The Wisconsin Senate last month passed an incentive package for Foxconn Technology Group that would give the company US$3 billion — including cash incentives over a period of 15 years, capped at US$2.85 billion, and US$150 million in sales tax exemptions — if it invests US$10 billion in a factory and employs 13,000 people.
The bill’s passage confirmed that Foxconn’s investment is expected to bring Wisconsin a profit of more than US$3 billion, and likely several times more than the value of the incentives.
Why has Foxconn — known as Hon Hai Precision Industry Co in Taiwan — not invested in Taiwan? Company chairman Terry Gou’s (郭台銘) answer is that “the market is my motherland.”
The company’s history shows that this has indeed been the case. Foxconn initially manufactured its goods in Taiwan, but as the company grew bigger, it began investing huge sums of money in China.
While it has more than 7,000 employees in Taiwan, it has more than 1 million employees in China, which is about 80 times the number of jobs its Wisconsin plant is expected to create.
From there, it is possible to calculate that Foxconn must have contributed at least US$240 billion to the Chinese economy, or even several times that amount.
In comparison with China and the US — both have high populations and big markets — Taiwan must have been too small for Gou to invest more money in.
Taiwan Semiconductor Manufacturing Co (TSMC) chairman Morris Chang (張忠謀) is the opposite of Gou.
TSMC has almost exclusively invested in Taiwan and did not make a major investment in China until its recently announced plan to build a plant in Nanjing. Its NT$500 billion (US$16.5 billion) plan to build a 3-nanometer chip plant in Tainan suggests that the company still prioritizes investing in Taiwan. TSMC has contributed trillions of New Taiwan dollars to the nation.
Unfortunately, most businesses in Taiwan are like Foxconn, preferring to build their factories in China.
Foxconn’s revenue for last year was NT$4.4 trillion, which far exceeded TSMC’s NT$947.9 billion. However, while almost all of TSMC’s economic contributions go to Taiwan, little of Foxconn’s revenue returns to the nation.
Despite the damage that Foxconn has done to the Taiwanese economy by investing in China, it is offered the same stimulus packages and tax exemptions as other companies, which is clearly unfair.
Companies like Foxconn enjoy tax exemptions, cheap labor and all kinds of benefits and market advantages from the Chinese government, which allow them to compete with other Taiwanese companies at cheaper prices.
Meanwhile, when they invest at home, they still receive the benefits and stimulus packages offered by the Taiwanese government. How is this fair for companies that have prioritized investing in the nation?
The government should consider offering businesses that prioritize investing in Taiwan larger tax exemptions — such as lowering their corporate income tax to 13 percent — while raising the tax rate of those that primarily invest in other nations to 25 percent.
The lack of investment in Taiwan has been a chronic problem, since China has attracted most investors away from the nation.
If the government does not eliminate factors that are preventing Taiwanese businesses from competing on an equal footing in the nation, the economy will remain dependent on just the handful of companies that are devoted to it, with little hope of getting better.
Huang Tien-lin is a national policy adviser.
Translated by Tu Yu-an
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