EDITORIAL: Time to diversify beyond chip supply

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Investment in local manufacturing fixed assets rose 17.8% year-on-year to NT$483 billion ($16.33 billion) in the first quarter of the year, the highest level for the period, as Companies in the integrated circuit, chemical materials, base metals and machinery equipment industries continued to increase production capacity in a bid to meet semiconductor and automation needs, reported Friday the Ministry of Economic Affairs.

The electronic components sector contributed the most to the manufacturing industry, with its capital investment hitting a record high of NT$354.8 billion in the first quarter, accounting for 73.4 percent of total investment. In the last quarter, it rose 23.7% from a year earlier, as semiconductor companies pushed investment in advanced and mature technologies, while producers of memory ICs and integrated circuit substrates have increased capacity to meet end-market demand, the ministry said in a statement.

Local manufacturers also saw their combined revenue rise 15.3% year-on-year to NT$8.36 trillion last quarter, the best performance for the January-March period, driven by strong demand for used electronics. in 5G, high performance computing. , automotive electronics and cloud computing segments, as well as contributions from petrochemical, steel and machinery sales, the ministry said.

Indeed, the electronic components industry, comprised of electronic component suppliers and semiconductor producers, has seen a significant increase in capital investment over the past decade. For example, its investment amounted to NT$631.3 billion in 2011, or 58.7% of the manufacturing sector’s total, but this figure rose to NT$1.32 trillion last year, or 68.7% of the total, the ministry said.

As a major pillar of the manufacturing sector, the rise and fall of investment in the electronic components industry is straining the country’s private investment. This was particularly evident when semiconductor companies dramatically increased their investments and increased their overseas shipments in recent years. The country’s private investment and exports have increased accordingly and have firmly contributed to Taiwan’s GDP growth.

It is gratifying that the steady increase in capital investment by companies in the electronic components industry over the decades has allowed Taiwan to play a pivotal role in global supply chains, especially companies in the semiconductor industry. However, over-reliance on a few technology segments – including electronics, semiconductors, computers, and communications – has resulted in unbalanced development in Taiwan’s industrial landscape. It also poses a major risk to the local economy, as companies slow down their investments due to weakening sales, setbacks in foreign demand and fluctuations in the global economic cycle.

The Washington-based Foundation for Information Technology and Innovation released a report last week indicating that Taiwan’s market share in high-tech industries relative to its size is more than double the average. world, driven almost solely by the country’s dominance in computers, electronics and optical components. Still, the US think tank also noted Taiwan’s weakness in industries such as pharmaceuticals and automobiles, saying the country’s advanced industrial production was “the least diverse” of the countries in the study.

Everyone knows not to put all your eggs in one basket. South Korea, like Taiwan, is an expert in semiconductor manufacturing. However, it is also a powerhouse in the automotive, flat panel display, shipbuilding, and petrochemical industries. When some South Korean industries are in bad shape, others help stabilize the economy. One of Taiwan’s top priorities should be to create star industries other than semiconductors, so that the country is not dependent on a single industry to thrive on the world stage.

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