Taiwan Business Brief – December 2022

President Tsai in October met with a group of executives from ASML, which plans to increase its investment in Taiwan.


Economy Shows Lackluster Growth

Taiwan’s economy remained sluggish for the second consecutive month in October, though an index by the National Development Council (NDC) gauging economic conditions rose slightly from September.

Taiwan’s industrial production index in October shrank by 3.56% year-on-year. The decrease comes as surging inflation and tightening monetary policy dampened consumer electronics demand, the Ministry of Economic Affairs (MOEA) said. However, the ministry still predicts the manufacturing sector will register positive growth in 2022.

On a brighter note, MOEA announced that Taiwan’s manufacturing output during Q3 rose 3.75% year-on-year to NT$4.36 trillion (US$139.88 billion). The boost was accredited to new mobile device launches, the effects of emerging technologies, and digital transformation opportunities. Chip production increased 43.83% to NT$784.6 billion, the highest ever for a single quarter.

MOEA has a less optimistic outlook for the first half of 2023, however, noting that the semiconductor industry appears to be losing steam. Chipmakers usually help boost other industries during downturns, according to the ministry, which also noted that traditional industries would continue to be burdened by global economic uncertainty.

Wage Increases Trail Inflation

The average annual income for salaried workers in Taiwan has risen to a seven-year high of NT$677,000 (US$21,689) this year, an increase of 3.1% year-on-year, online human resources platform 104 Job Bank reported in November.

The income level in the semiconductor sector topped the list at NT$969,000, followed by telecoms at NT$841,000, and electronics at NT$820,000.

Meanwhile, the average income in the financial sector is expected to decline 7.9% in 2022 due to the fallout of Covid-19 insurance payouts and decreasing turnover on the Taiwan Stock Exchange, which is down 31% year-on-year, 104 Job Bank said.

After adjustments for inflation, however, the real average income fell 0.07% from last year, according to the Directorate General of Budget, Accounting and Statistics (DGBAS). The consumer price index rose 3.04% in the first 10 months of 2022.

Major restaurant chains announced they would offer pay increases to attract and retain workers amid a post-pandemic labor shortage in the industry. Wowprime Corp., which operates several restaurant chains, said it would raise wages by 3-7.5% in 2023, lifting monthly income for full-time employees to NT$33,000-$34,400. Hi-Lai Foods Co., TTFB Co., and Louisa Professional Coffee also announced plans to raise wages next year.

U.S.-Taiwan Hold First Round of Trade Talks

The U.S. and Taiwan concluded the first round of physical meetings under the U.S.-Taiwan Initiative on 21st-Century Trade on November 8-9 in New York. The Taiwanese delegation, led by Office of Trade Negotiations (OTN) Deputy Trade Representative Yang Jen-ni, met with officials from the Office of the United States Trade Representative (USTR), led by Assistant United States Trade Representative Terry McCartin, as well as several other U.S. government agencies.

The two sides exchanged views on key concepts in several trade areas set out in the negotiating mandate for the Initiative. Negotiations aim to produce high-standard commitments and economically meaningful outcomes covering trade facilitation, good regulatory practices, anti-corruption, SMEs, agriculture, standards, digital trade, labor, environment, state-owned enterprises, and nonmarket policies and practices.

OTN described the results of the talks as extremely positive and productive. It said Taiwan hopes to arrange a second meeting with the aim of signing several interim agreements by the end of the year.

Nvidia Moves Hub to Taiwan

U.S. graphics chip designer Nvidia Corp. plans to relocate its Hong Kong-based logistics center to Taiwan, according to Minister of Economic Affairs Wang Mei-hua.

Before reaching an agreement, the government and Nvidia had been discussing tax incentives to facilitate the relocation since last year, Wang said in an interview with the Central News Agency.

Wang did not offer any specifics regarding the timeline for the transition or the expected tax arrangements for Nvidia.

ASML Expands Taiwan Investment

ASML Holding unveiled new investment plans in New Taipei City on October 16, which include building a factory in New Taipei to support international customers and the development of the semiconductor industry. This will be the largest investment in Taiwan by far by the Dutch-based company, the world’s leading supplier of equipment for the semiconductor industry. 

President Tsai met with ASML executives led by Chief Operations Officer Frederic Schneider-Maunoury on October 15. During the meeting, Tsai hailed the collaboration between ASML and Taiwan as “an ideal example in achieving excellence” and vowed to support the semiconductor sector “through policy measures as well as through the pursuit of maximum administrative efficiency,” according to a Presidential Office news release.

Taiwan Proposes Its Own CHIPS Act

An amendment to Article 10-2 of the Industrial Innovation Act, which has been described as “Taiwan’s CHIPS Act,” is expected to be vetted by the Legislative Yuan by the end of this year.

The draft bill would enable critical advanced technology companies with R&D expenditures reaching a certain threshold to enjoy a 25% corporate income tax deduction. The government emphasized that the plan is not limited to particular sectors or to Taiwanese companies.

TSMC Expands in U.S., Taiwan

TSMC announced plans to build a second semiconductor fab in Arizona, following the recent announcement by the Biden administration of financial incentives for semiconductor investment and manufacturing in the U.S. TSMC is currently constructing its first plant in the state, in a project involving investment of US$12 billion.

TSMC also announced plans for expansion domestically as well: a 28-nanometer fab in Kaohsiung, with production expected to start in 2024. Earlier, the company’s construction of a 7-nanometer plant in Kaohsiung was postponed because of weak demand for this type of chip. Warren Buffet’s Berkshire Hathaway on November 14 purchased US$4.1 billion of TSMC stock, helping boost the company’s stock price by 7.1% in one day. The deal attracted wide media attention, as Buffet in the past had been reluctant to invest heavily in the tech sector, saying it was not his area of expertise.