I co-authored a commentary with Evan Feigenbaum about how Taiwan can leverage its greatest competitive advantage—trust—to diversity its economy beyond semiconductors:
While scale can be a critical determinant of industry dynamics and, ultimately, a country’s economic power, it is not the only factor. Trust can matter even more, especially in industries that rely on sensitive government or personal data, those that have dual-use implications and touch national security, and those in which governments and businesses aim to mitigate supply chain risks. Despite the unprecedented scale of China’s economy, which offers significant market advantages, Taiwan has the essential ingredient of trust that China lacks. Bluntly put, in many areas, Taiwan is trusted, while China-origin products, services, and applications are not. And this distrust is growing rapidly, with politicians in many advanced industrial economies now calling for greater efforts to “China proof” elements of their supply chains and business models.
Taiwan should leverage trust as its pivotal comparative advantage. Fostering trust may prove more important than government planning documents, aspirational targets, and pledges to throw more money at a list of emerging industries. Trust can compensate for the disadvantages of Taiwan’s small scale if its firms become a more trusted tester and vendor than their larger global rivals.