TAINAN COUNTY, Taiwan — In a massive greenhouse in balmy southern Taiwan, workers pack boxes of 2-year-old white butterfly orchids.

Around them stretch row after row of the flowers, a hothouse battalion prepared for customers in Japan. There, the flowers fetch about $12 each, earning producer Tai-Ling Biotech a more than 30 percent profit margin, according to managing director Peter Liu.

Tai-Ling exports 7,000 to 8,000 flowers to Japan per month with a 185-strong workforce. And growing demand boosted the firm's sales to $10 million in 2010 from $7 million in 2009. "I need to expand into more greenhouses," said Liu, as workers scurried behind him.

Taiwan may be famous as a high-tech manufacturing giant. But in the last decade, the island of just 23 million has also quietly become one of the world's top flower exporters, and the world's No. 1 exporter of orchids. Taiwanese know-how has also powered China's own emerging flower industry.

Flower and flower-seed exports have nearly tripled in value in the last decade, from $48 million in 1999 to $111 million in 2009, according to statistics from the Taiwan Floriculture Exports Association. Those numbers show how Taiwan has successfully married its agricultural past with cutting-edge technology for breeding and mass-producing flowers.

Much of the boom has been in orchids. $87 million of last year's exports were orchids, up from $40 million in 2004, according to government statistics. Orchids account for just 20 percent of Taiwan's flower exports by quantity, but 80 percent of export value, according to the orchid growers' association.

In 2005, Taiwan became the world's top orchid exporting country, replacing Thailand — a spot the island still holds, according to the association.

"Butterfly" orchids, also known by their scientific name phalaenopsis, have been a star export. Exports of butterfly orchids earned Taiwan $62 million last year.

Taiwan firms have also played a key role in the birth of mainland China's mass-produced flower business. Beginning in the early 1990s, Taiwan firms moved across the Strait, especially to the area around Kunming, in southwest Yunnan Province, which has an ideal climate for horticulture.

Taiwan firms typically produce for the Chinese domestic market, and serve as middlemen between Chinese growers and foreign breeders.

Tai-Ling serves the China market from a branch in Shanghai that employs 70 to 80 Chinese workers. Production costs are half what they are in Taiwan, but managing director Liu says Taiwanese workers are far better — one of them can do the job of two typical Chinese workers, he says, erasing the mainland's cost advantage. And Japan remains his most important market by far, he says, because Chinese still don't have regular buying patterns.

"They don't have the habit of buying flowers, except during Chinese New Year or National Day," said Liu. "At other times sales are very small."

That could change soon. Flower consumption is rising 20 percent to 30 percent per year in China, says Liu Bang-shein, managing director of the Dahan Group, a Taiwanese pioneer in China's flower market. That's a contrast with nearby markets like Japan, where consumption is stable or even decreasing slightly. According to a recent documentary that aired on China's state-run CCTV, China's flower market is already estimated at some $10 billion.

Dahan is now Asia's largest company for poinsettias, producing 4 million cuttings a year — 20 percent of China's overall production, and 65 percent of "legal" production, that is, plants produced under license, with royalties paid to breeders.

Amid all the success, though, Taiwan already has its eye on the rear-view mirror. New Taiwanese firms have crowded into the market, increasing competition and lowering profit margins. The Dutch are planning large-scale greenhouses in the United States, which could give them an edge in that key market.

China doesn't export much yet, because of problems with breeders' rights — the right to grow and sell specific flower varieties. Exports without the proper paperwork and licenses are banned from key markets like Europe and the U.S.

"Our plant variety protection is better than theirs [China's]," said Chang Su-san, from Taiwan's Council of Agriculture. "They focus more on food crops, we focus more on horticulture."

But eventually, homegrown Chinese firms could compete in key flower markets. So Taiwan firms are looking to move up the value chain, in search of better margins and an edge.

"We need to keep increasing our varieties and efficiency," said Chang. Some Taiwan producers hope to set up a cross-strait production line, with the first stages of production in lower-cost China and final production, branding, and packaging in Taiwan for export to world markets.

Dutch flower exporters use a similar model, with plantations in Africa or other cheaper locations. But at the moment, cross-strait trade barriers make that business model impossible. Some flower imports from China are banned; others face a 35 percent import tariff, said Parker Wu, a veteran of the orchid business at Orchis Floriculturing.

Wu thinks the Taiwan government should set up an export zone and an auction, similar to the one in Yunnan province or in Holland, to better connect Taiwan's producers with global buyers.

Another focus will be on developing brands. Up until now, many of the island's flower firms have been akin to "contract" manufacturers in that they export small plants or cuttings to the U.S., where U.S. brands shepherd them through the final stages of production, market and sell them. That means Taiwan firms earn only a small slice of the profits.

Branding would expand Taiwan's slice. "In the end, your brand is the most important thing," said Richard Lin, of the Taiwan Orchid Growers Association. "There's still a lot we have to learn and improve."

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