Taiwan passes its own Chips Act with tax breaks for chip manufacturers

The Taiwan government has passed new chip legislation, allowing the island to allow local chip manufacturers to convert part of their annual research budget into tax credits. Taiwan wants to maintain its lead in the field of advanced chip production.

Under the new legislation, Taiwanese chip manufacturers can convert 25 percent of their R&D budget into tax credits, writes Bloomberg news agency. In addition, chip makers may apply for a tax credit for the purchase of advanced chip production equipment. The country wants to stimulate investments in new chip factories and chip research within Taiwan. The total credit may not exceed 50 percent of the business tax due per year.

Taiwan previously provided financial support to its domestic chip sector, but is stepping up efforts to ensure that the most advanced chip technologies ‘stay within Taiwan’. “Any company that is engaged in technological innovation in Taiwan and occupies a key position in the international supply chain can apply for this tax,” writes the Taiwanese Ministry of Economic Affairs.

Taiwan is doing this in response to support measures from several other countries and regions. “As the United States, Japan, South Korea and the European Union provide enormous incentives to promote the autonomy of key industries, Taiwan should strengthen its international competitive advantage in key industries,” the ministry said. The Taiwanese government previously warned that its chip sector could be affected by subsidy schemes from other countries.

Taiwanese chip manufacturer TSMC, currently the market leader, previously announced that it would build new advanced factories in the United States. However, TSMC also previously indicated that it is keeping its most advanced chip manufacturing processes within Taiwan; for example, the company is investing 31 billion euros in the construction of a 1nm chip factory on the island.

With its Chips Act, Taiwan follows the EU and the US, which are both working on their own support schemes for the semiconductor sector. These regions do this to become less dependent on other countries due to increasing geopolitical tensions. The European Chips Act, which provides billions in support for the European chip sector, was passed by EU member states in November, although it still has to be dealt with by the European Parliament this year. The American chip law, which also makes billions in subsidies available for chip production in the US, already came into effect last year. Countries such as South Korea and Japan are also working on initiatives to strengthen their chip sector.