Taiwan Business Brief – October 2023

Forty scholars visited the Cingshuei Geothermal Power Plant in Yilan in January as part of the 2023 Taiwan International Geothermal Forum.


A selection of these news stories are also covered in AmCham Taiwan’s Executive Sweet podcast, available on Apple PodcastsSpotify and online, here.

Taiwan’s Economic Slowdown Continues

Taiwan’s housing market is currently experiencing a downturn, with only 164,500 housing units sold or exchanged this year, according to the Ministry of the Interior. The figures show a year-on-year decline of 15%, marking a five-year low for the first half of the year. Adding to the growing signs of a potentially prolonged slump in the real estate market, the Consumer Confidence Index (CCI) in August recorded a drop after three consecutive months of gains. 

Taiwan’s Central Bank on September 21 announced that it would maintain the discount rate at 1.875% rather than adopt a rate hike, as some observers had speculated, to help stabilize economic and financial development. The rate on accommodations with collateral will remain unchanged at 2.25%, and the rate on accommodations without collateral at 4.125%. The Central Bank has increased rates by a total of 75 basis points since March last year to combat rising inflation.  

In addition, the Central Bank has projected that Taiwan’s consumer price index (CPI) will rise by 2.22% this year, with core inflation reaching 2.44%. CPI growth reached a seven-month year-on-year high in August at 2.52% due to rising fuel and food prices. Economists anticipate that unless the domestic CPI growth exceeds the 3% mark again, the Central Bank will likely maintain the current rates following its December meeting. 

The Central Bank has lowered its 2023 GDP growth forecast to 1.46% from its previous projection in June of 1.72%, but sees a rebound to 3.08% in 2004. Cathay Financial Holding also lowered its forecast from the previous 1.8% to 1.3%, citing weak exports, slowing capital equipment imports, and declining private investment.  

On the trade front, Taiwan’s exports have fallen for 12 consecutive months, experiencing a 7.3% drop from the same month last year and marking the sharpest such decline in nearly a decade. Attributing the slide in exports largely to falling demand from China, the Ministry of Finance said that a rebound in exports is unlikely before November.  

In another sign of a slumping economy, the Director General of Budget, Accounting and Statistics (DGBAS) stated that although regular wages adjusted for inflation had increased by 0.21% during the first seven months of this year over the same period in 2022, real total wages registered a negative growth of 0.67%. DGBAS said that lower bonus payments due to declining exports were a key reason for the drop, the first such decline in seven years. 

Reflecting that income pressure, the Ministry of Labor has proposed raising the minimum wage from NT$176 to NT$183 per hour and NT$26,400 to NT$27,470 per month beginning January 1, 2024, if approved by the Cabinet and Legislative Yuan.

Taiwanese Banks Lower Exposure in China       

Taiwanese banks are reducing their exposure in China over worries about economic conditions there, particularly the threat of a housing market collapse, according to a Bloomberg report. Participation rates in syndicated commercial loans made by Taiwan banks to borrowers in China have fallen from a high of 33% in 2014 to just 1.7% this year. Adding to fears of economic mismanagement by Beijing are geopolitical considerations as China ramps up its military threats against Taiwan.  

According to the report, Taiwanese banks have tightened credit approvals for Chinese customers and instead are expanding their loan business in Southeast Asia and Australia as part of a general de-risking trend.  

Geothermal Energy Shows Results

Taiwan’s first privately run geothermal power plant has generated over 38 million kWh of electricity between November 2022 and July this year. The Cingshuei Geothermal Power Plant, located in Datong Township, Yilan County, was developed by Yi Yuan Co., a joint venture of Fabulous Power Co. and Taiwan Cogeneration. The plant cost NT$765 million (US$27.52 million) to build.  

Yilan County Magistrate Lin Zi-mao said the plant’s completion marked an important milestone for Taiwan’s sustainable development efforts. The plant currently generates enough electricity to supply approximately 7,500 homes, or two-thirds of all households in the rural Datong and Sanxing townships.  

TSMC Progresses on Renewables Use

Taiwan Semiconductor Manufacturing Co. (TSMC) said it will reach its goal of operating entirely on renewable energy by 2040, 10 years earlier than it had originally anticipated.  

TSMC said that it aims to rely on renewable sources for 60% of its energy needs this year, up from the previous target of 40%. The company is currently the largest consumer of renewable energy in Taiwan, consuming 86.9% of the total renewable energy produced. TSMC made headlines in 2020 when it entered into the world’s biggest corporate power purchase agreement with Danish offshore wind company Ørsted, committing to purchase 100% of the electricity generated by Ørsted’s 920MW Greater Changhua 2b & 4 wind farms located off Taiwan’s west coast. 

Hon Hai, STMicro Aim to Make Chips in India

Taiwan’s Hon Hai Precision Industry Co., also known as Foxconn, is seeking Indian government support to build a semiconductor fab in India in cooperation with European multinational STMicroelectronics, Bloomberg reports. According to the news agency’s sources, the proposed project would make 40-nanometer chips for use in manufacturing cars, cameras, printers, and other products. A previous Hon Hai effort to launch a semiconductor venture in India was abandoned. 

Hon Hai has been highly successful in the ICT sector, especially as the leading assembler of Apple smartphones, but has no previous experience in semiconductors. Teaming up with STMicro would provide it with the necessary technology partner.  

The Indian government has been offering to help subsidize suitable chip-making projects as part of a drive to upgrade its industrial structure.