EDITORIAL: Boosting Taiwan’s chip designers – ???? Feedzy

The National Science and Technology Council (NSTC) on Friday launched a funding plan to help Taiwanese chip designers double their global market share within 10 years, making Taiwan the ultimate hub for the world’s chip design industry. The council said it earmarked NT$12 billion (US$375.4 million) for talent incubation through the buildup of infrastructure and equipment sourcing mainly for state-financed organizations for the first year.

The Taiwan Semiconductor Research Institute and the Industrial Technology Research Institute (ITRI) would be the major beneficiaries, according to the council’s initial arrangement. The council said it hoped the effect would spread to a variety of local industries, although it did not elaborate on how that would happen.

The budget for the remaining nine years is still undecided, NSTC Minister Wu Tsung-tsong (???) said. The goal is to help Taiwanese chip designers seize a 40 percent market share worldwide by 2033, from 18 percent last year. Compared with the more than 60 percent held by Taiwan’s foundry and chip packaging and testing companies, chip-designing houses “have abundant space for improvement,” Wu said.

However, the government agency’s latest plan goes against the expectations of local chip designers. In March, the nation’s major chip designers, led by MediaTek Inc, published a white paper which urged the government to formulate a state semiconductor strategy and comprehensive “chip act” that includes local chip designers and smaller-scale semiconductor companies, as they face competition from China.

Specifically, the chip designers hope they can apply for the tax incentives granted to local chipmakers under the nation’s “chip act.” The new amendments to the Statute for Industrial Innovation (??????) provide a legal basis for the government to provide chip companies with subsidies for the development of advanced technologies such as artificial intelligence, 5G and electric vehicles. Only a handful of semiconductor companies are eligible for a 25 percent tax break on their research and development spending.

Notably, the chip design sector is a technology-intensive business in which companies tend to allocate a much bigger portion of their revenue — about 20 percent — to research-and-development efforts, compared with up to 10 percent spent by chip manufacturers. Heavy R&D spending is considered one of the winning formulas to help chip designers stay ahead of their competitors.

Talent sufficiency also plays a crucial role for any industry including chip design to be successful. Taiwan’s chip designers have called on the government to relax rules on introducing skilled workers from overseas and offer more incentives for foreign students to join the local job market after graduation as local talent cultivation faces fundamental challenges with population reduction and an aging society.

The government tried to solve the talent shortage by loosening certain restrictions such as scrapping the requirement that an employee have two years’ work experience in a related field, and through offering a tax reduction for a longer period, according to new information from the Taiwan Employment Gold Card Office. However, lower salaries remain a pain point for local employers when it comes to attracting foreign workers with critical skills.

The NSTC’s proposal to uplift the global position of local chip designers is insufficient and not even practical as reflected in its initial plan. The government and the ITRI played an important role in creating Taiwan’s world-class semiconductor industry, but that was only in its budding stage more than 30 years ago. As the industry rapidly evolves, it might be more effective to help chip designers and other industries develop technologies and enlarge the talent pool through subsidy programs as many other countries are doing. “Less is more” could prove to be a better approach for the technology industry as well.