Taiwan, or the Republic of China, is one of the most densely populated places on earth. Geographically, is an island is a little over one hundred million miles of the east coast of mainland China. It has an interesting history especially as the current political structure date back to the Chinese civil war after the second world war, when the People’s Republic of China took over the mainland and ousted the former government to Taiwan. There remain frictions today.
One of the world’s largest mobile device processor manufacturers, MediaTek, is based in Taiwan and their Chief Executive Officer M.K. Tsai has been talking to reporters about Taiwan government rules regarding domestic semiconductor companies investing and merging overseas, particularly in mainland China. Tsai considered these rules to be too strict and should be reconsidered: they forbid the investment of money into mainland China for research and development purposes as well as excuding mergers and acquisitions. The risk, he believes, is that Taiwan could fall behind in the technology race to develop and implement the best System-on-Chips if it is unable to invest into overseas regions in order to recruit talent and better access these markets. Some of MediaTek’s competitors, and here Tsai named both Qualcomm and Intel, have invested significant sums of money into mainland China and Taiwan’s ruling is stifling this part of the business. He said this on the matter: “China is such a huge market … if everyone else is going and you have to stay on the sidelines, you’re in a weaker position … You have to keep up with the technological advancements or you’ll become irrelevant.” Tsai also observed that other semiconductor businesses without these restrictions are already benefiting, such as the $37 billion purchase of Broadcom by Avago technologies and Intel buying Alterna for $16.7 billion.
However, against this it must be remembered that the semiconductor, or chip, industry is a mainstay of the Taiwanese economy and one of the world’s largest. Furthermore, (mainland) China is lagging Taiwan when it comes to chip technology but it is catching up. MediaTek’s business has gone from strength to strength and supplie a large number of smartphone and tablet manufacturers across the world, but has proven especially popular with Chinese manufacturers and those companies designing ‘phones to sell into China. Taiwan’s government must be nervously considering the implications of China overtaking Taiwan and how best to position the country, and the industry, for this.