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Lunch with MOEA Minister Wang Mei-hua

The ECCT hosted a Premium Event lunch featuring guest speaker Wang Mei-hua, Minister of the Ministry of Economic Affairs. At the event, the minister gave a presentation on the topic of resilient and secure supply chains in Taiwan and engaged in a Q&A session hosted by ECCT Chairman Giuseppe Izzo.

Minister Wang began by citing figures that demonstrate the resilience of Taiwan’s economy despite severe challenges in recent years in the wake of the coronavirus pandemic, Russia’s war on Ukraine and the subsequent disruption to global supply chains, rising inflation and interest rates. Taiwan’s exports exceeded US$430 billion in each of the past three years and are up more than 12% year-on-year in the first quarter of 2024. Minister Wang acknowledged that this performance was spurred by AI related demand given the fact that TSMC produces 100% of high-end semiconductors while Taiwanese companies manufacture 90% of high-end servers and parts used for AI functions. Other sectors of the economy are not quite as robust. Meanwhile, foreign direct investments in Taiwan from 2016-2023 reached US$82 billion while investments from returning overseas Taiwanese investors have exceeded US$30 billion annually since 2019, helped by MOEA incentives. Moreover, TSMC alone has invested an average of US$30 billion in Taiwan annually in recent years. European investors in the semiconductor supply chain have also continued to increase their investments in Taiwan to meet the growing demand from their customers. In addition, the minister noted that many Japanese SMEs in the semiconductor supply chain have been increasing their investments in Taiwan.

In terms of physical resilience, it is noteworthy how well prepared Taiwan was for the 7.2 magnitude earthquake on 3 April. According to the minister, where power supply was disrupted, it was restored within two hours of the quake. Water supplies were also restored without significant delays. Thanks to good SOPs, businesses were also well prepared. TSMC reportedly had 80% of its equipment back up and running within 10 hours of the quake.

In the offshore wind sector, the minister recognised the enormous investment contribution from European companies across the supply chain. Thanks to their efforts, 296 turbines with a capacity of 2.37GW are now feeding power into the grid with plans to add 1.5GW of capacity every year in future. Nevertheless, she acknowledged the pressure facing the industry now owing to sharply higher costs from supply chain disruptions, inflation and higher interest rates.

She set out some of the ways the ministry is trying to address the challenges. In the current Round 3.2 of development, the minister spoke about “optimising the 3.2 mechanism” by offering a one-year grid connection grace period for developers in Round 3.2, increasing flexibility to local content regulations, increasing the scale of single projects up to 1GW and providing flexibility of payments for performance bonds (50% to be paid when the signing contract and 50% paid when the project reaches financial close). To mitigate the risks of Round 3.1 projects, the ministry is offering commercial operating date flexibility and reducing uncertainty in administrative procedures. Moreover, a credit guarantee mechanism has been set up to reduce risks to developers of defaults by offtakers. Nevertheless, she admitted that it is extremely challenging to reduce the gap between the price developers are willing to accept and that off-takers are willing to pay for power.

While Europeans have invested heavily in Taiwan, recent years have seen a significant increase in investments by Taiwanese investors in Europe, albeit from a low base. According to the minister, Taiwanese investors have invested €8.79 billion in Europe in the past five years. The biggest single projects are TSMC’s investment in Germany and ProLogium’s investment in a solid state battery factory in France. Other large investments are by AUO and Delta.

Minister Wang concluded that efficient, reliable, and stable value makes Taiwan resilient and an ideal partner for European companies. She noted that France has a lot of AI start-ups, which is an example of an area where there is opportunity for business cooperation between Taiwan and Europe.