Taiwanese lawmakers passed a new law that will give local companies doing business in the semiconductor industry a 25% tax break on their annual R&D spending. This is part of a plan to keep advanced semiconductor technology "at home" and keep the island's technological leadership.

Local government officials have repeatedly said that the latest advanced technology will remain in Taiwan, a similar point of view has been repeatedly expressed by the local TSMC and other island tech giants operating in this field. The authorities have already helped local chipmakers in the past, including with the creation of infrastructure, now the island intends to step up efforts to support the home semiconductor business.

The Taiwan Ministry of Economy said in a statement that the US, Japan and the European Union are already offering major incentives for setting up local production chains, so the island must maintain the competitiveness of its key industry segments.

Authorities from Washington to Seoul have been known to offer incentives for chip production in their territories, largely to reduce their heavy dependence on Taiwan, taking into account possible interruptions in the supply of chips from there in the future. To assuage such concerns, TSMC is building new factories in Japan and the US and is considering setting up an additional production site in Germany.

The new rules will come into force in 2023. Additionally, companies engaged in the island's semiconductor business will be able to count on annual tax incentives of 5% when purchasing new equipment for advanced manufacturing technologies. In other words, it will be Taiwan's version of the relatively recent US Chip Act. However, in aggregate, the amount of benefits cannot exceed 50% of the amount of all taxes payable annually.

Equipment purchases are the single largest expense in any new semiconductor manufacturing plant. For example, Dutch ASML Holding's EUV lithography machines cost approximately $200 million each.