Taiwan Business Brief – November 2022

Hon Hai founder Terry Gou drives a Foxconn EV Model C into its annual Tech Day event in Taipei on October 18, during which two new models were unveiled.


Further Signs of Slowdown

Taiwan’s gross domestic product (GDP) grew 4.1% year-on-year in the third quarter of 2022, according to the Directorate-General of Budget, Accounting, and Statistics (DGBAS). The outcome, though a healthy growth rate, was slightly lower than the 4.71% forecast made in August. DGBAS attributed the slowdown to decreasing global demand affecting Taiwan’s exports.

Taiwan export orders in September decreased by 5.29% year-on-year, while imports fell by 2.37% compared to the same month the year prior, according to the Taiwan Institute of Economic Research (TIER).

The Consumer Price Index (CPI), meanwhile, increased by 2.75% year-on-year in September, according to DGBAS. Core CPI, which excludes fruits, vegetables, and energy, rose by 2.79% compared to the same month the year before. Although September’s CPI and core CPI were higher than August’s, DGBAS said inflation had reached its peak, contrary to public concern.

Central Bank data showed that Taiwan’s forex reserves at the end of September had fallen by almost US$4.4 billion in a month to about US$541 billion. The Central Bank said it has been continuing its efforts to cap a decrease in the Taiwan dollar against the U.S. dollar during an aggressive rate hike cycle by the Federal Reserve.

Taiwan expects to face more severe economic challenges in 2023, Central Bank Governor Yang Chin-long said in a speech on October 19. He noted that rising global interest rates have had a spillover effect on small, open economies like Taiwan. Yang additionally cited the Russia-Ukraine war, growing U.S.-China tensions, and lingering COVID-related supply chain disruptions, as well as high inflation, as challenges impacting the economy.

Taiwan Per Capita GDP Strongest in Region

The International Monetary Fund (IMF) in October projected Taiwan’s per capita GDP to become the highest in East Asia this year. TIER analysts attributed Taiwan’s strong GDP per capita growth to the robust domestic semiconductor industry and an overall resilient domestic economy, despite increasing global turbulence.

According to the IMF, Taiwan’s GDP growth for 2022 will likely be 3.3%, higher than the level projected for other major Asia economies, including China, Japan, Singapore, and South Korea. The organization projects Taiwan’s per capita GDP to increase from US$33,140 (around NT$1 million) to around US$35,510 in 2022, marking the first time the island would surpass Japan in GDP per capita.

EVA Launches Taipei-Milan Flight

EVA Airways on October 25 launched the maiden flight of its new twice-a-week Taipei-Milan route, with the opening of a four-times-a-week route to Munich scheduled for November 3. Milan and Munich represent EVA’s fifth and sixth European destinations.

Inauguration of the Taipei-Milan route was originally set for February 2020 but was postponed due to COVID-19. The launch symbolizes post-pandemic recovery for the air travel market, EVA Chairman Steve Lin said in a news conference.

Hon Hai Unveils New EV Prototypes

Hon Hai Precision Industry Co. (also known as Foxconn) on October 18 unveiled two new electric vehicle (EV) prototypes. The company plans to start producing the Model V pick-up truck and Model B crossover will in Taiwan, the U.S., and Thailand starting in 2024.

Hon Hai is expanding its global EV footprint and plans to partner with local companies to deploy new manufacturing capacity in India and Indonesia as part of its “build, operate, and localize” strategy, according to its chairman, Young Liu.

Digital Competitiveness Ranking Drops

Taiwan this year fell from eighth to 11th place out of 63 major economies in the World Digital Competitiveness Ranking conducted by the Swiss-based International Institute for Management Development (IMD). The rankings are based on several factors organized within three categories: knowledge, technology, and future readiness.

Taiwan ranked first in total R&D personnel per capita, agility of companies, mobile broadband subscribers, and IT and media stock market capitalization. However, it ranked relatively low in public expenditure on education, female researchers, pupil-teacher ratio in tertiary education, and scientific and technical employment.

Minister of Digital Affairs Audrey Tang said the rankings would help better inform policymaking, particularly in strengthening public-private cooperation opportunities. Taiwan’s National Development Council stated it would take the strengths and weaknesses of Taiwan’s digital transformation into account as guidance for future government policies.

U.S. Further Restricts Chip Exports to China

The U.S. government on October 7 announced new measures restricting the export of advanced semiconductors and chipmaking equipment to China and prohibiting Americans from supporting the development or production of semiconductors at certain China-based manufacturing facilities. The measures are part of the Biden administration’s effort to protect U.S. national security and foreign policy interests by preventing high-end chips from being acquired by China, according to the U.S. Department of Commerce’s Bureau of Industry and Security.

Economics Minister Wang Mei-hua downplayed the impact of the restrictions on Taiwanese companies, emphasizing that the advanced chips targeted by the U.S. only take up a small percentage of production.

Speaking at the Taiwan Semiconductor Industry Association’s annual meeting, Taiwan Semiconductor Manufacturing Co. (TSMC) Chairman Mark Liu referred to the geopolitical tensions that are bringing serious challenges to the semiconductor industry worldwide. He urged industry, government, and academia to collaborate on industrial policies to maintain and secure Taiwan’s advantage in the industry.

Taiwan Joins Privacy, Data Declaration

The National Development Council on October 12 announced that Taiwan had joined the Joint Declaration on privacy and the protection of personal data, an EU-led initiative aimed at promoting rigorous data protection and privacy standards. The declaration was signed in February by the EU, Australia, Comoros, India, Japan, Mauritius, New Zealand, the Republic of Korea, Singapore, and Sri Lanka. The Philippines, Thailand, and Taiwan subsequently endorsed it in October.

The signatories “commit to foster and further develop international policy discussions and cooperation regarding data protection and cross-border data flows with trust, both bilaterally and multilaterally” to promote their shared vision and increase convergence amongst their data protection frameworks, according to the EU’s European External Action Service (EEAS).