Taiwan will enforce the latest regulation sometime later in 2023 in a bid to uphold its authority in the global chip market.
Taiwan has passed new rules that allow local chip firms to turn 25% of their annual research and development expenses into tax credits to retain the island’s dominance in the semiconductor market.
“As the US, Japan, South Korea and the European Union (EU) are all offering massive incentives to build domestic supply chains, Taiwan should bolster the global competitiveness of its key industries,” Taiwan’s Ministry of Economic Affairs said in a statement on Saturday. “The new rules will help encourage Taiwanese companies to keep their roots here,” mentioned the statement.
The new incentives are expected to be brought into effect sometime in 2023. Chip companies in Taiwan can also claim tax credits on 5% of the annual costs of buying new equipment for advanced process technologies, the ministry said. Any credits earned, however, cannot exceed 50% of the total annual income taxes a firm owes.
Taiwan is the world’s leading manufacturer of advanced semiconductors, contributing to 92% of global production. Of this, its local semiconductor manufacturer, TSMC has contributed to 54% of the global market share and dominates the semiconductor chip market. This country also ranked second in the world for its investment budget in semiconductors.
Taiwan’s latest regulation bears resemblance to America’s Chips Act. South Korea, the US and China have been offering incentives for domestic chip production, in hopes of reducing heavy reliance on Taiwan for advanced semiconductors and avoiding future supply disruptions.
South Korea invested $6.62 billion, up 48% over the same period in 2020 and ranks second in global chip production. Seoul plans to finance $700,000 (950 billion won) to research and develop electrical and automotive chips from 2024 to 2030.