Why Taiwan tech companies can catch up with US companies in the long run

Within tech hardware and semiconductor space, US, China, Taiwan, and Korea are 4 key players here. - US with the hardware brand and semiconductor fabless design, - China with hardware brand and manufacturing and aiming for semiconductor sufficiency, - while Taiwan is stronger in manufacturing than brand marketing and plays global key role in manufacturing of hardware and semiconductor, as well as fabless design. - Korea is also key, but focusing more on memory hence we are setting it aside. - Japan had been losing its competitiveness as production moves overseas, yet with the production shift, we may see a gradual shift of power of material players in US vs Japan.

Before 2008, there was a period when Taiwan tech companies were booming, but after 2008 it had gone through a rather tough period, facing China competition. There are a few reasons contributing to the bust and revival of Taiwanese tech companies, but the biggest in my view, is the accounting policy:

• Before 2008, bonus is not expensed for listed companies. With the accounting principle change since 2008, bonus are required to be expensed -> this reduced listed companies incentive to pay bonus, which in turn made them lose talent period for quite a few years. However, after reflecting the situation, most companies resume bonus, and to absorb the bonus impact, they start to move to higher-margin product, and the successful survivors are some of the top 20 fabless we see nowadays – Mediatek, Novatek, Realtek, and many other smaller niche players.
• Meanwhile, as Taiwan and Korea don't adopt non-GAAP, under same cost and compensation structure, margin look worse than its US peers, and hence Taiwanese CEOs spent more effort than US companies in taking business and saving cost. Accumulatively, this creates a difference in the long run