holds the largest market share of about 50.6%, with the compound annual
growth rate at about 7%, which is higher than 5.56% of the global market.
Since US citizens have much higher income and the medical system is also
better, the medical device market is therefore more developed.
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4. Another fast emerging market is Mainland China, with a compound
annual growth rate of 6.99%. People are now paying more attention to
healthcare as the country’s economy develops and its citizens acquire more
income. China has become a potential market for medical device due to the
continuous development of its hygiene industry, the increase in clinics, the
upgrade of products, and requirements from hospitals. Table 1 shows the
market value of the top 10 countries and the percentage of market shares with
respect to the global medical device market in 2003 and 2008 (forecast).
The monetary value of the global medical device market in 2003 was around
US$ 148.3 billion, and from 2003 to 2008, the global medical device market
was estimated to grow at about 5.56%. The various segments of this
industry are driven by various factors, most notably the aging population and
increasing rates of illness, especially found in industrial countries with
advanced medical technologies. Meanwhile, in newly emerging markets,
the demand for medical devices which have high quality and advanced
technologies with integration have also been increasing due to the rise of
income per capita.
The structure of the medical device industry varies across segments. For
instance, the cardiovascular device sector has gone through significant
consolidation, with the top five (5) companies taking up more than 80 % of
the global market. Meanwhile, the market for disposable surgical supplies is
highly fragmented, with the top five (5) companies representing less than one
third of the global market. The top 10 companies in the medical device
industry generate substantial revenues and therefore invest substantially in
research and development. In fact, those companies accounted for more
than 70.0 % of research and development expenditures in 2007, and invested
as much as 10-15 % of the revenues in research and development.
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5. Looking into the global markets for medical devices, the United States,
which has the highest income per capita and advanced medical technologies
and services, represents 50.6% of the global market. On the other hand,
Japan ranks second, with a market share of 11% . Finally, Germany ranks
third and represents 6.1% of the world market. Regarding the global
perspective, the market shares of the United States, Japan and Germany
represent over 70% of the total global medical device market. Table 2 shows
the growing trend of the global medical device market in various categories.
Table 1. Market values of the top 10 countries and the percentage of market shares with respect
to the global medical device market in 2003 and 2008 (forecast)
2003 2008f 2003-2008f
Country
Market Percentage Market Percentage AAGR
USA 75,120 50.6% 105,359 54.2% 7.00%
Japan 16,258 11.0% 18,847 9.7% 3.00%
Germany 9,091 6.1% 10,540 5.4% 3.00%
UK 4,052 2.7% 5,171 2.7% 3.98%
France 3,825 2.6% 4,434 2.3% 3.00%
Italy 3,808 2.6% 4,415 2.3% 3.00%
Canada 3,204 2.2% 4,090 2.1% 5.00%
Brazil 3,126 2.1% 3,989 2.1% 5.00%
Spain 2,547 1.7% 3,250 1.7% 5.00%
China 1,865 1.3% 2,615 1.3% 6.99%
Subtotal 122,896 82.8% 162,710 83.6% 5.77%
Global
148,378 100.0% 194,513 100.0% 5.56%
market
Source: Espicom Business Intelligence, IEK/ITRI (2007.12)
Table 2. Growth trends of the global medical device market in various categories
2003 2008 2003-2008
Categories Market Percentage Market Percentage AAGR
Bandages & other medical
11,539 7.8% 13,377 6.9% 3.2%
supplies
Contact lenses 3,999 2.7% 5,608 2.9% 8.0%
Dental instruments &
3,100 2.1% 3,594 1.8% 3.2%
appliances
Electromedicals 14,711 9.9% 17,504 8.8% 3.2%
Medical furniture 1,736 1.2% 2,012 1.0% 3.2%
Medical X-ray films 3,814 2.6% 4,868 2.5% 5.5%
Ophthalmic instruments
2,671 1.8% 3,746 1.9% 8.0%
and appliances
Orthopaedic/Prosthetic
25,971 17.5% 36,426 18.7% 8.1%
goods
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6. Other instruments and
32,766 22.1% 41,818 21.5% 5.5%
appliances
Rubber surgical or
3,748 2.5% 4,783 2.5% 5.5%
laboratory sterilizers
Syringes, needles &
19,178 12.9% 26,898 13.8% 8.1%
catheters
Therapy apparatus 6,842 4.6% 9,597 4.9% 8.1%
Wheelchairs 1,250 0.8% 1,595 0.8% 5.5%
X-ray apparatus 16,681 11.2% 23,397 12.0% 8.1%
Unit:US$million
Source: Espicom Business Intelligence, IEK/ITRI (2007.12)
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7. II. The Status Quo of Taiwan’s Medical Devices
Industry
(I) Supply & Demand of the Medical Devices Industry
In 2006, Taiwan's medical device industry had a total revenue of
US$2.14 billion, generated by 500 companies, with an average revenue of
US$4.2 million each. Taiwan has a workforce of about 16,350 involved in
medical devices. The current status of the medical device industry in
Taiwan is shown in Table 3. The medical device industry is a fast emerging
high tech industry, including diagnostic devices, disease treatment devices,
general medical assistance equipment, and patient aid products. According to
the statistical data, medical device has the highest growth rate in Taiwan’s
biotech industry, and its annual revenue has a great increase from US$ 2.2
million in 1992 to US$2.14 billion in 2006. Electronic clinical
thermometers, digital hemadynamometers, power wheelchairs and ventilators
reach 30% of the global market share with an export value of US$914 million,
import value of US $1.39 billion, and domestic demand value of US$2.65
billion.
Table 3. Current Status of the Medical Device Industry in Taiwan (2005/2006)
Industry Medical devices
Year 2005 2006
Revenue* 1.84 2.14
Company (Number) 484 500
Workforce (Number) 15,000 16,350
Export value* 0.84 0.90
Import value* 1.24 1.37
Domestic sales vs.export 54 : 46 58 : 42
Domestic market demand* 2.24 2.62
*Units: US$ billion
Source: Biotechnology and Pharmaceutical Industries Program Office, MOEA, 2007
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8. The Domestic Revenue, Domestic Demand, Import and Export Value of
Taiwan’s Device industry are shown in Table 4.
Table 4. 2005-2006 Taiwan Medical Device Production, Import and Export
Unit: % in Billion NTD
Growth Import
Domestic Domestic Exports Self-sufficient
Exports Imports Rate of Dependence
FY Revenue Demand Percentage Ratio
(B) (C) Domestic Ratio
(A) (D) (B/A) (1-G)
Demand (G=C/D)
2005 590 270 395 715 100.0% 45.8% 55.2% 44.8%
2006 697 293 447 851 119.0% 42.0% 52.5% 47.5%
Source：Pharmaceutical Industry Technology Development Center, 2007
(II) Gap in Industry Supply Chain, Investment Niche and
Prospective Foreign Investors
At present, Taiwan has many advantages including a highly organized
industry network and an excellent production and development of the
medical device industry. Having a critical technology, successful marketing,
and product certification are among some of the industry’s challenges or
bottlenecks, while how to work together between globally renowned
companies and medical device manufacturers in developing countries, and
how to create effective strategies in the highly competitive market are some
of the important concerns and key issues for Taiwanese companies. In recent
years, there is an emerging trend for large medical device manufactories
doing OEMs to gradually give their non-core production activities to other
companies and instead focus more on the development of their technology
research and product design center. There is therefore OEM business
opportunities in the medical device industry. In the past, Taiwan has
accumulated rich experiences and resources in the high tech industry.
Accompanying those advantages, it is expected that Taiwan will be able to
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9. seize OEM opportunities from foreign medical device manufactories and
form an OEM business. The current state of OEM development strategies in
the medical device industry in Taiwan has found a prospect for the OEM
development of medical devices. Instead of competitively lowering the
production prices, medical device companies are advised to improve their
product quality instead. Consolidating the upper and lower stream of supply
chain and broadening the industrial scale to improve the overall
competitiveness. Since the regulations of a country will affect the company’s
managerial strategies, it is essential for Taiwanese medical device companies
to provide thorough services to seize or extend the cooperation opportunities
with foreign medical device companies. As a result, the more resources and
efforts spent on research and development, the more rewards are reaped. The
technological transfer and interaction between two companies lead to some
performance issues. Generally speaking, the problem usually begins when the
company releasing or transfering the technology is less willing even when the
recipient company has the ability to adopt quickly to the new technology.
Taiwan is a leader in the manufacturing of medical devices, producing
diagnostic test kits and equipment and mechanical products, such as portable
electrocardiograms, motorized vehicles for the elderly, and digital
thermometers, blood pressure and glucose monitors, and pulse oximeters.
With the healthcare industry shifting its focus from treatments and therapies
to disease prevention and wellness, Taiwan's medical device companies are
well-positioned to capture those new global market opportunities.
(III) Major Suppliers in Taiwan
(1) Medical Device Industry Supply Chain
Medical device is one of the fast emerging and major industries
promoted by the Taiwan govenment. Short-, mid-, and long-term plans
focusing on developing potential medical device products have been mapped
out. Short-term plans will focus on clinical trials/bio-equivalence, clinical
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10. animal experiments, biotech-related contract manufacturing, bioinformatics,
biochips, drug development. The mid- to long-term plans will focus on gene
diagnostics and gene therapy, stem cell technologies, and artificial tissues and
organs. It is hoped that the development of these key technologies and
products will support the successful expansion of the island's medical device
sectors and companies.
(2) Investment Niche
A. Advantages
The government has plans to bring together the R&D capabilities of the
government, academic and research institutes to establish biotech industry
clusters, promoting the industry by focusing all the essential elements in one
place. In the northern part of Taiwan, the Taipei area, specifically the
NangGang Biotech Plaza, has 2 incubation centers: the Biotech Incubation
Center, Small and Medium Enterprise Administration, MOEA and the
Incubation Center, Genomic Research Center, Academia Sinica. More than
50 biotech companies are located here, thereby making it a biotech cluster.
In addition, Hsinchu county is the home to Taiwan’s first science-based
industrial park, set up to help the development of high-tech industries. A new
Biomedical Science Park is underway and will be managed by the Hsinchu
Science Park Administration Office.
Taiwan has many strengths that give it an edge over its competitors in
Asia. Some of Taiwan’s advantages include: existing expertise in high
technology; strategic location at the crossroads of three leading Asian
economic regions – Northeast Asia, China, and Southeast Asia; strong legal
framework; highly educated workforce, particularly in IT and biology;
world-class research facilities; abundant capital and Asia's most vibrant
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11. venture capital industry; and knowledge and experience in IT and mold
industry.
The listed incentive industry among newly encouraged emerging
strategic industries. The government has enthusiastically developed a
conducive environment to continuously attract foreign investors. Taiwan has
sufficient local capability for upstream medical devices’ research and
development. Compared with other Asia Pacific nations, Taiwan has
high-standard capabilities in conducting Chinese and western clinical trials,
and is suitable for developing contract research organization (CRO) services.
Taiwan has ensured conformity with international standards by implementing
cGMP regulations; domestic pharmaceutical companies are experienced in
developing generic drugs. Ample biotechnology and pharmaceutical
professionals are based both locally and internationally.
Taiwan has a conducive environment for the development of small and
medium size enterprises. Also, the Taiwanese are recognized for their
capitalist nature and entrepreneuial spirit. Advanced IT and mold technology
supports the development of medical device.
B. Investment Opportunities
(a) Rising demand for better living standards in the Asia-Pacific; (b)
Growing economy and market for potential development; (c) Increasing
number of strategic alliances and technology transfer cases with
multinational biotech and pharmaceutical companies; (d) R&D and precision
processing sectors are ready to take advantage of the growing global trend
towards outsourcing in the biotech industry; (e) Right timing for endless
business opportunities in post human gene decoding; (f) High value-added,
long life cycle and value chain of biotech; many points of entry available,
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12. from R&D to marketing; (g) Flourishing biotech R&D service industries
(technical evaluation, R&D design, intellectual property services, and
start-up incubation services); (h) Many large-sized and high-quality medical
centers provide optimal conditions for undertaking clinical trials; (i) Clear
market segmentation from temperate zone products of advanced countries
with Taiwan's sub-tropical climate develops Asian sub-tropical agricultural
biotech; (j) With the world’s rapidly aging population, the growth in demand
for medical and health products is inevitable.
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13. III. Optimal Choices for Foreign Investors
(1) Complete development of advanced industries such as photovoltaic,
communication, electronics, and semiconductor etc., mature development
of traditional manufacturing industries such as plastics, material, and
machinery, etc.
(2) Advanced medical system and standards enable the industry to provide an
ideal test environment and good chimical results.
(3) Taiwan has endeavored to protect intellectual property rights and
established suitable legal system. The protection of intellectual property
rights ranks 4th in Asia.
(4) Taiwan has abundant circuit board design, IC chip design capability and
human resources, and safety regulations, verification and quality control
personnel to integrate upstream electronic parts and components, which is
beneficial for the development of medical electronic products.
(5) Globally recognized for reliable manufacturing, product quality, vertical
integration and complete supply chain, as well as industry cluster.
(6) Strategic geographical location enables Taiwan to serve as the ideal
gateway or springboard to other Asian markets.
(7) Taiwan’s multicultural society enables its people to communicate in
English and Japanese fluently.
(8) Taiwan’s dynamic small and medium enterprises can serve as ideal
partners due to their sufficient experience in international sales and
merketing as well as global operations and logistics.
(9) Taiwan’s venture capital sector is the largest in Asia, which can integrate
technology, manpower, market opportunity and capital to develop new
market and industries.
(10) Strong government support and promotion.
(11) Strong network with other industry professionals and experts, as well as
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14. close relations with various government agencies, academic institutions
and research centers.
(12) Advanced infrastructure, information and communication technology.
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15. IV. Successful Examples of Cross-national Strategic
Alliances and Foreign Investments in Taiwan
(I) Foreign Investors in Taiwan
In Taiwan, there is still a shortage of manufacturers to produce advanced
medical devices such as X-ray imaging, computed tomography (CT),
magnetic resonance imaging (MRI), ultrasound imaging, etc. which are
mostly supplied by foreign multinational corporations with subsidiaries that
provide marketing and after sales services (e.g. education and training,
technical services, maintenance) in Taiwan. In their early stages of
development, Knowles Electronics, Home Diagnostics, and Top Corporation
established production plants in Taiwan due to the country’s high tech
industries and skilled workforce. Recently, the government has successfully
attracted high-tech companies such as Inovise Medical, U-System, AcryMed,
and Scandinavian Health Ltd. to invest in Taiwan. Although Medtecs
International is successfully established abroad, it has returned to Taiwan to
set up on operation center.
A potential foreign company BD (Becton, Dickinson and Company) is a
leading global medical technology company that is focused on new product
research and development. BD established its subsidiary in Taiwan in 1987,
providing omnibus research and diagnostic tools for the medical industry. BD
has three main subsidiaries: BD Medical, BD Diagnostics, and BD Biosciences.
It serves healthcare institutions, life science researchers, clinical laboratories, the
industry, and the general public.
Baxter International Inc. was founded in 1930, and its Taiwan branch was
founded in 1981. Baxter manufactures and sells more than 120,000 medical
products, and provides products and services for home healthcare. After
developing the first hemodialysis machine in the 1950s, Baxter became one of
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16. the leading dialysis companies in the world. Baxter also introduced
continuous ambulatory peritoneal dialysis (CAPD) as a practical alternative
to hemodialysis in 1979. Over thousands of patients developed healthier life
through Baxter’s hemodialysis service.
Dada Behring is a global clinical diagnostic company that provides
clinical products, health system and health care services, as well as improves
patients’ quality of life. It provides chemical tests, immunity tests, blood tests,
and diagnosis of microbial and infectious diseases.
GE Health is GE’s medical group, which is comprised of GE Healthcare
Technology and GE Healthcare Bioscience. It has annual sales of US$14
billion. GE Health is a global leader in medical imaging and information
technologies, medical diagnostics, patient monitoring systems, disease
research, drug discovery and manufacturing.
ARC Pharmaceuticals Inc. is a Canadian bio-company that focuses on
the research & development of novel therapeutic devices and disease
prevention methods after surgery, such as surgical adhesions.
Cochlear, Ltd. was founded in 1982 as a major producer of nucleus
products and accessories which convert surrounding sounds into digital
signals to stimulate the hearing nerve within the cochlea. After many years of
development and improvement, Cochlear, Ltd. has become a world leader in
hearing solutions. Over thousands of Taiwanese patients regain their hearing
by using Cochlear’s products.
From the list of global top 10 medical device manufacturers in Table 3,
majority comes from the US, with the exception of 3 large European
companies, namely Siemens Medical Solutions and B. Braun from Germany,
and Philips Medical Systems from Holland.
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17. Most of the big medical device companies use M&As as a strategy to
expand their operation scale and market share. But there are different
strategies for the deployment of production lines. Some companies
aggressively merge with leading manufacturers in various fields to expand
their production lines for diversifying operations. On the contrary, some
companies reduce their product lines and seek for more efficient management
and sales.
The medical device industry ranks first among the top 10 high tech
business opportunities in the 21st century. While the contunous increase of
the Gross National Income (GNI) and the evident aging population, the
demand for medical devices is growing annually. According to the data
provided by the Department of Health, people aged 65 or older will
outnumber children under the age of 5. Among developing countries, the
population growth for people aged 65 and older is expected to rise up to
140 % by the year 2030. Those factors are placing an increasing burden on
the global healthcare sector. However, the healthcare industry has identified a
solution, that is, shifting its focus from post-disease therapy and treatment to
wellness and disease prevention. This change is spurring on the global
medical devices industry to further explore opportunities in this area.
Therefore, the global medical device market will continue to maintain
steady growth due to aging population; development of new products such as
drug-eluting stent and pace synchronization systems being launched; and
global economic growth with increasing purchasing power. Looking into the
global medical device market, the US, Japan and Europe represent over 70%
of the global markets, and their growth will ensure that the global medical
device market continues to grow.
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18. (II) SHL Healthcare and Medical, Taiwan
The SHL Group is a global leader in OEM/ODM solutions for advanced
drug delivery devices, home & institutional healthcare products, and medical
& industrial manufacturing. SHL Healthcare delivers OEM/ODM solutions
for complex hospital and home healthcare equipment with a focus on patient
comfort. The products are found in major hospitals and clinics throughout the
world. SHL Healthcare integrates the collaborative strength of the SHL group,
offering design and development of new products to suit the demanding
needs of global customers.
Following a period of significant investment in manufacturing and
testing equipment, personnel and logistical supply systems, SHL Healthcare
is now a recognized leader in the manufacture and supply of home healthcare
solutions. The company’s products include slings, alternating pressure
mattress systems, and beds. SHL Healthcare leverages the synergies of the
SHL Group by offering the design and development of devices tailored to the
demanding needs of global customers. Currently, SHL Healthcare is
represented in Taiwan, in addition to Australia, Denmark, the UK, the USA
and Germany. The international presence facilitates close support for local
projects, with accurate follow-up and status reviews. SHL also provides
significant cost benefits through increased production efficiencies and a
global logistics system. With experienced engineers, intelligent logistics and
a flexible support team, SHL Healthcare can deliver tailored solutions
according to the exact requirements of the market.
New Medical Tech Corp. (NMC) is a Taiwan medical device company.
NMC develops Digital X-ray Retrofit systems for general radiography (DR)
and digital mammography (DM) applications. NMC products feature
state-of-the-art flat panel detectors combined with unique acquisition and
post processing workstations to be integrated with existing traditional
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19. medical X-ray systems. In addition to the DR & DM products, NMC also
teams up with strategic partners in developing HIFU (High Intensity Focused
Ultrasound) systems for advanced image-guided therapy solutions.
Backed by extensive know-how of medical diagnostic equipment design,
image processing technologies, and optical electronics, NMC bridges the two
worlds of healthcare industry and strong IT industry between Taiwan and
Korea. By taking advantage of local world class industrial strengths in both
TFT & CMOS semiconductor foundry capabilities, NMC is positioned to
make a breakthrough in its technological innovation, improving cost barriers
and employing a fast time-to-market strategy. NMC visions to dominate in
the emerging digital X-ray conversion market by offering superior products
at reasonable costs.
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20. V. Industry Investment Incentives
1. Preferential Taxes
The ROC government enacted the Statute for Upgrading Industries in
1991 to develop a more favorable environment for foreign and overseas
Chinese investors in Taiwan, and to further attract foreign investments 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 Measures Nature of Incentives
Equipment and facilities used exclusively for R&D,
experimentation, and quality control purposes, and equipment,
machinery, and facilities that are utilized for energy
conservation or that use new and clean energy, are eligible for
Accelerated depreciation of an accelerated depreciation period of two years. If there is any
equipment and facilities 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.
Companies may deduct 5% to 20% of the amount of investment
Investment in automation in these areas from their profit-seeking-enterprise income tax
equipment or technology over a five-year period beginning with the year in which the
investment is incurred.
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
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21. Incentive Measures Nature of Incentives
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 five-year period
Research and development beginning with the year in which the investment is incurred.
• Companies may deduct 50% of the amount of their
investment in R&D or personnel training that exceed 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.
• The total amount deducted from tax due per year under the
Personnel training 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.
Companies that invest a specific amount or employ a specific
additional number of persons in resource-poor or
Investment in resource-poor or
lesser-developed rural areas may deduct 20% of the invested
lesser-developed rural areas
amount from their profit-seeking-enterprise income tax 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 stock for at least three
years, may claim a deduction from the
profit-seeking-enterprise income tax or consolidated income
tax due over a period of five years beginning with the current
year:
A profit-seeking enterprise may deduct up to 20% of the
Investment in emerging, cost of such stock from its profit-seeking-enterprise income
important, and strategic tax for the current year.
industries 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 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
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22. Incentive Measures Nature of Incentives
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 located in a another enterprise in
Reinvestment 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 place of business in the Republic of China
receives a dividend distributed by a company or profit
distributed by a partnership located in the Republic of China
in which that individual or enterprise has invested under the
Statute for Investment by Overseas Chinese or Statute for
Investment by Foreign Nationals, 20% of the amount of
payment will be withheld as stipulated in the Income Tax
Investment by foreigners and
Law and the provisions of the Income Tax Law regarding tax
overseas Chinese
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,
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23. Incentive Measures Nature of Incentives
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 domestic profit-seeking enterprises
Establishment of international to set up logistics and distribution centers in Taiwan to engage
logistics and distribution centers in the warehousing and simple processing of goods from the
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 provisions for the deduction of
Company mergers 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 from the provision of management
services or research and development to the related companies
Establishment of operation
which they acquire in Taiwan, as well as royalty income, profit
headquarters
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 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
Science-based industries meets the conditions for tax exemption or 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.
21

24. In 2007, the Taiwan government announced the “Statute for the
Development of Biotechnology New Drug Industry” in order to break
through the barriers.
Incentive Measure Nature of Incentive
• 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
Investment in five-year period beginning with the year in which the investment is
personnel training, incurred.
research and • Companies may deduct 50% of the amount of their investment in R&D or
development personnel training that exceed 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.
A profit-making business, through the original share subscription or
subscription of shares issued by the said company, became a registered
shareholder for more than three years, and the said biotechnology new
drug company did not file for, based on the amount of the subscribed
shares or the subscription of shares, the exemption of business income
tax or the deduction entitled from shareholder’s investment according to
other regulations, then this business is entitled to deduct each year’s
business income tax payable for a period of five years starting from the
Encouraging the
year that the business income tax payable is incurred. The deductible
investment of
amount is limited to 20% of the acquisition price of the shares.
biotechnology new
drug company In the event that the aforementioned profit –making business is a venture
capital business, its shareholders, in accordance with the original
deductible amount of the said venture capital business specified in item 1,
take the shareholding ratio of the venture capital business to calculate the
deductible amount from the investment, and deduct each year’s business
income tax payable for the period of five years starting from the fourth
year after the venture capital business becomes a registered shareholder
of the biotechnology new drug company.
High ranking professionals and technology investors of biotechnology
new drug company as the technology shares are permitted not to be
included in the personal taxable income or business taxable income of the
year. Whereas, when the ownerships of such shares are transferred,
gifted, or distributed as heritage, the total transfer prices, or the market
Attracting high value at the time of gifting or distributing as heritage shall be included in
ranking the income of the year when filing income tax report, the cost can be
professionals and deducted.
technology
providers to When the issuing company processes the title transfer of the
participate aforementioned shares, it shall file to the district taxation authority within
30days starting from the next day after the title is transferred.
In the event that technology investors, while calculating the
aforementioned income, are not able to submit the certificate document
of the acquisition cost, they can deduct 30% of the transfer price as the
cost.
22

25. After the resolution is reached by the consent of more than half of the
board director attendees in a board meeting attended by more than two
third of the board directors, and after the approval of the governing
authority, the biotechnology new drug company may issue stock warrants
to high ranking professionals or technology investors.
Attracting talents
and technology by The holders of the aforementioned stock warrants may subscribe specific
stock warrant number of shares according to agreed prices, the subscribed price is not
constrained by Article 140 of the Company Law which stipulate that the
price shall not be lower than the face value. The aforementioned
regulation applies to the payable income tax of the acquired stocks.
Article 267 of the Company Law is not applicable when biotechnology
new drug company issues new shares according to Article 7
In the case that the major technology provider of a newly established
Encouraging biotechnology new drug company is a researcher employed by a state-run
researchers in research institute, then this researcher, subject to the consent of the
public institutes to employer, may have the ownership of more than ten percent of the total
transfer shares at the time the company is founded. The researcher may take the
technologies role of a founder, a board director, or a technology advising
commissioner, he/she is not constrained by Article 13 of Public Servant
Service Law.
Enhancing the
collaboration
Researchers in the academic and research institutes, subject to the consent of
between industrial,
the employer, may take the position of research and development advising
governmental,
commissioners or advisers.
academic and
research sectors
2. R&D Subsidies:
Below are some government measures for boosting the development of
new products:
(1) Contents
In order to encourage new product development by manufacturers with
R&D potential, and to relieve some of the burdens of risk, the government
may provide a subsidy of up to 40% of the cost of development.
(2) Scope of Eligible Products
(a) Products of emerging key industries.
23

26. (b) Products employing key technologies that surpass current standards
of industrial technology in Taiwan.
(c) Products that have a strong connection with good market potential,
and which can stimulate the development of related industries.
3. Intellectual property rights revert to developing companies
4. Low-interest Loans
To accelerate the industrial development and economic growth of the
country, a special fund has been allocated 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.
5. Government Participation in Investments
(1) 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) Mega Bank
(c) Management Committee of the Executive Yuan Development Fund
24

27. (2) Investment Focus
(a) In the past, the focus was on major productive industries included in the
government’s economic construction plans, such as petrochemicals and
semiconductors.
(b) In recent years, the focus has been on Ten (10) Emerging Industries,
including information, communications, aerospace, and biotechnology.
VI. Industry-Academia Collaborations in Taiwan
1. Biotechnology and Pharmaceutical Industries Program Office, MOEA
(The Executive Yuan's One-Stop-Service Office for the Biotechnology
Industry)
Responsible for promoting and implementing the government's
biotech-related plan and strategies; serves as the contact for international
communications for the industry; provides relevant information on
investment incentives, laws & regulations, provides consultation for business
startups.
Rm. A, 17F, 3 Yuan Qu St., Nangang District, Taipei, Taiwan
(http://www.biopharm.org.tw)
2. Council of Agriculture, Executive Yuan
Monitors matters or issues relating to local and national agricultural
affairs, forestry, fisheries, livestock herding, and other food-related
administrative affairs.
37 Nanhai Road, Taipei, Taiwan (http://www.coa.gov.tw)
25

28. 3. Overseas Chinese Affairs Commission
Coordinates with overseas Chinese and facilitates them in all matters
relating to business and investment processing, advertising, and promotion;
assists overseas Chinese businesses; provides visa services, news
broadcasting, and overseas promotional materials.
16F, 5 Hsu-Chou St., Taipei, Taiwan (http://www.ocac.gov.tw/)
4. Department of Health (DOH), Executive Yuan
Taiwan's highest-level health administrative body, the DOH is
responsible for health administration affairs of the whole nation. The DOH is
also responsible for instructing, monitoring, and coordinating regional health
bodies.
11F, 100 Aikuo East Road, Taipei, Taiwan (http://www.doh.gov.tw)
5. Industrial Development Bureau, MOEA
Responsible for industrial development strategies and policies, the
execution of industrial upgrades, industrial development and management,
planning of related financial and tax measures, industrial pollution prevention,
industrial security guidance and factory management, and general industrial
administrative management.
41-3 Hsinyi Road, Sec. 3, Taipei, Taiwan (http://www.moeaidb.gov.tw)
26

29. 6. Intellectual Property Office, MOEA
Offers service in patent examination; trademark registration; copyright
protection; trade secrets protection; intellectual property rights and related
information; prevention of counterfeits.
3F, No. 185, Hsinhai Road, Sec. 2, Taipei City, Taiwan, R.O.C.
http://www.moeaipo.gov.tw
7. Board of Foreign Trade, MOEA
Provides economic and trade information; import-export services;
international and regional economic and trade promotion.
1 Hukou St., Taipei, Taiwan (http://www.trade.gov.tw)
8. Department Of Investment Services (DOIS)
Actively promotes Taiwan as an ideal investment destination to overseas
investors; provides guidance to local companies to invest in other countries,
and recruits skilled and expert personnel from overseas.
8F, 71 Kuanchien Road, Taipei, Taiwan
(http://www.idic.gov.tw/spring.html)
9. Department of Industrial Technology (DOIT), MOEA
Responsible for researching and planning industrial technology
development strategies, technology project budgets, combining related
institutes to promote and develop industrial technology in these categories;
pioneering technologies, key technologies, and adaptive use technologies,
DOIT's overall aim is to promote the development emerging high-tech
industries, and accelerate the upgrading of local industries.
6F, D-Building, 15 Foo-Chow St., Taipei, Taiwan
(http://doit.moea.gov.tw)
27

30. 10. Economic Processing Zone Administration, MOEA
Responsible for investments in the zone; engages in foreign trade & sales;
company registration; labor; construction & land administration affairs.
600 Cha-Chang Rd., Nantze, Kaoshiung City, Taiwan
(http://www.epza.gov.tw)
11. Department of Commerce, MOEA
Responsible for the drawing up of business policies & laws; business
planning, managing, guiding, monitoring, and orchestrating; researching
business contracts, business taxes, and business registration management &
monitoring.
15 Foo-Chow St., Taipei, Taiwan
(http://www.moea.gov.tw/~meco/doc/ndoc/default.htm)
12. Investment Commission, MOEA
Responsible for overseas investments, technological collaborations, and
examination of foreign investments.
8F, 7 Roosevelt Road, Sec. 1, Taipei, Taiwan (http://www.moeaic.gov.tw)
13. Hsinchu Science-based Industrial Park Administration
Responsible for investments; locating land/factories; granting research
developments; personnel training, etc.
2 Hsin-an Road, Hsinchu City, Taiwan
(http://www.sipa.gov.tw/index_apis.php)
28

31. 14. Taiwan External Trade Development Council (TAITRA)
Provides customized trade and investment services to domestic and
overseas enterprises.
5-7 Floors, International Trade Building, 333 Keelung Road, Sec. 1,
Taipei, Taiwan
(http://www.taiwantrade.com.tw/cgi-bin/bv60/TWTRADE/index_tc.jsp)
15. Overseas Chinese Enterprises Commission
Promoting joint ventures between overseas Chinese firms and local
companies.
11F, No. 63 Hangchou South Road, Sec. 1, Taipei, Taiwan
16. Taiwan Venture Capital Association
Conducts surveys to local and overseas venture capital industries;
lobbying on behalf of the industry; serves as a bridge between members and
high-tech companies, providing investment-related industrial information to
members; improving international collaboration between overseas and local
VC companies.
Rm. 301, 3F, 142 Minchuan East Road, Sec. 3, Taipei, Taiwan
(http://www.tvca.org.tw)
17. Taiwan Pharmaceutical Development Association
Improving the production technology R&D, business management, and
encouraging international exchanges to enhance the development of Taiwan's
pharmaceutical industry.
3F, 12-1 Tunhwa North Road, Alley 145, Taipei, Taiwan
29

32. 18. Taiwan Pharmaceutical Manufacturer's Association
Increasing the quality and stability of locally-produced pharmaceutical
products; working on R&D of new medicines; promoting and upgrading the
industry; strengthening overseas collaboration and attracting investments;
expansion of overseas markets; providing efficient communication between
the pharmaceutical industries of Taiwan and China; providing information
resources to the local industry; personnel training.
3F, 267 Tunhwa South Road, Sec. 2, Taipei, Taiwan
(http://www.tpma.org.tw)
30

33. Appendix 1:
Related Laws and Regulations Regarding Taiwan's Biotechnology
Industry
I. Biotechnology and Pharmaceuticals
1. Statute of the Development of Biotechnology New Drug Industry (Enacted
on 2007/06/15) (http://lis.ly.gov.tw/npl/fast/02814/960614.htm)
2. Pharmaceutical Affairs Law (http://www.doh.gov.tw/EN/Webpage/ )
3. Nutritional Product Management Law
(http://www.doh.gov.tw/EN/Webpage/ )
4. Pharmaceutical Affairs Law: Details
(http://www.doh.gov.tw/EN/Webpage/ )
5. Statutes on Blood Derivatives (http://www.doh.gov.tw/EN/Webpage/ )
6. Rare Disease Prevention and Drug Law
(http://www.doh.gov.tw/EN/Webpage/ )
7. Guidelines for Good Clinical Practice
(http://www.doh.gov.tw/EN/Webpage/ )
8. Standards for Establishing Pharmaceutical Manufacturing Factories
(http://www.doh.gov.tw/EN/Webpage/ )
9. Ethical Guidelines of Placental Dry Cell Research
(http://www.doh.gov.tw/EN/Webpage/ )
10. GMP for Medical Devices (http://www.doh.gov.tw/EN/Webpage/ )
11. cGMP for Pharmaceutical Drugs (http://www.doh.gov.tw/EN/Webpage/ )
12. Good Manufacturing Practice for Pharmaceuticals
(http://www.doh.gov.tw/EN/Webpage/ )
II. Agriculture
1. Environmental Drug Management Law
(http://law.epa.gov.tw/en/laws/288564189.html )
31

34. 2. The Plant Variety and Plant Seed Act (http://eng.coa.gov.tw )
3. Regulations Governing Management Practices for Transgenic Plant Field
Tests (http://www.afa.gov.tw )
4. The Plant Variety and Plant Seed Law (http://eng.coa.gov.tw )
5. Enforcement Rules of Veterinary Drugs Control Act
(http://eng.coa.gov.tw )
6. Veterinary Drugs Control Act (http://eng.coa.gov.tw )
7. Regulation for the Field Trial of Transgenic Breeding Livestock (Fowl)
and the Bio-Safety Assessment (http://eng.coa.gov.tw )
8. Plant Health Inspection and Quarantine (http://eng.coa.gov.tw )
III. Intellectual Property Rights
1. Copyright Law (http://www.tipo.gov.tw/eng )
2. Guidelines for Ownership and Use of the Scientific Technological R&D
Results of the Government (http://www.nsc.gov.tw/ls/LS0000S.ASP )
3. Guidelines for Ownership and Use of Results from Research Subsidized or
Commissioned by the Ministry of Economic Affairs
(http://doit.moea.gov.tw/newenglish/00_whatsnew/whatsnew.asp )
4. The Foundation Law for Technological Development
(http://web.nsc.gov.tw )
5. The Plant Variety and Plant Seed Act (http://eng.coa.gov.tw )
6. Measures for Safekeeping of Microbiology-Related Patent Applications
(http://www.tipo.gov.tw/eng )
7. Trademark Law (http://www.tipo.gov.tw/eng )
8. Patent Law (http://www.tipo.gov.tw/eng )
9. Guidelines for Rights to R&D Results of the National Science Council
(http://web.nsc.gov.tw )
10. Trade Secrets Act (http://www.tipo.gov.tw/eng )
32

35. IV. Tax Benefits and Incentives
1. Agricultural Development Regulations
2. Tax Deduction Measures for Company R&D and Personnel Training
Expenditures
3. Incentive Measures for R&D and Manufacture of Drugs for Rare Diseases
4. Incentive Measures for Emergent Important Industries Belonging to
Agriculture
5. Statutes for Upgrading Industries
6. Scope of Venture Capital Business and Consulting Guidelines
7. IDB of MOEA Contracted Proposal for Points Regarding Industry
Technology and Production to be Developed Successfully and Having
Marketability to relax the listing requirement of local biotechnology
companies to apply for listing on the Taiwan Stock Exchange and the
OTC Exchange.
8. Regulations Governing Tax Incentives for Operations Headquarters and
Bylaws
9. Rules for Encouraging Pharmaceutical Technology Research and
Development
10. Guidelines for Considering Expenditures Incurred by Companies
Involved in R&D Commissioned by Local Biotech and Pharmaceutical
Companies as Investment.
11. Incentive Measures for Emergent Important Strategic Industries
Belonging to Manufacturing and Technology Service
33

36. References
[1]Taiwan Biotech and Pharmaceutical Industries, Asia Pacific Biotech, Vol.
11, No. 12, 2007.
[2]Spot on Taiwan, Advertisement Feature, Nature, 5 April (2007).
[3]Taiwan, A Key Link in the Bioscience Global Supply Chain, p.40,
BioSpectrum, Asia Edition, Vol. 1. Issue 1, March-April 2006.
[4]2007, Introduction to Biotechnology & Pharmaceutical Industries in
Taiwan, BPIPO, MOEA, Taiwan.
34