Taiwan builds a base for high-technology industry

Michael Pao, chairman of Flow Industries, likes to quote the Chinese philosopher Lao Tzu that ''water droplets can penetrate rock,'' to show that cutting things with water isn't something new under the sun.

Flow Industries took this idea and turned it into a new high-technology industry, becoming the world's leader in the production of water-jet cutting equipment.

The machines use water under very high pressure to cut out everything from automobile dashboards to corrugated cardboard.

Now the company is taking the idea back to the land of the philosopher by becoming one of the first American high-tech firms to locate a plant in the new Hsinchu science-based industrial park in Taiwan.

Located about 45 miles southwest of Taipei, the science park is the cornerstone of the Taiwan government's plan to transform the island's economy from labor-intensive, low-value industries to high-technology production.

Now in its second year, the industrial park so far has attracted about a dozen local and foreign companies with another dozen authorized. Eventually, Taiwan's planners say they hope to attract as many as 200 companies.

To gain admittance, a company must be working on the forefront of new technology. With some 30 PhDs doing research and development on fluid mechanics as well as other emerging technologies such as wind energy, Flow Industries easily fits the criteria.

The Kent, Wash., company was already an experienced exporter when it decided to open its Far East branch in Taiwan. The company claims to have about 80 percent of the world market share for water-jet cutting equipment with sales to some 20 different countries.

The Taiwan plant is designed to be the focus of the company's assault on the entire Pacific Rim area. ''To penetrate the market, you have to have an active presence there,'' Dr. Pao said.

Before settling on Taiwan, Flow Industries scouted other locations in Japan, Singapore, and Korea. ''We chose Taiwan because it seemed ready for high technology,'' Dr. Pao said.

Aside from the considerable attractions of the science park itself, a deciding factor was the quality of the work force. Taiwan offered a large pool of highly educated, well-trained employees with a relatively high number of college graduates in engineering.

Hsinchu also is the home of two national universities, the semi-governmental Industrial Technology Research Institute, and several other national research labs.

In addition, the Taiwan government undertook to build the entire plant, which it leases to Flow, extended a five-year tax holiday, and put up 49 percent of the capital required - standard benefits extended to all science park tenants.

The science park also doubles as a foreign trade zone, allowing the company to import materials and parts duty-free and export them to other parts of the Pacific Rim.

The amount of red tape involved in the venture seems to have been minimal, at least in Flow's experience. The company filed its application in July 1980 and received approval the following month. The plant was formally opened by Washington Gov. John Spellman during his Far Eastern trip last spring.

Rather than cutting equipment, Flow Industries sees a Pacific Rim market for its new ''waterdrill'' which uses high pressure water to cut through rock and which it believes will eventually replace the conventional jackhammer as a mainstay of mining and tunneling.

Many countries around the Asian littoral, Taiwan in particular, are mountainous and require a lot of drilling, officials reason. And as the philosopher says, ''water droplets can penetrate rock.''