Rediscovering the Industrial Competitiveness of Taiwan

As of the end of 2022, Taiwan surpassed both South Korea and Japan in terms of gross domestic product (GDP) per capita, a first since South Korea caught up with and then surpassed Taiwan 19 years ago. Even as many economies have struggled in the wake of the pandemic and the Russian invasion of Ukraine, Taiwan achieved steadfast economic growth from 2020 through 2022. The stability of Taiwan’s growth has been all the more remarkable amid the rapid and volatile reconfiguration of global supply chains against the looming backdrop of escalating United States-China tensions. Like South Korea, Taiwan has a heavily export-oriented economy that is also centered chiefly on semiconductors. Taiwan is also similarly dependent on China for both its industries and its trade but has managed to maintain a stable trade balance thus far. Compared to South Korea, the Taiwanese economy is also a more favorable host for small and medium-sized enterprises (SMEs), which contribute significantly to the nation’s competitiveness. The Taiwanese semiconductor industry boasts an evenly balanced ecosystem of chip design, manufacturing, packaging, and testing. The nation’s multiple science parks, led by the one at Hsinchu, are connected by open innovation networks through which researchers can move freely. The political stability of Taiwan has also buttressed its competitive industries, providing effective visions for new industry growth and timely legislative support, notably the most recent law on semiconductors. Taiwan’s self-positioning in trade with China and policy centered on important manufacturing industries, including semiconductors, carries many lessons for South Korea. It is time for Korea to analyze Taiwan’s success and ascertain what makes its Taiwanese competitors so competitive and successful. Keywords: Taiwan, Taiwanese economy, exports, export competitiveness, manufacturing, manufacturing competitiveness, manufacturing innovation, innovation networks, open innovation, US-China conflict, economic security, national security, protectionism, semiconductors, chips, strategic sectors