High Tech Development in Late Developing States: Taiwan's Semiconductor Success

This paper examines the development of Taiwan's semiconductor industry and the differing narratives on the factors contributing to the industry's success. The paper argues that both State-led policies and public institutions, as well as the experience and networks of returnee entrepreneurs, together facilitated the development of Taiwan's semiconductor industry, specifically the pureplay-foundry. Significantly, we argue that State-led policies were often tailored to attract the human capital as well as financial capital these returnees possessed and then incorporate their technical skills, managerial know-how, and knowledge of industry trends within State institutions. This paper analyzes specific State policies and inputs, like the financial system, that impact the development trajectories of Taiwan's domestic semiconductor firms. We then turn our analysis towards the backgrounds of key returnee individuals and their contributions both within State institutions, as well as their contributions as leaders within Taiwan's private semiconductor firms. Ultimately, we found that non-State origin pureplay-foundry firms tend to maintain a higher degree of R&D and specialization than State origin firms. However, State origin firms like TSMC and UMC are the largest semiconductor foundry firms in Taiwan and therefore have less need to continuously find niches in the division of labor and instead maintain a focus on achieving greater economies of scale.