Taiwan increased tax benefits for enterprises engaging in technological research and manufacturing to strengthen the island’s semiconductor sector and maintain its leadership position in the global chip supply chain.
According to the changes adopted by the cabinet of Taiwan on Thursday, IT businesses will be allowed to decrease their income tax bill by a fourth, provided they spend a certain amount on research and development. The legislation is meant to incentivize enterprises to spend money on manufacturing and R&D in Taiwan by offering a 5% tax exemption to those that invest a certain amount in modern equipment.
Several nations have expanded their assistance to their local chip sectors over the last year, promising tens of billions of dollars in subsidies to businesses that grow output within these markets and break free from China and Taiwan. As a result of these assurances, new factories are being constructed or planned in the United States, Japan, and Europe. Some in Taiwan are worried about the potential loss of the island nation’s dominant position in the semiconductor sector.
Companies are preparing for what to do if their ability to do business in China is curtailed or if a military war breaks out in the Taiwan Strait as geopolitical tensions between the US and China rise. More and more companies and countries are looking to relocate manufacturing away from Taiwan or to local chip behemoth Taiwan Semiconductor Manufacturing Co. due to rising worldwide concerns about the island’s concentration of chip manufacture.
This week, Samsung Electronics Co. said that as political concerns increase, the global technology sector is seeking new suppliers of innovative semiconductors. Apple Inc. chief executive Tim Cook recently said in an employee meeting that the tech giant would soon begin obtaining chips from a new facility being built in Arizona, the United States, marking a significant step towards lessening Apple’s dependence on Asian manufacture. Is.
It’s more probable, however, that when Cook mentioned a plant, he meant one that TSMC would manage. Opening in 2024, the factory is part of a larger initiative to expand chip manufacturing in the United States. The business is already investigating building a second facility in the country.
As a result of these trends away from Taiwan, the government has been actively seeking to encourage international investment in the native chip sector. On Wednesday, President Tsai Ing-wen met with executives from ASML Holding NV, a global leader in the design, fabrication, and testing of semiconductors and other electronic components. CNA reports that the business aims to spend $30 billion in northern Taiwan, quoting the mayor of New Taipei City.
According to a representative from Taiwan’s Economic Affairs Ministry who spoke at a conference after the announcement, the new tax reductions are intended to aid in this endeavor and boost Taiwan’s position in critical sectors.
The ministry published the details of the new tax cut, explaining that the continued growth of Taiwan’s industry needed to react to rising competition in the context of global supply chain restructuring. Legislators will be asked to approve the plan, which the administration hopes to implement in the new year and see it until the end of 2029.
Cabinet spokesperson Lo Ping-cheng told a conference in Taipei following the news, “Taiwan needs the world, and the world needs Taiwan even more.” Improvements in Taiwan’s semiconductor industry would have far-reaching effects on the global economy.
The global technology supply chain still relies heavily on Taiwan, but the country is increasingly at risk. The island, led by TSMC, currently produces over 90% of the world’s most powerful processors for military and business computer services. Over 85% of the worldwide smartphone chip market is controlled by Apple, MediaTek Inc., and Qualcomm Inc., depending on TSMC supply.