Taiwan's average monthly wage is $3,534. This puts it only slightly behind the US and Qatar, but ahead of every EU country. It is over 3 times the wage a person in Poland makes.
Cheap labor? No.
Taiwan spends billion of $ on tax breaks for chip companies and aggressively uses patents to keep out foreign competitors.
Massive tax incentives and anti-competitive behavior? Yes.
No. Tax breaks are nice, but those are present elsewhere too.
The real answer is supply chain consolidation. In a tiny geographic area around Taiwan, South Korea, and the south-east China coast, are basically every industry needed to go from a concept a completed manufactured products. Right from raw material processing to chip fabs to plastic manufacture to case injection moulding to paper production and packaging printing, etc. Passive components (caps, resistors, etc), ICs, buttons, displays, and so on. All within days of each other even by bulk sea freight, or within minutes to hours for some stages (e.g. if you live in the Huaqiang Bei area, you could be in literal walking distance from PCB fab and population houses, injection moulders, assembly houses, and packager/shippers, and could go from concept to shipped product within days, or even within a day if you can take advantage of existing moulds).
Moving or replicating that entire stack of multiple industries domestically is a multi-trillion dollar operation. It's no good having domestic PCB manufacture and domestic large IC fabs if you then need to import all the passives from halfway around the planet, or have to ship the components you just made to SEA for assembly.
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