Asia Express - East Asian ICT
Taiwan Promulgates New Chips Act
August 07, 2023

Taiwan's Legislative Yuan has recently passed amendments of Article 10-2 of the Industrial Innovative Act, also known as the "New Taiwan Chips Act," as reported by the Economic Daily News on August 7. The Act is slated to come into effect today, introducing a comprehensive set of stipulations intended to promote R&D in the Taiwan semiconductor industry. According to the Act, companies that meet specific criteria will be eligible to apply for tax incentives. These criteria include reaching a minimum R&D expenditure of NT$6 billion (US$192.3million; US$1=NT$31.2), achieving a R&D intensity of 6% (calculated as R&D expenses as a percentage of net revenue), making qualified equipment purchases of advanced manufacturing processes amounting to no less than NT$10 billion (US$320.1 million), and maintaining an effective tax rate of 12% for the year 2023. The new Act is anticipated to benefit companies in the various industries such as semiconductors, EVs (Electric Vehicles), and 5G. Tax incentives include a 25% deduction for expenditures on forward-looking research and a 5% reduction for expenditures on new machinery or equipment for advanced manufacturing processes, which is claimed to have no upper limit. 

According to predictions from the Market Intelligence & Consulting Institute (MIC), the global semiconductor market is expected to experience a 4.1% year-on-year decline, reaching approximately US$556.6 billion in 2023. Additionally, the shipment value of the Taiwanese semiconductor industry is projected to reach NT$41.1 billion (US$1.32 billion) in the same year, representing a 6.9% year-on-year decrease. MIC, established in 1987, is a division of the Institute for Information Industry (III), a prominent government think tank and one of the leading IT research institutes in Taiwan.