The emergence of new 5G Internet and electric vehicle supply chains has given Taiwan a chance to expand its economy beyond its traditional strength in semiconductors, while also setting up a broad network of complementary industries, Minister of Economic Affairs Wang Mei-hua (王美花) said.
In an interview, Wang said that the government sees the two new industries as vital to Taiwan’s economic diversification, even though the domestic semiconductor industry reported record profits amid a tech boom driven by the COVID-19 pandemic.
Regarding the automotive industry, Wang said that US automaker Tesla Inc sought out supply chain partners in Japan and South Korea, before settling on Taiwan for its ability to provide small-volume, high-variety manufacturing.
The industry has also created high demand for electronic components, a sector that has long been one of Taiwan’s strengths, Wang said, adding that local companies Pegatron Corp (和碩), Delta Electronics Inc (台達電) and Fukuta Electric and Machinery Co Ltd (富田電機) have all become Tesla suppliers.
Although Taiwan has struggled to break into the supply chains of traditional automakers such as BMW AG and Mercedes-Benz, it is likely to have a major opportunity to do so as these companies enter the electric vehicle market, she added.
Wang predicted that the rise of 5G would break up the 4G era’s highly consolidated communications sector, in which a handful of giants such as Ericsson, Nokia Oyj and Huawei Technologies Co (華為) dominated the global market.
“The 5G era, with its emphasis on providing high-bandwidth, low-latency services to high-density networks of users ... will open up business opportunities for Taiwanese network communications firms, manufacturers of servers and terminal equipment, and telecoms,” she said.
The growth in the 5G and electric vehicle sectors would also spur demand in derivative markets for automotive chips and the Internet of Things, further bolstering Taiwan’s semiconductor industry, Wang said.
Last year, the output value of Taiwan’s semiconductor industry reached NT$3 trillion, (US$105.37 billion), growing 20.7 percent from a year earlier and 3.3 percent faster than the global semiconductor industry, she said.
Wang said that these trends would reduce the country’s dependence on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), whose economic dominance has earned it the nickname of Taiwan’s “sacred mountain and protector of the nation.”
In the future, the electric vehicle and 5G industries, along with the broader semiconductor ecosystem, would serve as important pillars of Taiwan’s economy, she said.
Wang said that the economics ministry is supporting these goals by offering research and development grants to relevant industries, and tax rebates to companies that invest in smart machinery.
For example, under the Statute for Industrial Innovation (產業創新條例), firms that invest NT$1 million to NT$1 billion in smart machinery are eligible for a once-off 5 percent corporate earnings tax deduction or a 3 percent deduction over three years, Wang said.
Although “the sun has not yet set” on the current pandemic-driven economy, “we have to plan ahead,” Wang added.
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