Bloomberg News reports that Taiwan was expanding tax breaks for companies that intend to invest in technology research and production. This move comes as an attempt to strengthen the semiconductor market on the island, and it also aims at helping maintain its leadership position in the worldwide chip supply chain industry.
What will be the impact of Tax Breaks?
Following the move, the tech companies will be able to slash their income tax bills by at least a quarter, provided their spending or the expense they incur on research and development will hit a set level, as per the amendments approved on Thursday by the cabinet in Taiwan. Aside from the above, this tax break approval will also extend yet another 5% tax break to those companies that incur expenses on equipment that will also reach a certain set level. The tax break move aims to encourage companies to continue investing in Taiwan’s production and development sector.
Over the last few years, several counties have been ramping up support for their chip industries within the nation, thereby promising to offer tens of billions of dollars as subsidies to those companies that have enhanced their production in the markets and diversified from Taiwan to China. It was found that these promises nose-dived and have been leading to budding and mushrooming factories that are developed in Europe, Japan, and United States.
Impact of Geopolitical Tensions
Bloomberg News reports that with the escalation of geopolitical tensions between China and the United States, the businesses have prepared contingency plans in the event foreign companies can no longer function in China or there is a military confrontation around Taiwan. This escalating global concern related to the concentration of chip production has fostered more companies and countries for trying and moving output away from Taiwan or away from the Taiwan Semiconductor Manufacturing Co., Taiwan’s local chip giant.
Samsung Electronics Co. stated this week that the global technology industry is looking for alternative sources for advanced semiconductors due to surging political risks. Simultaneously, the Chief executive Officer of Apple Inc., Tim Cook, revealed in a meeting that preparations are on for sourcing chips from a plant under construction in the United States, Arizona. This is a major step for the company to reduce its dependence on Asian production.
However, Tim Cook perhaps referred to a factory that Taiwan Semiconductor Manufacturing Company will operate. It is expected that the plant will become operational in 2024. Also, this company is planning for the second unit in a US facility, which is underway. To counter these steps, the Taiwanese government is trying to tempt foreign investment in the domestic semiconductor market.
