Taipei, Jan. 19 (CNA) The emergence of new 5G internet and electric car supply chains offers Taiwan a chance to expand its economy beyond its traditional strength in semiconductor chips, while also setting up a broad network of complementary industries, according to Minister of Economic Affairs Wang Mei-hua (王美花).

In a recent interview with CNA, Wang said the government sees the two new industries as vital to Taiwan’s economic diversification, even as the domestic semiconductor industry earned record profits amid a tech boom driven by the COVID-19 pandemic.

Regarding the automotive industry, Wang said that the American carmaker Tesla sought out supply chain partners in Japan and South Korea, before settling on Taiwan for its ability to provide small-volume, high-variety manufacturing.

This industry has also created high demand for electronic components, a sector which has long been one of Taiwan’s strengths, Wang said, noting that the local companies Pegatron, Delta Electronics and Fukata Elec. & Mach. Co. have all become Tesla suppliers.

In addition, although Taiwan has struggled to break into the supply chains of traditional automakers like BMW and Mercedes-Benz, it is likely to have a major opportunity to do so as these companies enter the electric car market, she added.

At the same time, Wang predicted that the rise of 5G would break up the highly consolidated communications sector of the 4G era, in which a handful of giants like Ericsson, Nokia and Huawei dominated the global market.

“The 5G era, with its emphasis on providing high bandwidth, low latency services to high-density networks of users … will open up business opportunities for Taiwanese network communications firms, manufacturers of servers and terminal equipment and telecom operators,” she said.

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The growth in the 5G and electric car sectors will also spur demand in derivative markets for automotive chips and the Internet of things, further bolstering Taiwan’s semiconductor industry, Wang said.

Already in 2020, she said, the output value of Taiwan’s semiconductor industry reached NT$3 trillion, (US$35.69 billion), growing 20.7 percent over the previous year and 3.3 percent faster than the global semiconductor industry.

Wang suggested that these trends will reduce the country’s dependence on Taiwan Semiconductor Manufacturing Company (TSMC), whose economic dominance has earned it the nickname of Taiwan’s “sacred mountain and protector of the nation.”

In the future, the electric car and 5G industries, along with the broader semiconductor ecosystem, will each serve as important pillars of Taiwan’s economy, she said.

According to Wang, the economics ministry is supporting these goals by offering research and development grants to relevant industries and tax rebates to companies that invest in smart machinery.

For example, under the 2019 Statute for Industrial Innovation, firms that have invested NT$1 million-NT$1 billion in smart machinery are eligible for a one-off 5 percent corporate earnings tax deduction or a 3 percent deduction over three years, Wang said.

Although “the sun hasn’t yet set” on the current pandemic-driven economy, “we have to plan ahead,” Wang added.

(By Liang Pei-chih, Yang Shu-ching and Matthew Mazzetta)

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