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On Jan. 10, Microsoft announced that it will establish an artificial intelligence (AI) R&D center in Taiwan, a potentially significant milestone for the country.

An unusually impressive number of business and government leaders packed into Microsoft’s office in Xinyi District in Taipei for the occasion. They included heavyweights Premier Lai Ching-te, Taiwan’s economic affairs and science ministers, Industrial Technology Research Institute (ITRI) Chairman Lee Chih-kung, Advantech Co. Chairman K.C. Liu, and Far EasTone Telecommunications Co. President Yvonne Li.

They were there because of the accelerating, even feverish, global interest in AI.

“The R&D center aims to develop AI core technologies, with a focus on intelligent input, audience intent recognition and AI vertical industrial integration,” said David Ku, chief technology officer of Microsoft’s AI and Research Group.

Expecting to invest NT$1 billion in the center over the next two years and build a team of more than 200 AI engineers in five years, Microsoft hopes to encourage the widespread adoption of AI across Taiwanese businesses and create a domestic AI ecosystem. But it also has regional ambitions.

“The brain of the operation is in Taiwan. The brain will make the decisions, and its legs will extend into Southeast Asia,” said Michael Chang, the CEO of Microsoft’s AI R&D center.

Taiwan’s government has aggressively encouraged the development of the AI sector, and though he was bogged down by a controversy over labor law amendments, the premier still made sure to be at the unveiling event.

Noting the government’s commitment to investing NT$16 billion over five years to foster an AI ecosystem, Lai welcomed Microsoft’s latest investment in the country. By putting a facility as important to Microsoft as the AI R&D center in Taiwan, he said, the company was essentially bringing in advanced AI technologies and resources from its headquarters and Microsoft Research Asia, and was poised to become one of the leaders in investing in emerging technologies among foreign companies in Taiwan.

Exactly how important is the AI R&D Center to Microsoft? A look at the company’s organizational chart reveals that it falls directly under David Ku.

Born in Taiwan, Ku as chief technology officer is responsible for applying AI functions to search engine Bing, Microsoft personal assistant Cortana, Microsoft Office and cloud platform Azure. (Read: The Gap between AI-Haves and AI-Have-Nots Will Be Larger)

So it’s not hard to imagine the AI base in Taiwan playing the important role of an Asian regional R&D center.

David Ku, CVP of Microsoft AI Core and CTO of Microsoft AI and Research Division (Image: Ming Yang)

Choosing Taiwan: Talent, Local Partners

There was fierce competition to host the center, with Asian powerhouses India and China both vying for the honor. So why did it end up in Taiwan?

“We wanted to be able to recruit local talent, and we also saw a big opportunity in Taiwan. The corporate partners here can use AI to transform their operations. We have AI technology and AI talent; where we need a breakthrough is in understanding more deeply the needs of vertical industries. We may not have knowledge of specific vertical industries, but our local partners do, and they can help us penetrate local vertical industries,” Ku said in an interview with CommonWealth Magazine.

“Talent and local partners were the keys to establishing this R&D center,” Ku said, noting that the Taiwan AI R&D center will participate in the development of both local and global products for Microsoft.

Taiwan’s information technology talent was a particularly important factor.

“The talent is competitive; Taiwan has a niche,” Chang said. Microsoft expects to recruit 50 people for the center in the first year, of whom 60 percent will be recruited from Taiwanese universities, in essence keeping attractive international R&D opportunities in Taiwan.

Several other major international tech companies also expect to set up R&D centers in Taiwan in the near future, including Qualcomm and Amazon.

Big Companies Hunting for Talent

A professor at a leading university considered to be an expert in the field says there are two main factors leading big international companies to set up research facilities in Taiwan.

The first is that the cost of recruiting and poaching such talent in the United States has become hugely expensive, even to the biggest tech companies.

People who have just graduated with a master’s or Ph.D. and are recruited by companies in the U.S. can command salaries of US$250,000 a year, and the professor had even heard of one example of a new graduate getting a starting salary of US$500,000 a year.

“So these companies simply can’t afford this anymore and have gone to China searching for talent. But it’s now becoming hard to find good people in first tier cities so they’ve shifted to second-tier cities. In any case, they have the money so they can go for it, but is the talent in China’s second-tier cities really better than Taiwan’s?” the expert asks.

The other factor playing into the equation are the limits the Trump administration has imposed on foreign nationals working in the United States, such as reducing the odds of high-tech talent getting an H1 visa to one out of three. The expert says Google came up with a plan to get around the proverbial Trump “wall,” offering talent hired in Taiwan the opportunity to apply to work at Google’s U.S. headquarters.

“Don’t you think Microsoft and Amazon want to do something similar?” the expert asks.

The new trend seems to be a reprisal of an old trend, according to Ouhyoung Ming, who teaches in National Taiwan University’s Department of Computer Science and Information Engineering.

Thirty years ago, multinationals often set up centers in Taiwan, with top Taiwanese executives working first in their home market and then being promoted to positions with responsibilities for Greater China. But over the past 10 years, the trend has changed, as international companies have set up their centers in China, with Taiwanese talent heading across the Taiwan Strait to work.

“Now, foreign companies are once again setting up key facilities in Taiwan, giving Taiwanese talent a world-class platform that connects them directly to global headquarters. I think that’s a good thing,” observes Ouhyoung, who himself returned to Taiwan in the 1990s to teach.

Even with other big companies like Amazon preparing to set up R&D or innovation centers in Taiwan, Microsoft remains unconcerned about being able to recruit the talent it needs.

“Other foreign companies’ investments are focused on money. Microsoft is focused on deepening its roots in industries,” Microsoft’s Chang says.

Because it has positioned its new investment as a regional R&D center, Microsoft said it will primarily recruit R&D engineers.

“At this R&D center, everybody will be dedicated to understanding customers’ needs rather than selling product,” says Jason Tsao, Microsoft Taiwan’s chief operating officer. Much like the role of a “central kitchen,” the center will serve to “effectively integrate the AI resources of Microsoft units and apply them to customers’ businesses,” he says.

When the R&D center’s team visits customers to ascertain their needs, they won’t simply seek out customer data but also help customers upgrade their operations and improve their competitiveness.

Solving Labor Shortages

One example is Taiwan’s biggest steel maker, China Steel Corporation, which will soon face a retirement wave. Those retirements will leave behind a severe talent gap, in part because young people are unwilling to do certain jobs, such as entering hot furnaces to perform routine maintenance. With appropriate AI tools, however, maintenance will be possible without human intervention.

“The manufacturing sector is an important vertical industry targeted by this R&D center,” says Microsoft Taiwan General Manager Ken Sun, who joined Microsoft last year after having worked for automation equipment specialist Schneider Electric Taiwan.

The manufacturing sectors targeted by the center include high-tech assembly, semiconductors, heavy industry, and precision machinery. “We hope our technology can find its way into these local industries,” Sun says.

Hiring 200 R&D engineers in five years – it’s an ambitious goal but one that represents an important opportunity for Taiwan’s high-tech researchers and the country’s ability to join in on the international AI wave.

Translated from the Chinese article by Luke Sabatier

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