"Semiconductors Are a Strategic Industry That Determines Taiwan’s Fate... Strengths in Electronic Components and Telecommunications Equipment"

Recently, we spoke with Heo Jae-cheol, Research Fellow at KIEP, about the current state and strengths of Taiwan’s economy. The following is a Q&A.
Q: Is it possible for Taiwan to achieve such rapid growth based solely on the semiconductor industry?
A: Looking at the industrial composition of Taiwan’s economy last year, the service sector accounted for about 59%, making it the largest share. Industry (manufacturing) made up about 40%, ranking second, while agriculture was minimal at around 1.5%. The manufacturing sector is growing the fastest, and its share of the overall economy is steadily increasing. Within manufacturing, Taiwan is also competitive in the production of electronic components and information and communications equipment, not just semiconductors.
Q: What are the strengths of Taiwan’s economy?
A: Taiwan boasts world-class competitiveness in semiconductor manufacturing and an economic structure based on skill-based small and medium-sized enterprises (SMEs). While there are large corporations like TSMC, the concentration of conglomerates is lower than in Korea or Japan, and the economy is characterized by a vibrant ecosystem of specialized firms in technology, components, and modules. As a result, Taiwan is quick to adapt to changes in the business environment and is highly responsive to global OEM demand.
Q: Is Taiwan’s materials, components, and equipment industry more advanced than Korea’s?
A: In the materials sector, Taiwan relies heavily on Japan, Korea, and the United States for chemical materials and specialty gases used in semiconductors. However, it is known for its world-class silicon wafers, functional polymers, and industrial fibers. In components, Taiwan is a global hub for semiconductor back-end processing, substrates, servers, and the ODM supply chain. As for equipment, Taiwan depends on imports for front-end processes but has a robust domestic ecosystem for back-end processes.
Q: Aside from TSMC, does Taiwan have conglomerates similar to Korea’s Samsung Group or Hyundai?
A: Such conglomerates do not exist in Taiwan. However, there are several large companies with global competitiveness in specialized fields beyond TSMC. For example, Advanced Semiconductor Engineering, Inc. (ASE) is the world’s largest semiconductor packaging and testing company, MediaTek Inc is a leading global fabless semiconductor design company, and Foxconn is known for assembling iPhones and ranks among the world’s top 10 manufacturers by revenue. There are also server and notebook manufacturers such as Quanta Computer, Wistron Corporation, Compal Electronics, and Pegatron Corporation. Major petrochemical companies like Formosa Plastics Group and global container shipping companies like Evergreen Marine Corporation are also present.
Q: How did Taiwan’s ruling and opposition parties come together in supporting businesses?
A: Taiwan’s political landscape is defined by competition between the Kuomintang (KMT), which advocates for engagement and cooperation with China, and the Democratic Progressive Party (DPP), which is strongly anti-China. While there is intense political confrontation, both sides recognize the importance of major companies for economic development. Thus, both parties are proactive in supporting businesses.
Q: It is said that Taiwan also distributed cash to its citizens.
A: To stabilize livelihoods and stimulate consumption, the government is distributing about 460,000 KRW (10,000 New Taiwan dollars) per person to all citizens. The opposition KMT was proactive in pushing this policy, while the ruling DPP and the government took a more cautious stance. In Taiwan’s political environment, where the opposition holds a majority, the KMT’s position prevailed. While many Taiwanese support the cash payments, there are also critical voices regarding fiscal soundness.
Q: Are prices in Taiwan lower and more stable than in Korea?
A: In Taiwan, basic living expenses such as food, transportation, and rent (outside Taipei) are relatively lower and more stable than in Korea. Labor and rental costs are also lower, and the prevalence of small-scale dining and well-developed service industries contribute to abundant supply and downward pressure on prices. Public utility fees are well managed. However, housing and living costs in Taipei are comparable to those in Seoul.
Q: Is it true that starting salaries for college graduates are low, around 1.5 million KRW?
A: Because basic living costs are lower than in Korea, there is less pressure for wage increases. The SME-centered economic structure also means there are relatively fewer high-paying entry-level jobs compared to Korea. Additionally, labor-management wage negotiations are less common. While starting salaries are low, wages tend to rise rapidly as experience is gained.
Q: Is the labor movement in Taiwan more moderate than in Korea?
A: Yes. Historically, Taiwan was under martial law from 1949 to 1987, and this political environment limited union activities. The SME-centered economic structure also leads to low unionization rates and fewer large-scale unions. As a result, union activities rarely become major social or political issues, and the connection between unions and political parties is weaker than in Korea. There is a tendency to focus more on workplace or company-specific issues rather than broader social concerns.
Q: Are the labor policies of Taiwan’s progressive government different from Korea’s?
A: In Taiwan, strikes are widely recognized as a legitimate means based on legal procedures, so there is little culture of pressuring unions with damage claims for industrial action. Therefore, there is no strong social movement to enact a separate 'Yellow Envelope Act' as in Korea. As previously mentioned, labor-management relations are not as confrontational as in Korea, and the frequency of strikes is relatively low, which is why issues like the Yellow Envelope Act have not become prominent.
Q: Taiwan was also a country pursuing nuclear phase-out, wasn’t it?
A: Taiwan, as an island with limited energy resources, began nuclear power generation in the early 1970s to ensure stable electricity supply. The Democratic Progressive Party (DPP), founded in 1986, criticized the pro-nuclear policy after the Chernobyl Nuclear Power Plant Accident. The DPP was able to build social support and a political base through its anti-nuclear stance. Anti-nuclear policy and independence from China are the two main pillars of the DPP’s ideology. Taiwan continues to maintain a nuclear phase-out policy while expanding green energy production.
Q: What should Korea do to surpass Taiwan again?
A: Taiwan defines the semiconductor industry as a strategic sector that determines the nation’s fate—a 'silicon shield'—and implements strong support policies. Korea also needs active government support and a system in which the public, private, and academic sectors cooperate. Korea and Taiwan should pursue cooperation. As trade with Taiwan expands, Korea’s export linkage in processors, controllers, and specialized system semiconductors is rapidly increasing, strengthening Korea’s role in Taiwan’s supply chain. It is necessary to further enhance mutual cooperation through joint investment in packaging technology, cross-licensing agreements, and collaborative R&D for next-generation manufacturing.
Son Sung-jin, Editorial Director