Talent mismatch emerges as top hiring challenge for Japanese firms in Taiwan

Nearly half of surveyed companies said candidates are available, “but suitable matches are scarce”.

Japanese companies operating in Taiwan remain confident about the market's long-term growth prospects, but an increasingly acute talent mismatch is emerging as a key obstacle to expansion, according to the latest Taiwan Employer Outlook Report 2026 by Reeracoen Taiwan.

Based on a survey of 183 management-level representatives from Japanese companies in Taiwan conducted between 30 January and 13 February 2026, 57.4% of respondents reported business growth in 2025, while 59% expect further business expansion in 2026.

More than half (54.6%) also plan to continue investing in Taiwan over the next three years.

Talent mismatch overtakes talent shortage

Against this positive business outlook, hiring activity remained strong, with around 85% of surveyed companies conducting recruitment in 2025 and expecting a similar level of demand in 2026.

However, nearly half (48.1%) said their biggest hiring challenge was “candidates apply but suitable matches are scarce”. By comparison, only 20.2% cited insufficient application volume as their primary concern.

The findings suggested that Taiwan's labour market is no longer facing a simple candidate shortage. Instead, employers are increasingly struggling to find candidates with the right combination of skills, experience, and organisational fit.

Respondents identified the following key hiring challenges:

• Labour market talent shortage (57.4%)
• Non-competitive compensation (39.6%)
• Low industry attractiveness (28.4%)
• A gap relative to competitor offer conditions (24.9%)
• Low company brand recognition (23.1%)

The report noted that employers investing in stronger employer branding, more targeted sourcing strategies, and faster hiring processes may be better positioned to secure talent than those relying solely on salary increases.

AI and semiconductor sectors reshape the labour market

A major factor influencing Taiwan's hiring landscape is the continued growth of the semiconductor and AI ecosystem.

The report identified Taiwan's semiconductor and AI industries as the primary drivers of business growth in 2025, particularly among companies involved in semiconductor manufacturing, data centres, AI servers, and electronic component production.

At the same time, the rapid growth of these sectors is creating ripple effects across the broader labour market. Engineering and technical talent is increasingly being drawn towards semiconductor companies, which operate at a different compensation level and offer a different scale of career opportunity, leaving companies in manufacturing, logistics, construction, and service-related sectors competing for a shrinking pool of qualified candidates.

Compensation gaps heighten retention challenges

The survey also provided insights into compensation practices among Japanese companies in Taiwan.

Annual salary increments in 2025 ranged between 2.1% to 4%, with the overall cross-industry average standing at approximately 3%.

For Lunar New Year bonuses, two months' salary was the most commonly reported level, cited by 35% of respondents.

Finance and insurance led all sectors in bonus payout, while the IT and information services sector recorded the lowest average increment and bonus among the industries surveyed. The report flagged that this could heighten attrition risk given the intensity of digital talent competition in Taiwan.