| HBS Case Collection
(Revised December 2010)
Upgrading the Economy: Industrial Policy and Taiwan's Semiconductor Industry
The government-led creation and incubation of the semiconductor industry in Taiwan is a striking success for advocates of strong industrial policy. It has led to the island nation's domination of the global "foundry" business in which firms like Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) manufacture the designs of "fabless" design companies. The two have a combined global market share of close to 70% of this global business segment. This success was all the more striking because when the initiative began, the country had few of the large-scale firms that could support the R&D and scale necessary to enter such sophisticated capital-intensive industries. There were no firms with the deep technological roots or the skill base to even begin. Yet government planners recognized the challenges of upgrading the nation's technology base and formulated a strategy that entailed the creation of "pilot agencies" that would serve as vehicles to bridge between sources of leading-edge technology (predominantly sourced from overseas) and the commercialization to be carried out by local firms.
Keywords: Economic Growth;
Business and Government Relations;