TECHNOLOGY INDUSTRIES SUPPORT ECONOMIC GROWTH

Several factors, such as the uncertainties surrounding the global economy, high inflation levels, the invasion of Ukraine by Russia, and the slowing demand for consumer electronics have inevitably had a negative impact on Taiwan’s economy. The Directorate General of Budget, Accounting, and Statistics (DGBAS) has revised Taiwan’s GDP projections for 2022 and 2023 to 3.76% and 3.05%, respectively. Exports have started to feel pressure as volumes delivered negative growth of 5.3% this September, ending 26 consecutive months of YoY growth and negative growth is now expected every month through to the end of 2022. 

Nevertheless, export growth in 2022 as a whole will remain positive due to the strong performance posted over the first eight months. Electronic components and ICT products posted the fastest growth, especially the semiconductors category which has doubled over five years. As the engine of Taiwan’s economy and its exports, the continuing expansion of the semiconductor industry boosts demand for upstream and downstream supply chains.

Even though Taiwan plays a key role in the chip manufacturing sector, the rising geopolitical risk has brought massive uncertainty over the future. While the trade war between China and the US has become a tech war, several countries, such as the US and European Union, have accepted chip production as a national security issue and started to develop domestic supply chains. For instance, The Cip and Science Act announced in August 2022 prohibits sending the latest technology or US persons who could support chip manufacture to China. In the short term, Taiwan could benefit from order transfers, however, the trend to more localized chip manufacturing might mean that Taiwan leading position could one day come under pressure.