Taiwan Eyes Bigger R&D Tax Break for Chip Makers

Taiwan’s government on Thursday proposed a bigger tax break for research and development for technology companies as it aims to provide more support to its vital semiconductor industry and stay competitive internationally.

The proposal comes as an amendment to the industrialization law introduced by the economy ministry, which increases the corporate tax break to 25% from 15%. The amendment needs parliamentary approval to be passed into law.

The economy ministry said it is important for Taiwan to remain competitive as countries such as the US, Japan and South Korea increase tax breaks and subsidies for their chip industries after major disruptions to global supply chains caused by the COVID-19 pandemic.

“As we face new competitive pressures brought about by the restructuring of the global supply chain, the future development of Taiwan’s industry is at risk,” the ministry said in a statement.

Taiwan is home to the world’s largest contract manufacturer TSMC, as well as hundreds of other firms that form a complex and long-established supply chain, from chip design houses to packaging and testing companies.

Taipei has promised to keep its most advanced chip production at home, but the government has also supported some companies such as TSMC to build new factories in the US and Japan, both of which support Taiwan overseas.

After the global chip shortage, governments around the world have been encouraging to bring chip production onshore.

In August, US President Joe Biden signed the $52.7 billion (roughly Rs. 4,30,400) Chips and Science Act to reduce its reliance on chip makers in Taiwan and South Korea and increase competition -US and China.

The law, which authorizes subsidies for US semiconductor manufacturing and research, has already spurred massive investment on US soil.

The European Commission this year also unveiled a EUR 45 billion (approx. Rs. 3,80,100 crore) chip plan.

© Thomson Reuters 2022