Taiwan Semiconductor Manufacturing Co’s (TSMC) announcement on Thursday last week that it expected its second-quarter revenue to grow by about 17 percent was higher than most forecasts. The following day, strong buying by foreign investors lifted the TAIEX by 140 points, pulling the market out of its dispirited state. As TSMC’s shares soared close to their daily limit, they struck a sharp contrast to what Premier Jiang Yi-huah’s (江宜樺) Cabinet has been calling a “depressed” economy.
Ever since President Ma Ying-jeou (馬英九) took office in 2008, the stock market has languished. Since US President Barack Obama’s inauguration, US stock indices have risen by 76 percent and South Korea’s by 2.17 percent. Japan’s Nikkei has also been doing very well recently. Only Taiwan’s stock market has faltered.
As of Monday, the TAIEX had dropped 14.28 percent from its closing on May 17, 2008, shortly before Ma’s first inauguration. Workers’ salaries are low and youth unemployment is high. The average monthly salary for young people is less than NT$22,000 (US$740). Young people cannot afford to buy homes and they dare not get married. For the great majority of people, “depressed” is a good description of how they feel about the economy.
However, while the economy is depressed, TSMC is not depressed at all, and even gave employees generous year-end bonuses totaling to NT$11.1 billion. What, then, is the secret to its success? This is a point that people should examine when discussing the state of the economy.
The key to TSMC’s success is the attitude of the people who run it. Unlike so many others, they are in no rush, and have no desire, to make China their manufacturing base. Taiwan is TSMC’s sole operations center, and the fact that other firms in the same sector are fleeing to China has not caused it to waver in this respect.
TSMC’s policy of staying put means that its managers do not have to wear themselves out traveling. They can concentrate on developing global markets and on research and development.
The company’s leaders do not underestimate China, but they see it as just one link in the world market. The reason the firm has been able to build one factory after another in Taiwan and keep upgrading its technology is that the people who run it do not let themselves get distracted.
They spend the best part of their time at their posts in Taiwan. Time is money, and time is also needed for innovation. Having plenty of time allows them to concentrate on thinking about the next step in its operations.
In contrast to TSMC’s calm concentration and global outlook, the government has been seeking economic renewal through involvement with China. What the Ma government always has on its mind is how to strengthen Taiwan’s integration with China. Most of its time and energy have been devoted to attracting Chinese tourists and to negotiating a series of 18 cross-strait agreements, of which the Economic Cooperation Framework Agreement (ECFA) is the most important.
This mindset has pushed Taiwan’s money, technology and professionals in China’s direction, while the government has been hard pressed to develop policies for upgrading domestic industries and encouraging businesses to put down roots in Taiwan.
Various programs have been announced, such as the “i-Taiwan 12 Projects” and the “six key emerging industries,” but the government has done very little to turn these slogans into action.
More recently, the government has proposed setting up “free economic pilot zones,” but the plan is still centered on China and on Taiwanese businesses based there. When the government has this kind of mindset, it is not surprising that the economy is “as depressed as could be.”
Is there any way out? All that needs to be done is to take a good look at TSMC’s concentration and global outlook. If the government can bring itself to abandon its line of integration with China and instead devote time and resources to Taiwan, then the nation could surely produce more outstanding companies like TSMC, and the days of the “depressed” economy would be numbered.
In January, TSMC chairman Morris Chang (張忠謀) suggested the New Taiwan dollar’s exchange rate could afford to fall a bit. It is precisely because TSMC does almost all of its manufacturing in Taiwan that Chang perceived the need for this.
Huang Tien-lin is former president and chairman of the First Commercial Bank.
Translated by Julian Clegg