Why Taiwan Could Embrace TSMC and MediaTek... Different 'This' from Korea

Taiwan's Semiconductor Giants 2.3 Times More Than Korea Despite Lower GDP
Taiwan Provides Comprehensive Support in Workforce, Tax, and R&D to Boost Local Semiconductor Industry
Professor Kang Jun-young of Hankuk University of Foreign Studies: "Taiwan's Domestic and Overseas Talent Acquisition Strategies Can Be Considered in Korea"

Source=Federation of Korean Industries

[Asia Economy Reporter Kim Pyeonghwa] Although Taiwan's economic scale is less than half of South Korea's, it has more than twice the number of major semiconductor companies. This is attributed to the Taiwanese government's industrial policies that fully support advanced and future industries such as semiconductors and ease related regulations.

According to the report "Current Status and Implications of Taiwan's Industrial Restructuring," commissioned by the Federation of Korean Industries (FKI) to Professor Kang Jun-young of Hankuk University of Foreign Studies on the 4th, Taiwan's national economic scale (GDP) in 2021 was $789.5 billion (KRW 1076.0885 trillion), less than half of South Korea's $1.7985 trillion (KRW 2451.3555 trillion). Conversely, the number of semiconductor companies with sales exceeding $1 billion (KRW 1.363 trillion) was 28 in Taiwan, 2.3 times more than South Korea's 12. Leading companies such as TSMC, the world's number one foundry (semiconductor contract manufacturing) company, UMC, the world's third-largest foundry, and MediaTek, the world's fourth-largest fabless (semiconductor design) company, are all Taiwanese firms.

The FKI pointed to the tax environment as the background for the difference in semiconductor industry competitiveness between Taiwan and South Korea. It noted that domestic companies bear a heavier corporate tax burden compared to Taiwan. According to the FKI, when comparing the average corporate tax burden rate in the semiconductor industry from 2019 to 2021, South Korea's rate was 26.5%, 1.9 times higher than Taiwan's 14.1%. Looking at individual companies, domestic firms such as Samsung Electronics (27.0%), SK Hynix (23.1%), and LX Semicon (20.1%) had corporate tax rates exceeding 15%, whereas Taiwanese companies like TSMC (10.9%), MediaTek (13.0%), and UMC (6.1%) all had rates below 15%.

Taiwan's comprehensive support and regulatory easing across all areas including ▲human resources ▲research and development (R&D) ▲taxation ▲reshoring (relocation of production facilities back to the country) for core technologies and industries driving the national economy are also factors fostering the semiconductor industry, according to the FKI. For example, when local companies in Taiwan complained about shortages of talent in science, technology, and engineering fields, the Taiwanese government actively promoted local talent development and attracted overseas talent.

In fact, the Taiwanese government announced plans to invest 1.5 billion Taiwan dollars (KRW 66.75 billion) from 2021 to 2025 to train 2,000 semiconductor specialists. To attract high-level foreign talent, it provided additional support such as exempting half of the income exceeding 3 million Taiwan dollars (KRW 133.5 million) from taxation and easing visa and residency regulations for foreign experts.

Source=Federation of Korean Industries

Another key feature of the Taiwanese government is its increased utilization of national institutions to support advanced technology R&D. The Industrial Technology Research Institute (ITRI) in Taiwan plays a role in developing and providing core technologies to companies in fields such as artificial intelligence (AI) chips, next-generation memory semiconductor design, and advanced devices. ITRI's focus on wafer production technology has been credited with enhancing Taiwan's semiconductor competitiveness. TSMC itself started as a public enterprise when it was established in 1987.

Taiwan's tax policies are also noteworthy. The Executive Yuan (equivalent to South Korea's Prime Minister's Office) announced the "Advanced Science and Technology R&D Center - Leading Enterprises' R&D Intensification Plan" in 2020, providing substantial tax benefits in key areas such as AI, next-generation communications, and future semiconductors. For example, it offers a tax credit on business income up to 15% of R&D expenditures and exempts import tariffs on machinery and equipment not produced domestically.

Additionally, Taiwan is promoting reshoring policies in response to global supply chain restructuring. Taiwanese companies that have invested in China for more than two years and then reshore can access a national development fund worth 500 billion Taiwan dollars (KRW 22.25 trillion) for loans and interest support. It also allows foreign worker employment rates up to 40% and provides preferential benefits related to infrastructure such as land, hydropower, and electricity.

Professor Kang said, "In fields like semiconductors that require large-scale investment and long-term R&D, it is essential for the government to provide detailed support by linking all areas such as human resources, R&D, and taxation." He added, "(Taiwan) is simultaneously developing domestic talent and attracting key overseas personnel for core technology human resources, which is something South Korea could consider in terms of policy utilization."

This content was produced with the assistance of AI translation services.