From the onset of the trade war in 2019 to the Covid19 outbreak in 2020, Taiwanese companies have been weighing the possibilities of creating a second manufacturing base. Until now, China had been playing an increasingly disproportionate role in Taiwan’s supply chain, hosting the majority of its manufacturing sites and attracting ever more investments.
Min-Hsin Kung, the Minister of Taiwan’s National Development Council, said in an interview that Taiwan was in need of a new growth driver, instead of placing all its bets on one single market. The government thus came up with the so-called “5+2 strategy”, under which five industrial sectors have become the focuses of Taiwan’s industrial policy: IoT, smart machinery, green energy, biomedicine and defense industry, According to Kung, the strategy puts more emphasis on system integration and applications.
“In the past, we concentrated on contract manufacturing components, paying no attention to the end products and their users”, said Kung. “As our focus switches to system integration and applications, we have to be clearly aware of what problems to solve, and for whom.”
The Minister said that the government’s New Southbound Policy, with its focus on Southeast Asia, was not merely an attempt of supply chain relocation or cost reduction. Instead, it aimed to establish the Taiwanese industry’s presence in the Southeast Asian market.
For big companies, that means that the government will take care of the relevant legal framework, investment pacts and other protective measures. For SMEs, following the footsteps of bigger companies can lead to systematic development, but most SMEs have limited resources to support such transitions. Therefore, the Taiwanese government has been in talks with its Southeast Asian counterparts to establish industrial parks, laying the foundations for industrial clusters.