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Lai Ching-te, who<\/span> won Taiwan\u2019s presidential election last Saturday, will be facing a crossroads in the country\u2019s technology industry when he takes office in May.<\/p>\n Lai\u2019s administration will be the third term of Democratic Progressive Party rule in Taiwan, and he is widely expected to continue the work of his predecessor, Tsai Ing-wen, when it comes to supporting one of the country\u2019s biggest economic drivers and most valuable exports: its semiconductor industry. But Lai has spoken several times about Taiwan\u2019s chips without laying out specific policies, and he may find himself having to adapt as the industry becomes increasingly vulnerable to geopolitics.<\/p>\n Lai has also pledged to create 20,000 startup jobs<\/a> within five years, but has given little detail on how he plans to achieve that. Lai made impassioned comments about Taiwan\u2019s chip industry after his victory on Saturday that seem to make it clear that his administration\u2019s main tech focus will be on semiconductors. That makes sense, given their outsized importance to Taiwan and the world\u2019s chip supply chain. For example, TSMC alone accounts for 60% of the world\u2019s foundry capacity. Taiwan\u2019s semiconductor industry strengthens the global standing of the country, a small island with a population of 23 million. And notably, the well-being of Taiwan\u2019s economy is closely intertwined with its semiconductor industry\u2019s performance<\/a>.<\/p>\n In his acceptance speech Lai said he would \u201ccontinue to assist the development of the semiconductor industry,\u201d<\/a> adding that this would also benefit the global economy.<\/p>\n Lai\u2019s mention of Taiwan\u2019s chips was enough to cause a boost in chip stocks<\/a>. He notably highlighted TSMC\u2019s importance to the world, which Albright Stonebridge Group associate partner and technology policy lead Paul Triolo applauded.<\/p>\n \u201cThe big thing was that it was a focus of his speech, and I\u2019ve been arguing this for a long time, which is that Taiwan and TSMC are global assets,\u201d said Triolo.<\/p>\n There\u2019s precedence that Lai is willing to enact policies favorable to the semiconductor industry instead of just speaking in platitudes. While serving as mayor of Tainan in the south of Taiwan, Lai helped establish a TSMC plant in a science park<\/a>.<\/p>\n But what can Lai actually do for the semiconductor industry? Taiwan has provided TSMC and other companies with tax subsidies and other perks, but it\u2019s starting to lag behind other countries that provide more generous funding and tax breaks. SemiAnalysis chief analyst Dylan Patel said Lai is expected to continue providing chip companies with subsidies and favorable treatment under Taiwan\u2019s environmental protection laws. But at the same time, Taiwan is now playing catch-up with places like the European Union, Japan, South Korea and, of course, China. Patel notes that the U.S. has allocated $52 billion for its chip industry, while China gives semiconductors subsidies for buying tools and apartment buildings for their workers.<\/p>\n In Taiwan, there\u2019s the plus of a lower tax burden, but \u201cthat\u2019s about it,\u201d says Patel. \u201cThere\u2019s nothing like the U.S. and China have enacted and you\u2019re kind of fighting with your hand tied behind your back\u201d since Taiwan is a small country with a small economy.<\/p>\n Another barrier is that even though the semiconductor industry is important to Taiwan\u2019s economy, most people don\u2019t work in it. Lai has to keep them happy by spending on other domestic issues, especially since he didn\u2019t win by a strong mandate (Lai got 40% in a three-way race with the Kuomintang\u2019s Hou Yu-ih and the Taiwan People\u2019s Party\u2019s Ko Wen-je).<\/p>\n \u201cMost people in the nation are not employed in the semiconductor industry, even though it\u2019s the lifeblood of the economy,\u201d says Patel. \u201cSo obviously it\u2019s not going to be popular, especially for the sort of disgruntled people who gave the DPP that margin of victory. I think it\u2019s going to be really hard for them to throw serious money at the semiconductor industry.\u201d<\/p>\n Chris Miller, author of \u201cChip War: The Fight for the World\u2019s Most Critical Technology,\u201d also thinks that the Taiwanese government is not going to win the perks race.<\/p>\n \u201cIt\u2019s very hard to win a subsidy race with the Chinese government, so ideally you wouldn\u2019t go down that path. Taiwan has a much smaller economy, so it\u2019s even harder,\u201d he says. But one benefit Taiwan has is lower costs, not only because of wages, but also because of the way its infrastructure and ecosystem developed.<\/p>\n One way Lai\u2019s administration can help is fostering semiconductor talent. \u201cIt\u2019s a mix of education. Do you have the right programs in universities and then have the right internship pathways from university students into companies? And those are two things that governments can focus on,\u201d Miller says.<\/p>\n On the geopolitical front, Lai will deal with a lot when it comes to chips.<\/p>\n \u201cThe complication here with Taiwan semiconductors is you have the industry, global supply chain issue and then the geopolitical overlay of the U.S.-China conflict, U.S.-China technology competition, U.S.-China-Taiwan relations,\u201d says Triolo. \u201cTo understand all those things together is important. I think Lai is uniquely positioned here because of his background. He seems to really understand this more. He seems to have a very visceral grasp of that because he\u2019s been in positions before supporting the industry.\u201d<\/p>\n In a August 2023 interview with Bloomberg, Lai said he welcomed the expansion of TSMC<\/a>, which has fabs in Taiwan, the U.S. and China, in other countries, and wouldn\u2019t stop the chipmaker from building more facilities abroad if elected. His reason was that Taiwan\u2019s chip industry has a \u201cresponsibility to give back to the international community,\u201d but this can alleviate concerns about the international tech industry\u2019s reliance on TSMC\u2019s Taiwan facilities.<\/p>\n