ALL YEAR LONG, the boss of Taiwan's most successful hi-tech company - Morris Chang, the chairman of Taiwan Semiconducter Manufacturing Co Ltd (TSMC) - made clear he was no mindless follower of foolish fashion. Other Taiwanese companies might flock to the mainland with their investment dollars, but not TSMC. Even if Taipei reversed policy and encouraged such spending, he insisted, his company would wait at least three to five years before joining the throng.
Then, two weeks ago, a prestigious advisory panel - with Mr Chang as a member - told the Taipei Government it was time to change course. Once President Chen Shui-bian had agreed, Mr Chang quickly said TSMC, too, would open shop on the mainland because it could not afford to be left behind.
When it finally gets there, TSMC will find lots of company. Thousands of Taiwanese businesses have invested an estimated HK$467 billion in China, where they produce a large and growing share of 'Taiwanese' products. This migration gives Taiwan an economic challenge that goes beyond the present global downturn, and so far it has no clear solution. But if China is partly the cause, many also see China as part of the cure. But not all of it, as over-reliance on the mainland might prove dangerous.
The cyclical downturn is problem enough on its own. July exports were down 28 per cent, and recent figures showed an economy shrinking at an annual rate of 2.4 per cent, the worst record for 25 years. Among other things, this means tougher times at the island's Hsinchu Science-based Industrial Park, where many engineers are paid partly with stock options.
Like other relatively small global players, Taiwan alone cannot reverse the cycle. It might adjust social and economic policies to ease the pain and encourage job creation in a declining market. But it needs the big economies to put themselves right, and resume purchasing and investing patterns of recent years. And a recovery would still leave the long-term structural issue, which worried Taiwanese call their 'hollowing out' problem.
For years, Taiwan has thrived by making hi-tech products and components for others, sold worldwide under such brand names as Dell, Compaq and Hewlett-Packard. But rising costs are driving many Taiwanese manufacturers - and jobs - to the mainland in particular. Similarities of language and culture, plus the lure of a potentially huge domestic market, combine with cheaper land and labour to pull them across the Taiwan Strait.