【2024 Semiconductor Forum】Roundtable Forum 3: Japan-Taiwan Economic Security and Next-Generation Forum

Roundtable Forum 3 / Keynote Speakers (phote: the DSET)

During the morning keynote address, Professor Suzuki Kazuto spoke about economic security, emphasizing that we have entered a geopolitical era. He noted that democratic allies should unite to strengthen economic security. The U.S., Japan, and Taiwan should collaborate to enhance the semiconductor supply chain. Professor Yang Guang-lei discussed the evolution of the semiconductor industry in Japan and Taiwan, analyzing each country’s strengths and supporting the idea of U.S.-Japan-Taiwan collaboration. The key question raised was how the younger generation of researchers views issues of semiconductor and economic security.

Professor Kawai Daisuke shared his perspective, stating that despite no formal diplomatic relations between Japan and Taiwan, they can still form a semiconductor alliance to integrate their strengths and establish a more flexible cooperation framework. He found TSMC’s experience building a plant in Kumamoto impressive, suggesting that importing Taiwanese semiconductor expertise could help revitalize Japan’s semiconductor industry. To achieve deeper Japan-Taiwan cooperation, Professor Kawai proposed five policy recommendations:

  1. Establish a joint committee to facilitate high-level discussions on semiconductor policies between Japan and Taiwan, allowing for coordinated policies and prompt problem-solving.
  2. Create a special economic zone or technology park in Japan with incentives to attract Taiwanese semiconductor companies.
  3. Draft a comprehensive bilateral agreement covering intellectual property rights, data security, and technology transfer, promoting a secure environment for cooperation.
  4. Launch a joint R&D fund to support advanced semiconductor processes and encourage Japan-Taiwan collaboration.
  5. Establish a bilateral dialogue mechanism at the government level to coordinate policies and solve issues in real-time.

Professor Kawai indicated that implementing these measures and harnessing the power of economic cooperation could open a new chapter in Japan-Taiwan relations, fostering trust, mutual respect, and a shared commitment to innovation and progress.

Challenges and Risks in Japan-Taiwan Cooperation

What risks and challenges might arise beyond the potential and future of Japan-Taiwan cooperation?

Based on his years of observation in Japan, researcher Chang Chih-cheng noted that the Japanese government has recently focused heavily on national and economic security, hoping to rebuild its semiconductor industry. Consequently, it provided substantial subsidies to TSMC. While both Japan and Taiwan benefit from these initiatives regarding economic growth and geopolitical resilience, this collaboration could lead to conflicts of interest. From Taiwan’s perspective, if increased semiconductor industry investment abroad, thanks to Japanese subsidies, reduces domestic investment, this could create competition between Japan and Taiwan. Conversely, many in Japan are concerned about high government subsidies for foreign companies and worry about Japan becoming a mere processing and export zone. If foreign investment ceases, it could harm the local economy, raising concerns about Japan’s ability to establish a sustainable industrial ecosystem.

Chang Chih-cheng also highlighted that Taiwan is not recognized internationally as an independent country, and Japan has no diplomatic relations with it. This raises important questions about whether Taiwan can demand certain resources from Japan in exchange for sharing key interests in economic and national security, aiming for a win-win scenario. Additionally, can Taiwan’s government participate in negotiations between Japan’s government and TSMC? These are crucial topics to explore further.

Taiwan’s Economic Security and Semiconductor Strategy

Due to intensifying U.S.-China competition, with the U.S. imposing semiconductor restrictions on China, Taiwan has faced China’s threats for years, making economic security a major concern. Researcher Min-yen Chiang explained Taiwan’s legal framework for managing foreign investment and Taiwan’s outbound investment. Taiwan differentiates between general foreign investment and Chinese investment with distinct review standards. Outbound investment reviews are also divided into three categories: China, Hong Kong and Macau, and general foreign countries. To prevent outbound investment from harming Taiwan’s economic interests and national security, all investments undergo government scrutiny, regardless of amount. Taiwan has had this system for 30 years, predating similar U.S. legislation. Additionally, Taiwan has an export licensing system with different review agencies for various products. In 2022, Taiwan added core technology regulations to address national security concerns, requiring strict reviews for technology transfers or licenses to China, ensuring compliance with international agreements. Min-yen Chiang used TSMC’s investment cases in China, Germany, Japan, and the U.S. to illustrate these review processes.

Why is economic security crucial? Min-yen Chiang argued that without Taiwan’s global semiconductor supply chain system, current technology innovation and growth wouldn’t exist. Furthermore, without trust among democratic alliances, TSMC wouldn’t be able to serve global clients or contribute to the global supply chain. He stressed that in the face of China’s economic coercion, the global democratic alliance should implement strategies to protect commerce, stimulate economic growth, and hold China accountable. Finally, Min-yen Chiang urged for a closer defense collaboration to deter China through global coordination, preventing instability in the Taiwan Strait and East Asia, otherwise jeopardizing the thriving semiconductor ecosystem.

Q&A and Future Collaboration

After the discussions, a Q&A session followed. Executive Director Liu Chi-feng opened with questions about the success factors for Japan-Taiwan cooperation. Could this model be replicated in TSMC’s outbound investment cases? How can Taiwan maintain its competitive edge if Japan’s semiconductor manufacturing capacity improves due to Japan-Taiwan collaboration? Will it lose the protective advantage of its “silicon shield”? Beyond Japan-Taiwan cooperation, could political and business cooperation with the U.S. extend from semiconductors to other sectors?

Professor Igata Akira responded with three key elements: protection, promotion, and partnership. He emphasized the importance of protecting semiconductor technology, suggesting security background checks for sensitive information holders. Furthermore, when promoting cooperation, he emphasized raising public awareness to avoid misinformation and ensure public support. In terms of partnership, he suggested establishing a coordination mechanism, but warned against having too many disparate mechanisms that might lead to inconsistent policies within the same country.

Min-yen Chiang responded that both parties could clarify their strategic goals through dialogue. While Taiwan’s public sector often finds it challenging to manage geopolitical risks, it benefits from a vibrant civil society with many NGOs and new policy think tanks. This enables strategic discussions within Taiwanese society before connecting with international partners. He suggested more consistency in global policy measures and commitments from all governments to drive meaningful change.

Researcher Chang Chih-cheng shared insights from his time working in Japanese policy think tanks, noting that Japanese policymakers often create strategic national frameworks. Taiwan, however, struggles with developing comprehensive national strategies, especially in response to the shift to a geopolitical technology era. He acknowledged Professor Igata’s point about misinformation manipulation and highlighted the challenge Taiwan faces due to China’s cognitive warfare. Nonetheless, the longstanding trust and shared values between Japan and Taiwan lay the foundation for fruitful bilateral cooperation. He noted that Korea could be part of this ecosystem beyond Japan and Taiwan, maintaining the semiconductor supply chain and ecosystem centered in the region.

Professor Kawai also agreed with Chang Chih-cheng’s view, highlighting the mutual trust and cultural similarities between Japan and Taiwan, as well as Taiwan’s significant geographical importance to Japan. He noted that even if China blocks Taiwan from joining international platforms, Japan can play an intermediary role to assist Taiwan.

Further discussions covered various topics, such as talent development in the semiconductor industry and environmental issues related to the semiconductor industry, demonstrating the roundtable’s diverse content.

In conclusion, DSET’s Director Wen-ling Tu expressed hope that this international forum could be the first step toward deeper dialogue and collaboration among countries.

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