Experts from key industries and government officials from Japan and Taiwan gathered at the 2024 Taiwan-Japan (Kyushu) Economic and Trade Forum to discuss strengthening collaboration in the semiconductor and innovation sectors.
According to statistics from the International Trade Administration of MOEA, bilateral trade between Taiwan and Japan in 2023 totaled US$75.8 billion, experiencing a slight decline of approximately 14% compared to the previous year. Despite this, Japan remains Taiwan's third-largest trading partner and a significant source of foreign investment and technology while Taiwan is Japan's fourth-largest trading partner.
Bilateral Trade Dynamics
Regarding trade relations between Taiwan and Japan, electronic components, information and audiovisual products, basic metals and their products, and machinery account for the lion's share of exports, totaling 73.7%. Conversely, imports are dominated by electronic components, machinery, chemicals, and basic metals and their products, constituting 63.7% of total imports.
Key discussions at the forum included Japan's continued expansion of semiconductor-related investments in Taiwan, aiming to enhance cooperation in semiconductor critical supplies like gallium arsenide(GaAs) and leveraging Japan's expertise in hydrogen energy applications and infrastructure.
Statistics from Mizuho Bank highlight a significant shift in Japanese investments in Taiwan, with semiconductor raw materials and equipment dominating the investment landscape in 2022, reaching a record high of USD$1.7 billion.
Semiconductor Synergy
Kyushu, Japan's "Silicon Island," boasts a robust semiconductor industry cluster, automotive, and stable, competitive green energy, making it a prime destination for overseas semiconductor investments. Kyushu's semiconductor industry has seen significant growth, with approximately 1,000 companies and offices clustered in the region. The semiconductor sector's output, including ICs, comprises about 49% of Japan's market share, with notable contributions from global enterprises such as Sony Semiconductor Manufacturing, Renesas Electronics, and Mitsubishi Electric.
The semiconductor industry in Kyushu has witnessed a resurgence since 2013, with IC production reaching a historic high of JPY9.964 trillion in 2022, a 15-year record, and semiconductor manufacturing equipment production reaching JPY5.137 trillion, also an all-time high, representing 20% of Japan's total semiconductor output.
To foster further collaboration, Memorandums of Understanding (MOUs) were signed between Kyushu and Taiwanese institutions, such as the Kyushu Semiconductor & Digital Innovation Association and the Industrial Technology Research Institute (ITRI) of Taiwan, to facilitate joint research and development initiatives.
Regional Development and Investment Incentives
Kumamoto has rolled out lucrative incentives, particularly aimed at attracting foreign enterprises. Notably, the semiconductor manufacturing sector stands to benefit substantially, with incentive support amounting to approximately 3-5% of the investment made by foreign companies, capped at JPY15 billion. The decision by TSMC to establish a presence in Kumamoto has sparked a flurry of activity, 48 enterprises have confirmed expansion plans, accompanied by a notable uptick in logistics warehouse facilities.
Investments by TSMC's Kumamoto plant and the forthcoming second plant spread across Kyushu and Yamaguchi Prefecture are anticipated to surpass JPY20 trillion over the next decade. This trend isn't confined to the semiconductor realm; it's also driving Taiwan's financial sector to establish footholds in Kyushu.
Switching gears, Taiwanese companies are diversifying their outward direct investments away from mainland China, surpassing investments in the ASEAN region in 2023. Factors contributing to this shift include rising investment costs, a decelerating Chinese economy, supply chain restructuring, and geopolitical risks.
A survey conducted at the Taiwan-Japan Investment Cooperation Forum 2023 shed light on future trends in Taiwan's semiconductor industry. The majority of respondents expressed optimism, with 68% indicating expansion plans. Back-end processes in semiconductor manufacturing are particularly poised for growth, with 59% of respondents foreseeing growth in front-end and back-end processes.
Taiwan's economic resilience, with a projected growth of 3.4% this year, outperforming the global average of 2.3%. Notably, Taiwan's exports have consistently ranked in the top three globally over the past three years, experiencing a growth rate exceeding 30% in the past five years, surpassing the global average of 25%. Furthermore, a survey by the American Chamber of Commerce in Taiwan (AmCham) indicated positive sentiment, with 81% expressing optimism about this year's economy and 92% intending to maintain or increase investments in Taiwan.
