Three Questions to Jeremy Chang: Taiwan’s Contract Manufacturing Model, Dancing with Clients

How are concepts of "strategic autonomy" and "indispensability" understood in Taiwan, and do they have any influence on semiconductor policies?

Taiwan is home to the world’s most comprehensive tech manufacturing ecosystem, composed of thousands of B2B enterprises ranging from semiconductor fabrication to the broader ICT manufacturing activities. We define Taiwan as a hardware contract manufacturing-defined ecosystem.

This comprehensive ecosystem we see in Taiwan today is the result of over five decades of development, beginning in the 1970s with the rise of the ICT contract manufacturing sector. Looking back, Taiwanese firms did not focus on building their own brands, but instead concentrated on developing a robust B2B business model, delivering the most efficient, reliable, resilient, and cost-effective services to upstream global supply chain actors and end-market brand clients.

From Taiwan’s perspective, its ICT ecosystem is not necessarily defined by technological leadership or cutting-edge innovation and domination. Instead, Taiwan’s leading position stems from its business model of "dancing with the clients": serving clients attentively, solving their problems, and providing competitive pricing and high-quality manufacturing services.

This is why, while policymakers in Europe and Japan discuss using industrial policy to rebuild domestic semiconductor production-often in pursuit of "strategic autonomy" and "strategic indispensability"-Taiwan operates with a different rationale. Taiwan does not use the language of "strategic autonomy", because its semiconductor production capacity has never been backed by domestic brands. From the start, Taiwan’s strategy has been to integrate into the global supply chain as a manufacturing partner to global-scale clients such as Apple or Nvidia, helping those clients scale up. Nor does Taiwan emphasize indispensability as an end in itself. For Taiwanese firms, only if the value of our services becomes indispensable to the customer can the whole ecosystem be considered truly indispensable.

Though concepts like autonomy and indispensability have traditionally been absent in Taiwan, in the era of techno-geopolitics, where these concepts have become central and governments around the world are reasserting control over supply chains in the name of economic security, Taiwan should articulate an updated strategic rationale for its semiconductor policies. It must seek to leverage its role in the global supply chain and propose a different definition of autonomy and indispensability-An innovative concept that differs from those of the Global North countries, but is rooted in the role of contract manufacturing.

How is the Taiwanese semiconductor industry positioning itself to remain a central player in global AI supply chains?

In a nation defined by a hardware contract manufacturing ecosystem, Taiwanese business leaders have always asked themselves: Who will be our customer? Who will buy our products? What kind of clients should we work with to maximize market share and profitability?

Taiwan’s journey began with manufacturing ICs for electronic watches. As the PC era emerged, we became a key contract manufacturing hub for PC chips. The island nation’s industry has consistently innovated alongside the latest technological breakthroughs. Just three years ago, TSMC and most of Taiwan’s ICT suppliers were still heavily concentrated around the Apple iPhone ecosystem. But with the explosion of AI, the entire ecosystem-from TSMC to small and medium-sized suppliers-rapidly pivoted to meet the hardware needs of AI leaders such as NVIDIA.

In the future, brands will rise and fall even faster as technological cycles accelerate. But contract manufacturers will always optimize the manufacturing needs of the world’s champions. Taiwan’s choice to specialize in contract manufacturing is the more sustainable path.

What complementarities do you see between Taiwanese and European industrial ecosystems?

Due to Taiwan’s unique role in the global supply chain, we not only support Europe’s efforts toward reindustrialization, but are also eager to serve as a "silicon catalyst" to help Europe achieve its reindustrialization goals.

Over the past two decades, Europe has struggled to generate the kind of disruptive innovation that has repeatedly allowed the United States to redefine global markets and value creation. From the internet revolution to digitalization, from the iPhone to the ongoing AI revolution, these transformations did not originate in Europe. Taiwan’s supply chains initially served all Western customers - the U.S., Japan, and Europe alike. In particular, we clearly remember that investment and technology transfer from Philips was key to the creation of TSMC’s foundry model.

Today, however, Taiwan’s supply chains are increasingly focused on serving U.S. customers, who lead in technological innovation and define markets, and who are willing and able to purchase the most advanced and expensive semiconductor chips. Through this complementary relationship in design and manufacturing, Taiwan and U.S. firms have grown together. Yet from Taiwan’s perspective, the loss of European and Japanese customers - and the resulting reliance on U.S. clients alone - may pose long-term economic security risks.

In my view, whether advanced tech manufacturing can successfully return to Europe depends primarily on mastering the supply chain ecosystem and talents. Policies such as the EU Chips Act and German subsidies for TSMC are designed to attract a manufacturing ecosystem. But as the European Commission works on a Chips Act 2.0, it should consider offering more effective incentives for foreign firms like those from Taiwan to invest in Europe. While subsidies may offer one-time incentive, more ambitious tax deductions could provide lasting incentives to build out supply chains and support European reindustrialization.

Taiwan’s private sectors and government-backed semiconductor academies are dedicated to cultivating manufacturing talent, and Europe must more actively send young professionals to Taiwan to gain educational or industrial experience and develop cultural and language fluency. These Europe-based professionals with dual exposure to Taiwan and their home countries will be key enablers for Taiwanese companies investing in Europe. Moreover, when they bring Taiwan’s experience back and help shape local industry norms and cultures, Europeans having benefited from such exchanges may finally find a path to reindustrialize technology manufacturing in a way that aligns with its own environment and identity.

Copyright I-Hwa Cheng / AFP
The Computex IT trade show in Taipei, May 20, 2025.