Local manufacturing fixed asset investment grew 17.8 percent year-on-year to NT$483 billion (US$16.33 billion) in the first quarter of the year, the highest level for the period, as companies in the integrated circuit, chemical materials, basic metals and machinery equipment industries continued to expand production capacity in a bid to meet semiconductor and automation needs, the Ministry of Economic Affairs reported on Friday.
The electronic components sector contributed the most to the manufacturing industry, as its fixed asset investment hit a record high of NT$354.8 billion in the first quarter, accounting for 73.4 percent of total investment. Last quarter, it increased 23.7 percent from a year earlier, as semiconductor companies pushed investment in advanced and matured technologies, while memory IC and IC substrate producers expanded capacity to meet end-market demand, the ministry said in a statement.
Local manufacturers also saw their combined revenue rise 15.3 percent year-on-year to NT$8.36 trillion last quarter, the best performance for the January-to-March period, thanks to robust demand for electronic products used in the 5G, high-performance computing, automotive electronics and cloud computing segments, as well as contributions from petrochemical, steel and machinery sales, the ministry said.
Indeed, the electronic components industry, composed of electronic parts suppliers and semiconductor producers, has posted a significant increase in fixed asset investment over the past decade. For instance, its investment amounted to NT$631.3 billion in 2011, accounting for 58.7 percent of the manufacturing sector’s total, but the figure rose to NT$1.32 trillion last year, or 68.7 percent of the total, the ministry said.
As a major pillar of the manufacturing sector, the electronic components industry’s rise and fall in the investment weighs on the nation’s private investment. That was particularly evident when semiconductor companies substantially increased investment and boosted overseas shipments over the past few years. The nation’s private investment and exports expanded accordingly and firmly contributed to Taiwan’s GDP growth.
It is gratifying that the steady increase in fixed asset investment by companies in the electronic components industry over the decades has enabled Taiwan to play a pivotal role in global supply chains — companies in the semiconductor industry in particular. However, overreliance on a few tech segments — among them electronics, semiconductors, computers and communications — has resulted in imbalanced development in Taiwan’s industrial landscape. It also poses a major risk to the local economy as companies slow their investments given weakening sales, setbacks in foreign demand and fluctuations in the global economic cycle.
The Washington-based Information Technology and Innovation Foundation last week issued a report saying that Taiwan’s market share in advanced industries relative to its size is more than double the global average, driven almost solely by the nation’s dominance in computers, electronics and optical components. Nonetheless, the US think tank also noted Taiwan’s weakness in industries such as pharmaceuticals and automobiles, saying the nation’s advanced industrial output was “the least diversified” of the countries in the study.
Everyone knows not to put all their eggs in one basket. South Korea, like Taiwan, is adept at semiconductor manufacturing. However, it is also a powerhouse in the automobile, flat panel, shipbuilding and petrochemical industries. When some South Korean industries are in bad shape, others help stabilize the economy. A top priority for Taiwan should be to create star industries other than semiconductors, so that the nation does not rely on a sole industry to thrive on the global stage.
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