Tax cuts that the legislature passed yesterday are only the “first step” needed to prepare Taiwan’s semiconductor manufacturers for the fierce international competition in chipmaking, and more measures would be necessary to consolidate the nation’s advantage in the field, experts said.
Lawmakers passed amendments to the Act for Industrial Innovation (產業創新條例) offering income tax cuts of up to 50 percent from Sunday last week to Dec. 31, 2029, for companies that meet yet-to-be-defined requirements that innovate technologies domestically and occupy a critical position in international supply chains.
Liu Pei-chen (劉佩真), a researcher at the Taiwan Industry Economics Database of the Taiwan Institute of Economic Research, said the amendments would incentivize semiconductor manufacturers to continue investing in Taiwan, and help to cement the nation’s standing as the world’s second-largest semiconductor supplier.
Photo courtesy of the Taiwan Institute of Economic Research
However, Taiwan has a relatively low output of materials and equipment for wafer fabrication, which are mostly imported, and if it wants to have more control over supply chains, it must work to address that weakness, Liu said.
The government could introduce measures that would ensure wafer fabrication equipment and materials are manufactured domestically, making the local semiconductor industry more self-sufficient, she said.
As countries in Europe, as well as Japan, the US and South Korea pick up the pace to bolster their positions in their respective semiconductor supply chains, it is likely that they would seek to poach semiconductor engineers from Taiwan, she said.
Offers of competitive salaries, good social welfare terms and residency could prove enticing for research and development personnel and executives at Taiwanese semiconductor companies, she said.
The College of Semiconductor Research, sponsored by the public and private sectors, could also serve as an incubator for talent for the semiconductor industry, but to prevent a brain drain, a more comprehensive government policy is needed, she added.
Industrial Technology Research Institute senior vice president Stephen Su (蘇孟宗) said the amendments were only the “first step” to prepare chipmakers for the fierce international competition and “geopolitical pressures,” with more still needing to be done.
Policies to strategically nurture semiconductor companies and accompanying measures should be put in place, as these policies are crucial to consolidating Taiwan’s competitive edge in the face of intense international chipmaking competition, he said.
ASE Group, the world’s largest chip packaging and testing company, said it welcomed the introduction of the tax breaks, but the actual effects of the policy would only become clear after the criteria for receiving the tax deductions are announced.
Yageo Corp, the world’s third-largest multilayer ceramic capacitor supplier, said it welcomed the policy and would look into the criteria for determining companies’ eligibility for the tax breaks when they are announced.
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