This is a countermeasure to the American chip law that gives tax breaks to companies that conduct research and development activities in the US
A few days ago we reported to you that TSMC is changing its decision and instead of 5 nm factories it will build more advanced factories in the USA. Now, as Europe, Japan and the U.S. entice chipmakers to produce on their soil with incentives and tax breaks in an attempt to disrupt Taiwan and South Korea’s monopoly on top chip manufacturing, Taiwan is fighting back. Taiwan’s government on Thursday approved tax breaks for high-tech companies conducting research, development and production operations in the country.
High-tech companies that invest huge sums in R&D in Taiwan will be able to reduce their income payments by 25%. Also, the government will give 5% tax breaks to companies that purchase equipment for advanced production.
Through the new tax breaks, the Taiwanese government hopes to stop the departure of companies like TSMC that do both R&D and manufacturing in Taiwan (so they will get a 30% tax break). It also makes Taiwan more attractive to companies like Alchip, which designs chips in Taiwan (which should get a 25% tax break if it invests enough in R&D), and Micron, which operates two large factories full of expensive wafer-making equipment (which should get a tax cut of 5%).
When Maurice Chang founded TSMC in 1987, he received $100 million from the Taiwanese government in exchange for a 49% stake. Other factories that followed in Chang’s footsteps also received money from the government that understood the importance of the semiconductor industry in general and chip manufacturing in particular. It was actually Taiwan’s analogy to the microchip law that was implemented about 35 years before the US. Apparently, Taiwan’s government feels confident about the country’s semiconductor manufacturing industry, but wants to lure more scientists and engineers to bolster it with innovations.
The new tax breaks make Taiwan more enticing for high-tech giants like AMD, Intel and Nvidia, which invest huge sums in R&D and have development centers in India because of the low costs.