The last step has been reached in the process of approving Taiwan’s “CHIPS Act,” which is a set of benefits for the local chipmaking industry. Companies and people have until the end of May to tell Taiwan’s Ministry of Economic Affairs (MOEA) what they think about the planned changes to Article 10-2 of the Statute for Industrial Innovation, which is the official name of the law.
The main goal of the policy is to get manufacturers to spend more on high-value equipment and research and development. This would help Taiwanese manufacturers stay at the top of the global industrial chain and give Taiwan a competitive edge in key industries around the world.
After communicating with the Ministry of Finance (MOF), the MOEA came up with some requirements for companies that want to take advantage of the tax breaks. These include at least NT$10 billion will be spent on advanced process manufacturing tools; spending at least NT$6 billion (US$194.68 million) per year on research and development (R&D) and spending at least 6% of annual sales on R&D.
In 2021, Taiwanese businesses with more than 1,000 employees spent NT$496.36 billion on research and development, according to a survey by the National Science and Technology Council (NSTC). The survey also found that companies with more than 1,000 people spend 70% of their money on R&D.
Sources say that most tech companies in Taiwan should do much better than the MOEA minimum. To stop people from saying that these preferential policies were made just for TSMC, the regulation cited that a company can still get tax breaks if it invests in R&D for innovative applications of mature process technologies and meets the requirements, even if it doesn’t invest in world-leading technologies.
Taiwanese manufacturers put most of their money into improving the efficiency of their production lines, meeting current customer orders, increasing yield, and lowering costs. This helps them reach their business goals.
Hence, the MOEA and MOF couldn’t go against Taiwan’s existing economic structure and ecosystem when they came up with preferential tax policies to reward R&D. After getting all the relevant views, the MOEA and MOF will announce the policy together. In 2024, businesses that are eligible will be able to ask for tax breaks.
The CHIPS Act is an important piece of legislation for Taiwan and the global semiconductor industry as a whole. The act aims to increase Taiwan’s investment in research and development of advanced semiconductor technologies, to maintain its leading position as a key player in the global semiconductor supply chain.
Taiwan is home to TSMC (Taiwan Semiconductor Manufacturing Company), which is the world’s largest contract chipmaker, and other major semiconductor companies. The country is responsible for producing a significant portion of the world’s semiconductors and plays a crucial role in the supply chain for industries such as smartphones, automobiles, and consumer electronics.
However, the semiconductor industry is facing challenges such as a shortage of skilled workers and increased competition from other countries such as China and South Korea. The CHIPS Act aims to address these challenges by investing in research and development of advanced semiconductor technologies, as well as providing funding and incentives for companies to set up manufacturing facilities in Taiwan.
The act is also important for the U.S., as it recognises the strategic importance of the semiconductor industry for national security and economic competitiveness. The U.S. relies heavily on Taiwan for the supply of semiconductors, and the CHIPS Act provides a framework for increased collaboration and cooperation between the US and Taiwan in this critical area.
