Signs of Tech Turnaround in Taiwan

12 January 2010—Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest semiconductor foundry, had a nice holiday present for its employees: a 15 percent raise beginning in 2010. The bonus had many wondering if the long-awaited economic recovery had finally arrived.

Chairman Morris Chang's Santa Claus act came in a 21 December video presentation. "This is a structural change and is unrelated to the annual salary review," Chang told employees. "I believe that on average, the total compensation that everyone will receive in 2010 will continue to be better than 2009, and you will be able to see for yourself very soon."

So far, TSMC is the only high-tech enterprise announcing a pay raise. But there are signs that technology employment in Taiwan is improving. On 8 January, Taiwan's cabinet announced that the number of employees taking unpaid leave in the country's three science parks dropped sharply to 888, as of 31 December 2009, from 128 334 in January 2009. (TSMC is headquartered in one of the science parks.)

In addition to high-tech firms in science parks, 12 000 enterprises located in Taiwan's 60 industrial complexes also suffered from the global economic crisis in 2009. According to a government survey of 3000 firms, in December 2008, 17.8 percent of enterprises nationwide adopted the unpaid leave practice. According to the latest government statistics, this affected 238 975 workers at the peak in February 2009, or nearly 9 percent of the total. This number includes about 75 000 professionals from the R&D and administration departments, as well as around 125 000 assembly-line operators. On average, affected employees took four days of unpaid leave in that month. However, as of 31 December 2009, according to the Ministry of Economic Affairs, there were only 17 697 employees taking unpaid leave, suggesting that the pressure has lifted.

Meanwhile, government statistics show that sales for the high-tech firms in the three science parks are growing gradually. In January 2009, monthly sales for the science parks had fallen to only NT $71.9 billion (US $2.42 billion)—about 40 percent of their precrisis level. By September 2009, however, monthly sales had rebounded to NT $163.2 billion (US $ 5.28 billion).

Premier Den-yih Wu attributes the improvement to prompt policy responses to the global economic downturn. Wu says that two key policy moves lessened the impact of the sagging economy on Taiwan's high-tech firms, which are predominantly situated in the three science parks. First, in January 2009, the National Science Council, which supervises the science parks, cut the management fees charged to the companies there by half for 12 months, from 0.19 percent of sales to 0.095 percent. The council estimates that science park firms saved NT $1.5 billion (about US $46.32 million) in 2009, because of the move. Second, the council also allocated NT $398.18 million (US $12.3 million) in 2009 to finance research projects proposed by high-tech professionals who were on unpaid leave.

Unpaid-leave practices appear to be nearing an end. Thanks to an increasing demand for consumer electronics in remote areas in China, Taiwan's two major foundry vendors, TSMC and United Microelectronics Corp. (UMC), were among the companies able to scrap unpaid leave practices they'd put in place earlier in the year. They also rehired some employees.

Local dynamic RAM makers experienced a similar employment rebound. In late 2008 and early 2009, they laid off workers or put them on unpaid leave for three to four days per week. But by June 2009, DRAM contract prices rose, and manufacturers were able to end unpaid leave.

An engineer at semiconductor manufacturing equipment supplier Applied Materials, who did not wish to be identified for this article, says an unpaid leave practice instituted in May 2008 ended in late December 2009. During that period employees were asked to take 10 to 12 days off every quarter, according to the engineer.

IT-services firms and LCD manufacturers were among the companies that asked staff members to accept salary cuts if they were reluctant to take unpaid leave. A programmer manager at HP's Taiwan Product Development Center, who declined to be identified, says that his colleagues faced 5 to 15 percent salary cuts in 2009 while still working full-time as usual. "Unlike other colleagues in some countries opposing mandatory pay cuts, Taiwanese employees tend to adapt to a new situation quickly, even with disappointment," he says.

In industrial complexes, employees for some high-tech enterprises are now looking forward to normal pay. "We've seen signs of economic revival since September. The management has announced that our 15 percent pay cut, which was launched in February, will end next February," according to Carol Chen, who works at an automotive parts and components supplier based in an industrial complex in southern Taiwan.

The Manila-based Asian Development Bank released a report on 15 December that forecast that the 14 economies in emerging East Asia (including Taiwan) will grow by 4.2 percent in 2009 and by 6.8 percent in 2010. That is higher than the 3.6 percent in 2009 and the 6.5 percent in 2010 that the bank had forecast for the region in September.