Taiwan Business Brief – May 2024

Japanese Prime Minister Fumio Kishida (center), and TSMC CEO C.C. Wei (right) are briefed on developments at the company’s first fab in Japan, which opened in February. Production is scheduled to begin in the fourth quarter of this year.


GDP Forecasts Raised 

The Chung-Hua Institution for Economic Research (CIER) has raised its 2024 GDP growth outlook for Taiwan from 3.1% in January to 3.38%, citing optimism for recovery in the export sector. As global trade is expected to expand by 5.09% this year, CIER expects Taiwan’s exports to increase by 5.63%. The Taiwan Institute of Economic Research also raised its GDP forecast from 3.15% to 3.29%, projecting a 7.55% growth in exports and a 6.44% increase in imports in 2024. 

According to the Ministry of Economic Affairs (MOEA), total exports in March climbed by 4.3% year-over-year to reach US$40.26 billion. Within this figure, electronics exports accounted for US$12.45 billion, marking a significant 23.8% increase from the previous year. The United States remained Taiwan’s largest export destination with a total of US$11.75 billion, reflecting a 9.1% year-on-year rise.  

In March, the consumer price index (CPI) increased by 2.14% year-over-year, marking a slower pace than February’s 3.08%. The Directorate General of Budget, Accounting and Statistics (DGBAS) attributed February’s higher rate to this year’s early occurrence of the Lunar New Year. March’s figure of 1.88%, discounting the seasonal impact of the holiday, was the lowest since July 2023. Prices of core CPI components, excluding fruit, vegetables, and energy, rose by 2.12%, down from February’s 2.89%.  

Given the decelerating rise in prices, CIER anticipates that Taiwan’s private consumption will maintain a 2.09% growth rate in 2024. The institute also points to factors such as the April earthquake in Hualien and of its impact on tourism as contributors to subdued consumer spending. Additionally, CIER forecasts a decline of 0.2% in private investment this year. 

DGBAS reported that average year-end bonuses for 2024 (paid out between December 2023 and February 2024) reached NT$77,348 (US$2,397), equivalent to 1.69 months’ average salary. This figure represents a slight increase from the 1.68 months reported in 2023 and is the highest in nine years. The financial services sector recorded the highest level of bonuses, averaging 3.64 months, or NT$251,402, while the hospitality and catering sector had the lowest, with an average of 0.59 months. Regular average salaries, excluding overtime and bonuses, rose by 2.52% year-over-year to NT$45,917 during the same period.

Taiwan Launches Silicon Valley Plan                       

In February, the Executive Yuan approved a plan to transform Taoyuan, Hsinchu, and Miaoli into a “new Silicon Valley.” The initiative plans to build an industrial zone expected to create 140,000 jobs and contribute NT$6 trillion to the economy. The plan includes integrating the region’s infrastructure with semiconductor hubs in southern Tainan and Kaohsiung, creating a continuous tech corridor across western Taiwan. The initiative will be supported by the Taiwan Chip-based Industrial Innovation Program, which was approved by the National Science and Technology Council in 2023. 

Unlike their counterparts in Silicon Valley, Taiwan’s technology startups have faced major challenges in securing funding. In response, the U.S. National Science Foundation, with backing from Taiwan’s MOEA, is sponsoring a series of workshops fostering connections between Taiwanese and U.S. startups in fields such as biotechnology, semiconductors, AI, and quantum computing. 

SME Tax Incentive Program Expanded

A draft amendment proposed by the MOEA was approved to extend and expand tax reduction incentives for small- and medium-sized enterprises (SMEs). The deductions on corporate income tax are proposed to be extended to December 2033. To incentivize enterprises to employ older workers, tax deductions equal to up to 150% of the employee’s annual gross salary will be available to companies employing new hires aged 45 or older. 

The amendment is expected to generate significant economic benefits, including the creation of over 4,000 job openings and pay raises for 5,850 employees. Additionally, it is projected to bring NT$10 million into government coffers from increased employment, and an additional NT$7 million from pay raises. 

Changhua Wind Farm Opens

Taiwan’s Greater Changhua 1 and 2a offshore wind farms, built by Danish energy company Ørsted, commenced operations on April 25. With a combined capacity of 900 megawatts, these facilities are now the largest offshore wind farms in Asia. President Tsai Ing-wen, speaking at the inauguration ceremony at the Port of Taichung, said that besides hosting the largest wind farms in Asia, Taiwan has also developed its own offshore wind supply chain. Looking to the future, Tsai emphasized Taiwan’s commitment to sustainable development, declaring: “We will keep striving forward.” 

The opening of the wind farms came amid significant delays at the dedicated offshore wind Operation and Maintenance (O&M) harbor in Changhua County. Although construction of the port has been completed, it has yet to go into operation. A spokesperson for Copenhagen Infrastructure Partners, which is co-developing the port with the government, said the release of a tender for port services has been postponed for months due to “political reasons.” 

TSMC Confirms Japan, U.S. Expansions                    

Taiwan Semiconductor Manufacturing Co. (TSMC) on April 7 confirmed the location of its second plant in Japan. The facility, which was first announced in February, will be built in the same location as its first fab, in the town of Kikuyo, Kumamoto Prefecture. In a statement to Japanese media, TSMC said that construction is slated for the end of 2024, with production expected within two years.  

As part of an agreement with the U.S. Department of Commerce, TSMC will also invest a further US$25 billion to build a third plant in Arizona. The deal, which was possible due to the CHIPS and Science Act, will bring TSMC’s total investment in the United States to US$65 billion. The three Arizona plants will directly employ 6,000 high-tech workers and up to 20,000 construction workers during the building phase.