CHAPTER 8 : FOREIGN INVESTMENT BY TAIWAN’S HIGHTECH SECTOR AND ITS IMPACT
Kuancheng Huang (National Yang Ming Chiao Tung University)
Abstract
The chapter focuses on the Taiwanese high-tech sector's investments in several geographic areas. Against the backdrop of global supply chain restructuring and emerging technology competition, it analyzes Taiwan's two representative industries: electronics manufacturing service (EMS) with a long production history in China, and the semiconductor foundry service with its well-established local cluster. Taiwanese EMS companies’ investments in Central and Eastern Europe have facilitated the establishment of regional centers and led to a substantial economic impact on exports and employment. Meanwhile, owing to the trade and technology war between the US and China, and the launch of Taiwan’s New South Bound Policy, the investments by Taiwan’s EMS companies in Southeast and South Asia have become very substantial. For the semiconductor industry, sometimes known as the Silicon Shield, the highly efficient local cluster will continue to grow. Some critical foreign investments have been made lately to address global concerns over chip shortages and economic security. Policy initiatives to better support the global expansion of Taiwanese high-tech companies and relate them to foreign relations development are discussed.
This chapter focuses on trade and investment involving Taiwan's high-tech sector in several geographic areas, complementing other chapters that focused on the contest for diplomatic recognition and on countries that have been targeted or courted by China. The studies have been made mainly from the point of view of the private sector by considering the business logic and decision-making processes of technology companies headquartered in Taiwan. Nonetheless, the major policies and actions of the governments of Taiwan, China, and the countries involved in a trade or investment relationship with Taiwan are examined. In addition, policy implications from the aspect of international relationship development are discussed whenever appropriate. Two representative high-tech subsectors of Taiwan are selected for the studies, focusing on regions or countries with substantial investments from Taiwan.
The first part of the chapter addresses the subsector of the EMS (Electronics Manufacturing Service) industry, for which Taiwanese companies have demonstrated their global significance. EMS providers offer a wide range of manufacturing and design services for electronic production, which may be complemented by additional value- added 2 activities, such as global supply chain management and after-sales customer support during the entire product life cycle. Of the top 40 global EMS or ODM (Original Design Manufacturing) companies listed in 2020, ten were Taiwanese. 1 The leading five are Foxconn/Hon Hai, Pegatron, Quanta, Compal, and Wistron, with a combined revenue accounting for more than 70% of the overall revenue of the top 40. Hon Hai’s revenue alone reached US$190 billion
The EMS industry has relied heavily on production sites in China, which account for more than 70% of production capacity.2 However, as part of a globalization strategy, many Taiwanese hi-tech companies began to invest in Central and Eastern Europe (CEE), including Foxconn's moves into the Czech Republic in 2000. Moreover, with the intensification of the US-China trade and technology war starting from 2018, many multinational enterprises (MNEs) have been trying to seek production sites outsides China to restructure their supply chains. As a result, some developing countries, such as Vietnam, Thailand and India, began to receive substantial investments from Taiwanese EMS companies and their upstream suppliers, giving these countries an indispensable future role in the EMS industry.
The second part of this chapter focuses on the semiconductor industry. In particular, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), as the top semiconductor foundry service provider, has achieved a dominating market share of 55%, supplying global customers including Apple, Nvidia, AMD, Qualcomm and Broadcom. TSMC is also one of the largest buyers of semiconductor materials and equipment. Although foreign investments by Taiwanese semiconductor companies were rare in the past, recent investments by TSMC in the US and Japan, and potential plans for expansion elsewhere, have drawn global attention, accentuated by the worldwide chip shortage.
Introduction
