Taiwan Business in Brief – March 2022

Taiwan Welcomes EU’s New Chip Act

Taiwan’s Ministry of Foreign Affairs welcomed the EU’s announcement on February 9 of The European Chips Act, citing its potential to boost Taiwan-EU bilateral investment. The proposed legislation seeks to increase the number of semiconductors manufactured in Europe by expanding cooperation with the world’s leading chipmakers. It will dedicate billions of euros to semiconductor manufacturing research and lift restrictions on government subsidies to attract semiconductor manufacturers to produce chips in the region. Up to 40-50% of factory construction could be subsidized.

In addition, the aims to reduce Europe’s reliance on Asian-made semiconductors by expanding the EU’s global market share of semiconductors from its current 9% to 20%. Emphasizing the importance of building Europe’s own semiconductor supply chain, Thierry Breton, the European Commissioner for Internal Market, said that if Taiwan were to become unable to export semiconductors, nearly every factory on earth would shut down within three weeks. Since European companies cannot manufacture the most cutting-edge chips, the measures are designed to entice companies like Taiwan’s TSMC to invest in the region. TSMC recently began discussions with the German government about potentially establishing a factory there.

Crisis in Ukraine Raises Fuel Prices

In the weeks prior to and following Russia’s invasion of Ukraine, crude oil prices have risen significantly, impacting markets worldwide. To stabilize domestic prices and fight inflation, Taiwan’s government reduced tariffs and implemented fuel-tax cuts, the second time since December that such measures were taken. As a result, fuel prices dropped slightly in early February, but rose again a few weeks later.

By the end of the month, Taiwan’s state-run oil supplier, CPC Corporation, had set the premium diesel price at NT$28 per liter, a NT$2 increase from a few weeks earlier. Meanwhile, 92 octane unleaded gasoline prices rose NT$1.5 within the month of February, exceeding NT$30 per liter. Compared to other crude oil markets, the price hikes could have been more substantial, but given Taiwan’s policy of keeping domestic fuel prices lower than those of its neighbors, CPC is expected to absorb some of the increasing costs.

Global natural gas prices have also been on the rise. Nevertheless, CPC kept natural gas prices unchanged throughout the month of February for residential users. This price freeze is also part of the government’s effort to combat rising inflationary pressures. In response to concerns about threats to Taiwan’s energy supply in the event of a war between Russia and Ukraine, CPC explained that Russia only supplies 10% of Taiwan’s natural gas and that the company has already secured Taiwan’s natural gas supply through the end of March.

Hon Hai Expands Global EV Capacity

Young Liu, chairman of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. (known outside of Taiwan as Foxconn), announced in February the recent progress on the company’s plans to expand its production of electric vehicles (EV) this year. He noted that Hon Hai will conclude a formal agreement with its partners in Indonesia in March and that construction on its Thailand plant will begin this year, with production slated to commence in 2024.

Meanwhile, Liu revealed that two new EV models will be rolled out on Hon Hai Tech Day later this year. He stated that mass production of the Endurance electric pickup truck, a collaboration between Hon Hai and U.S.-based electric light-duty pickup truck provider Lordstown Motors, will be reached in the third quarter of 2022 at the earliest. In November 2021, Hon Hai purchased the majority of Lordstown’s EV assembly plant in Ohio state for US$230 million.

Hon Hai aims to secure NT$20 billion (US$717 million) in sales of automotive components this year. As for the company’s semiconductor projects, year-on-year growth is expected to reach 10-20% in 2022.