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5 Reasons Why Taiwan's Semiconductor Industry Is so Successful

Hello, I am Vishal Agarwal, a student pursuing my Masters in Economics. I write blogs on Economics, Analytics and Finance.

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Taiwan is an island with a total population of approximately 23.6 million, which went through rapid industrialization and high economic growth rates between the 1960s and the 1990s. Such industrialization led to its development into a high-income economy thus being called the Four Asian Tigers, along with South Korea, Singapore, and Hong Kong.

In the world of semiconductors, Taiwan dominates the market for the manufacturing of semiconductors. Its contract manufacturers together accounted for more than 60% of total global foundry revenue last year, according to data by Taipei-based research firm TrendForce and count major technology firms such as Apple, Qualcomm, and Nvidia as its clients.

5-reasons-why-taiwans-semiconductor-industry-is-so-successful

The reasons driving this growth are:

First, Taiwan has a well-educated workforce. Nearly all of the island’s universities offer degrees in semiconductor engineering, and Taiwan’s technical schools are renowned for their training in microelectronics.

Second, Taiwan has a strong semiconductor industry ecosystem. The island is home to major semiconductor companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC), as well as a host of smaller companies that supply these larger players. This ecosystem of suppliers helps to drive down the cost of manufacturing and promote innovation.

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5-reasons-why-taiwans-semiconductor-industry-is-so-successful

Third, Taiwan has a robust policy environment that supports semiconductor manufacturing. The government has offered generous incentives to companies that locate or expand their operations in Taiwan and has worked to develop a robust supply chain for the industry.

Fourth, Taiwan has a well-developed infrastructure. The island is home to several leading-edge semiconductor fabrication plants, or fabs, which are among the most advanced in the world. These fabs are powered by a reliable supply of electricity and water and connected to a robust telecommunications infrastructure.

Finally, Taiwan enjoys a strong trade relationship with China. Nearly half of Taiwan’s semiconductor exports go to China, and the two countries have worked together to develop the Chinese semiconductor market. This close relationship has helped Taiwan to remain competitive in the face of rising labor costs and other challenges. These factors have helped make Taiwan a world leader in semiconductor manufacturing.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2022 Vishal Agarwal

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