Taiwan’s Semiconductor Industry: What the State Did and Did Not

An‐Chi Tung

Review of Development Economics, 2001, vol. 5, issue 2, 266-288

Abstract: Relative to Korea, Taiwan’s semiconductor sector combines high value‐added, low risk, and an innovative mode of virtual integration, which is adapted to the new world of “fabless” and “chipless” operations, away from the older style of integrated device manufacturers. The rise of this owes much to the catalytic government role which overcomes market failures to launch institutions in each of the five stages of the industry’s evolution, introducing pre‐commercialization research, nurturing industrial clusters, providing venture capital, and spinning off world‐class, privately managed firms as well as attracting the interest of traditional business groups, without ever micro‐managing the development as bureaucratic state enterprises. The state operates in a manner which is both distinctively different from the practice of Brazil, India, Japan, Korea, or Singapore, and also apparently replicable elsewhere.

Date: 2001
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