China’s roadmap to develop an internal supply chain specifically to aid its high-tech manufacturing sector has been flagged as a serious threat by Taiwan enterprises. Highly placed sources from Taiwan’s Ministry of Economic Affairs stated that the country was highly concerned about the latest developments as China’s efforts towards fortifying its internal supply chain is to reduce its dependence on imported parts from Taiwan.
China’s dependence on Taiwan has been steadily decreasing already. The plan which was made public in May is a move to foster a manufacturing revolution over the next 10 years. At the core of this revolution lies smart technologies. Labeled as ‘Made in China 2015’ China’s plan aims to foster its high-tech sector inclusive of information technology and intensely focus on the semiconductor segment. This will definitely have an untowardly impact on Taiwan’s already dwindling exports to China. The small island nation’s exports according to its Bureau of Foreign Trade (BOFT) to China is now said to be around 7.76% in 2104 down from 11.3% in 2005.
Taiwan’s rival and China’s ally South Korea is also facing a similar situation. The downward slide in the share of exports is not as phenomenal as of Taiwan. China imports from South Korea is around 9.69% in 2014 from 11.64% in 2005. A majority of China’s imports, approximately around 60% was semi-finished products. The current ratio of the same is now around 20% meaning the world most populous country’s steps towards upgrading its industrial supply have delivered the intended results.
The red supply chain as the plan to enhance the high- tech sector is commonly referred is feared to set into motion a series of events that could work against Taiwan. The Made in China 2015 plan is to get Chinese companies to master critical technologies in the integrated circuit sector spanning IC design, water foundry operations, and IC packing and testing services. Domains in which Taiwan currently excels.
The plan will make best use of the significant growth being recorded by China’s semiconductor sector. Nine Chinese companies made it to the top 50 is 2014. In 2009 though only one IC designer from China made it to the list. Will growing gap between China and Taiwan force the latter to take steps imperative to ensure a global competitive edge for its semiconductor industry?