I. Policy Initiatives

1. Asia Silicon Valley 2.0 Development Plan

The Taiwan government began implementing the Asia Silicon Valley Development Plan in 2016. The plan has two themes: "Promoting IoT innovation and R&D" and "strengthening the innovative entrepreneurial ecosystem" and aims to integrate technology R&D capabilities, talents, capital, and markets worldwide to drive comprehensive transformation and upgrade of Taiwan's industries through the IoT.

2. Specific Promotion Strategies

1. The government created the Asian Silicon Valley Development Plan (ASVDP)-Major League IoT for promoting cross-disciplinary cooperation and forming industry standards in December 2016. The League has created Special Interest Groups (SIGs) in smart transportation, smart logistics, smart manufacturing, smart energy efficiency and environment monitoring, smart commerce, smart homes, smart farming, smart healthcare, and IoT information security. It organizes quarterly conferences and actively promotes cross-disciplinary exchanges between domestic industry, government, and academia on IoT applications.
2. To effectively promote the startup and IoT industries, the government created a demonstration site in Taoyuan, planned the Asia Silicon Valley Innovation and R&D Center, promoted smart industrial parks, and established the Hutoushan Innovation Hub, which is the first site in Taiwan created for the verification and validation of autonomous vehicles and IoT innovative technologies.

II. Overview of Industrial Development

1. Output Value

      The output value of Taiwan's IoT industry grew from NT$0.83 trillion in 2016 (accounts for 4.02% of the global output value) to NT$1.17 trillion in 2018, surpassing the NT$1 trillion mark for the first time and accounting for 4.24% of the global output value. It is expected to exceed NT$2 trillion by 2022 (4.84%), and its share of the total global output value is expected to reach 5% by 2025 (refer to Figure 1).

                      Figure 1 Global IoT business output and global market share 2016-2022

2. Industry Value Chains

The IoT industry can generally be divided into four layers (as shown in Figure 2): the sensor layer, the network layer, the platform layer, and the application layer. 

                                                                     Figure 2 IoT Industry Chain in Taiwan 

3. Industrial Clusters

The IoT industry spans the IT manufacturing industry, equipment manufacturing industry, and software and information service industry, which involves multiple fields of technology, including computers, communications, networks, computing, sensors, embedded systems, and microelectronics. Due to the wide range of fields involved in the IoT industry, the government may prioritize key clusters in Taoyuan and Kaohsiung in future development to facilitate balanced development in Southern and Northern Taiwan and local industries (refer to Figure 3).

                                             Figure 3 5G and AIoT Industrial Cluster

III. Potential Investment and Collaboration Opportunities in Taiwan

1. Utilizing Taiwan's Dominant Industries to Develop Core Applications in  the IoT Undustry

Taiwan has a complete semiconductor supply chain, an abundance of engineering talent for R&D and design, and is close to emerging markets in Asia. System application/assembly companies in the ICT industry are recognized by international brands for their manufacturing ability. The companies have recently expanded beyond conventional 3C (computer, communications, consumer electronics) into vertical IoT applications and system integration solutions. Through investing in Taiwan, foreign companies are able to increase the depth of their partnership with Taiwan's semiconductor and ICT industries, implement high-end parts and components/software design and development technologies, and search for module, subsystem, and application developers to work with, then jointly develop targeted vertical IoT application markets.

2. Bolster Incubation Resources to Strengthen Innovation and Application Capacity

The MOEA's Industrial Development Administration has set up incubation centers in Nangang in Taipei and Qianzhen in Kaohsiung to cultivate teams/ companies that specialize in emerging applications in the semiconductor and smart IoT industries. It has also established the IoT Service Hub in Taipei, Taichung, and Kaohsiung to provide cross-sector software and hardware technology integration, cloud platform connection, product design, market development, and data application resources to help IoT products with potential to attain mass production and enter the market.

3. Development of Key Sensor Technologies for the IoT in Niche Markets

The IoT framework consists of a sensor, network, and application layer. Sensor technologies play a crucial role in the sensor layer, not only involving the integration of hardware sensor components/circuit design and integration, but also software technologies for integrating multiple sensor signals and special algorithms for integrating AI and edge computing. Foreign companies can invest in optical/3D vision sensors, biomedical sensors, or gas sensors for environmental protection and food safety. They can partner with smart vehicle and smart manufacturing test sites in Taiwan to jointly develop key sensor technologies that meet demands particular to the markets of Taiwan and elsewhere in Asia.

4. Expand Business Opportunities in Unnovative IoT Applications to Respond to the Contactless Economy

The pandemic has had a tremendous worl dwide impact. The contactless economy has emerged as a new trend as people seek to control the spread of the pandemic. The demand for working from home, online meetings, digital courses, telemedicine, video and audio entertainment streaming, and digital financial payments has increased dramatically. There is also potential for growth in the smart manufacturing, robotic warehousing, and service robot market. By investing in Taiwan or working with Taiwanese businesses to explore business opportunities in the contactless economy, foreign companies can take advantage of Taiwan's ICT, machinery, and medical equipment industries and testing grounds to develop innovative IoT applications.

5. Reducing the Risks and Costs Derived from Changes in the Global Environment

Network information security and government control policy are important factors that will affect the development of the IoT industry at the place where the investment is made. Taiwan is deeply trusted by international corporations due to complete regulations that fully protecting their intellectual property rights and information security. Next, the Taiwanese government and companies are fully aware of trends in the global industry, and flexibly adjust their supply chains based on changes in the international economic and trade situation. Foreign companies that invest in Taiwan or partner with Taiwanese companies will be able to reduce the risks and costs brought by the U.S.-China trade and technology conflicts or global pandemics. 

IV. Investment Incentive Measures

1. Tax Incentives

The income tax rate for profit-seeking enterprises in Taiwan is 20%. To encourage foreign investments Taiwan, support industrial innovation, and promote industry-academia collaboration, Taiwan offers the following preferential taxes to foreign companies (Table 1):

Table 1 Preferential Taxes

2. Subsidies

(1) Global Innovation Partnership Initiatives Program

Foreign companies that complement Taiwan's industries are encouraged to invest in Taiwan’s R&D innovation and work with Taiwanese companies to jointly develop forward-looking technologies, key technologies, or integrated technologies beyond our current capacities. Such businesses could exert a key influence on Taiwanese industry by: (a) inspiring R&D work on industrial technologies as well as the establishment and development of supply chains; (b) improving R&D efficiency; (c) accelerating the timetable from R&D to production; and (d) contributing actively to the expansion of international markets. Foreign companies successful in endeavors relating to this program will be eligible, upon approval from the MOEA, for subsidies of up to 50% of total R&D expenditures.

(2) Pioneers for Innovation Leadership on Technology Program

The program aims to transform Taiwan into a high-tech R&D center and encourage leading international manufacturers to establish cutting-edge R&D bases in Taiwan, empowering their work in forward-looking technologies in Taiwan and connecting with Taiwan's supply chain, thereby creating a division of labor in the areas of research, co-creation, and development, with an eye to strengthening the technological competitiveness of Taiwan's leading industries and accelerating the formation of clusters in emerging industries. Program funding of up to 50% of total expenditures may be granted for any project that has been approved by the Ministry of Economic Affairs.

(3) Industrial Upgrading Innovation Platform Guidance Program

To guide industries in Taiwan to develop high-value products and encourage corporations to enter the high-end market to increase the industry's added value, the Industrial Development Administration, Ministry of Economic Affairs, and the Ministry of Science and Technology are promoting the "Taiwan Industry Innovation Platform Program". The program provides companies that have R&D teams in Taiwan with funding of up to 40%-50% of the project budget for themed R&D projects and funding of up to 40% for projects independently conducted by corporations.

(4) Promotion Plan for Smart Commercial Services in the Asian Silicon Valley Project

Subsidies were provided to the retail industry and integrated service industry in 2020. Subsidies of up to 50% of the total budget of each proposal (including subsidies and self-raised funds) are available to qualified applicants. Applicants may only file applications for projects within their own systems, and subsidies are capped at NT$3 million. For "large companies supporting small companies" or "cross-industry alliances," the maximum subsidy is limited to NT$5 million. Furthermore, self-raised funds may not be exceed paid-in capital by the company.

V. Examples of Successes Achieved by Foreign Companies

1. Digital Transformation and Cooperation

Starting from 2016, Microsoft has set up the IoT Innovation Center (2016), Artificial Intelligence R&D Center (2018), Microsoft Startup Accelerator (2019), and IoT Center of Excellence (2020). The Microsoft Startup Accelerator has cultivated 32 startup teams for cloud applications in the 3 years after its establishment in the Startup Terrace. 7 startups have become global partners of Microsoft.

2. Development of Smart Applications

1.          Merck, a major pharmaceuticals company in Germany, entered into a collaborative project with Instant NanoBiosensors Co., Ltd., a biomedicalstartup company in Taiwan, in 2020.
2.        The American company Synergies has helped the SME Wantlight Gas introduce the JarviX data analytics system and create an AI war room in response to the digital transformation trend of the post-pandemic era in 2021. It significantly reduced transportation costs by 25% and actively predicts customer demand to increase customer satisfaction rate.

3. Talent Development

1.         Google activated the Digital Talent Exploration Plan in 2020 to provide free digital training services, improve the quality and quantity of digital talents in Taiwan, and accelerate digital transformation in Taiwan.
2.          In January 2022, AWS launched Skills Guild to provide companies with customized cloud skill improvement plans and help them address the challenge of talent shortages in cloud technologies. AWS also worked with the Cloud Innovation School of Feng Chia University to incorporate education resources into the curriculum and help industries in Central Taiwan cultivate talent in cloud technologies.