(iPoster) Configuration-Specific Vulnerability: Taiwan's Development and Deglobalization

• In Event: Poster Session: Politics and History

Abstract

For the past three decades, Taiwan's semiconductor industry has dominated advanced chip manufacturing. However, with the emergence of deglobalization, Taiwan's semiconductor firms face increased external pressure. While some have explained these pressures through firm capabilities or contemporary geopolitics, an often-overlooked perspective is the role of institutional configurations built under Taiwan's postwar developmental state (DS). These institutions enabled semiconductor dominance but also created vulnerabilities now exposed by deglobalization. These vulnerabilities refer to increased exposure to external leverage and constrained industrial reorientation through overseas fabrication commitments, dependence on external supply-chain chokepoints, and limited state capacity to pivot toward new strategic sectors. This paper asks: how did Taiwan's DS institutions create both semiconductor dominance and the structural dependencies underlying contemporary vulnerability under deglobalization?

The answer lies in the institutional configurations established and consolidated under KMT rule in the 1950s-1970s. Party reform, land reform, and strict macroeconomic stabilization facilitated rapid industrial upgrading that shaped a dispersed, SME-oriented structure rather than concentrated domestic private capital. When Taiwan began developing its semiconductor industry in the late 1970s and 1980s, these legacies shaped the industry’s distinctive horizontal model. At the heart of this structure lie public research institutions, particularly the Industrial Technology Research Institute (ITRI), which acquired and upgraded foreign production processes and then diffused them through spin-offs across small and medium enterprises (SMEs). This configuration enabled deep manufacturing specialization while concentrating critical dependencies.

This paper argues that Taiwan's DS institutions embedded horizontal economic structures into high-tech industrialization. After democratization, while the semiconductor sector remained largely unaffected, broader DS capacity to cultivate new industries weakened, deepening path dependence on existing strengths rather than enabling diversification. The paper theorizes “configuration-specific vulnerabilities” under reversing globalization where different DS legacies generate different patterns of exposure and constraint despite high levels of industrial competitiveness. Taiwan serves as a pathway case that clarifies the mechanism and scope conditions of this argument without requiring a cross-national comparison.

To examine this claim, this paper conducts a historical analysis using process tracing across three causal episodes spanning 1950 to the early 2000s. The first episode (1950-1970) traces how land reforms and party-state governance produced dispersed production structures that shaped industrial policy preferences. The second (1970-1987) shows how these preferences were institutionalized through the creation of ITRI and its technology acquisition and diffusion model. This enabled the emergence of semiconductor manufacturing capabilities through public-private coordination and sector diffusion. The third (1987-2000) identifies how democratization did not impact industry competitiveness, but fragmented state capacity for new industrial initiatives, reinforcing reliance on semiconductors and constraining diversification. Evidence of these causal chains draws on industrial policy documents, legislative and political debates over industrial strategy, firm histories, and secondary historical scholarship to trace the causal links and adjudicate alternative explanations.

This paper makes three contributions. First, it advances DS scholarship into the emerging deglobalization era by showing how late 20th century developmental choices generate configuration-specific vulnerability profiles when globalization reverses, differing from literature that has primarily examined growth and institutional outcomes under globalization. Second, it reframes democratization transitions through a historical institutionalist lens by identifying an emerging paradox of late-stage democratizers where political liberalization preserved dominant strategic sectors, but led to weakened coordinating capacities for adaptation in new technologies or sectors. Third, it explains contemporary geopolitical pressure through historical institutional origins by showing how external leverage operates through inherited industrial and governance constraints rather than only through contemporaneous bargaining. This analysis speaks to the conference theme “Democracy under Threat: How to Understand, Protect, and Rebuild” by examining how the historical transformation of DS institutions through democratization creates economic vulnerabilities that become vectors for external leverage. Understanding these causal chains is essential for protecting and rebuilding democratic institutions balancing political openness with economic adaptability.

Author

• Julian Chiao, Tamkang University Graduate Institute of International Affairs and Strategic Studies