Taiwanese Companies Come Back from China in Droves
The IMF recently said that Taiwan’s GDP per capita is expected to increase at least 6 percent to over US$36,000 this year and that of South Korea is estimated to edge up US$190 to US$34,990. South Korea surpassed Taiwan for the first time in 2003 and then the gap continued to widen. However, it has been reduced for the past five years and Taiwan is poised to catch up this year.
The South Korean economy contracted by 0.9 percent in 2020 and grew 4 percent in 2021, the highest growth rate since 6.8 percent in 2010. Although this is not poor, Taiwan fought COVID-19 even better. Specifically, the Taiwanese economy grew 3.11 percent in 2020 and 6.28 percent in 2021 after having shown annual growth rates of 1 percent to 4 percent in the 2010s. The 2025 GDPs per capita of South Korea and Taiwan are estimated at US$42,719 and US$42,801, respectively.
According to the Chung-hua Institution for Economic Research, this is because the South Korean economy is heavily reliant on conglomerates, which are advantageous in terms of economy of scale but slow in responding to economic contraction. “Meanwhile, Taiwan is benefiting from the ongoing global supply chain reshaping,” it said.
Taiwanese President Tsai Ing-wen has put emphasis on technology, semiconductor technology in particular, and implemented business-friendly policies since 2016. Various attractive incentives have been provided for years, leading to a highly successful reshoring. In 2019 and 2020, no less than 209 Taiwanese companies came back from China, investing 32 trillion won and creating more than 65,000 jobs in their home country. Foreign companies, including Microsoft and Intel, also increased their investments, exports from Taiwan increased 100 percent for the past 10 years, and its economic growth rate was the highest in the world in both 2019 and 2020.
In addition, the current status of the global semiconductor industry itself is much more favorable for Taiwan. Samsung Electronics is currently leading the global memory chip market, TSMC is doing so in non-memory, the latter market is about 150 percent of the former, and TSMC is way ahead of Samsung Electronics in the bigger market.
Although Samsung Electronics is trying to raise its share in the bigger market by increasing its investment, their market share gap is as large as more than 30 percent. In the fourth quarter of 2021, TSMC’s market share in terms of sales amounted to 52.1 percent while that of Samsung Electronics stood at 18.3 percent. These days, TSMC is increasing its investment in the automotive chip market as well while strengthening its partnership with the United States and Japan. The company increased its automotive chip output by 60 percent last year.
At present, the global top 10 fabless firms consist of six U.S. (Qualcomm, Nvidia, Broadcom, AMD, Marvell and Xilinx) and four Taiwanese (MediaTek, Novatek, Realtek and Himax). “The growth of the semiconductor industry of Taiwan is accelerating the growth of the Taiwanese economy as a whole,” said an industry source, adding, “Its leadership in the industry is likely to continue for long with the United States and Europe working more and more closely with Taiwanese semiconductor companies.”