We Are Not Solely Dependent On Semiconductor Chip Industry, Not Afflicted By “Dutch Disease”: Taiwan FM Su Jain-rong

Taiwan does not have the "Dutch disease," the country's Minister of Finance Su Jain-rong said, responding to criticism that the surge in the semiconductor chip and electronics sector is coming at the cost of other industries.

In economic parlance, the Dutch disease is a popular term to describe the relationship between the increase in the economic development of a specific sector and a decline in other sectors.

The term was first coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959.

The government supports a variety of sectors, not just the semiconductor industry, whose development "does not harm other sectors," the finance minister said.

Su's comments came after opposition lawmakers said that Taiwan has become overly reliant on a few tech firms while non-tech manufacturing sectors are declining.

Exports of integrated circuits, which include semiconductor chips, have grown by 20.9% year-on-year in 2021 and already account for more than 36% of all the country's exports.

Boosted by a global surge in demand for electronic components and semiconductor chips, Taiwan exports touched a record high of $446.45 billion in 2021.

In 2021, exports of Taiwan-made electronics components rose 26.9% from a year earlier to US$172.01 billion, with semiconductor outbound sales growing 27.1% from a year earlier to US$155.50 billion.

Exports of Taiwan's information and communications gadgets and audio and video devices also showed strong growth, climbing 24.8% from the previous year to US$61.35 billion.

While semiconductor chip and electronics manufacturing is the crown jewel of the Taiwanese economy, it also has resulted in significant challenges like extreme wage inequity. The wages of employees of electronic component manufacturers are estimated to be approximately 50% higher on average than those of the general manufacturing industry and 59% higher than those of the services sector.

The staggering success and stellar growth of the Taiwanese semiconductor and electronics industry have also led to a massive shortage of skilled workers, with chips companies offering wages that cannot be matched other sectors, already reeling under the impact of the pandemic.

While chip and electronic manufacturing contribute about 80% of the nation's total manufacturing output, other industries like chemicals, base metals, auto parts, and machine tools make up the remaining 20%. A decade or two earlier, the sectors' contributions were almost uniform.

Pointing out that President Tsai Ing-wen is seeking to establish a new agricultural model and a circular economy, Su said that while local semiconductor firms command global leadership positions, but small and medium-sized firms in other sectors also contribute significantly to GDP growth and employ many people.