Taiwan is shifting its economic focus from China towards the United States, reflecting a strategic move amidst growing tensions with Beijing. This change is evident across various industries, from tapioca balls to computer chips, where Taiwan’s largest chip manufacturer has ramped up investments in the U.S. following support from the Biden administration. Concurrently, a Taiwanese semiconductor company has ceased operations in mainland China after two decades, highlighting a global competition in high-tech industries.
These developments underscore Taiwan’s efforts to reduce dependency on China and strengthen economic ties with the U.S., its primary ally. In a significant shift, the U.S. has become Taiwan’s top export destination, surpassing mainland China for the first time since 2016. Taiwan’s investments in mainland China have decreased sharply while investments in the U.S. have surged, reaching $9.6 billion in 2023.
Additionally, recent agreements and legislative efforts between Washington and Taipei further solidify their economic partnership, with ongoing negotiations aimed at expanding trade relations.
“Everything is motivated by … a desire to build Taiwan’s deterrent capability and their resilience, all in support of maintaining the status quo and deterring China from being tempted to take … action against Taiwan,” Assistant Secretary of State Daniel Kritenbrink said.
The world’s largest computer chip maker, TSMC, announced recently its plans to increase investments in the U.S. to $65 billion. This decision followed commitments from the Biden administration to provide up to $6.6 billion in incentives aimed at enabling TSMC’s Arizona facilities to produce approximately 20% of the world’s most advanced chips by 2030.
Meanwhile, Foxconn, a Taiwanese conglomerate recognized as Apple’s primary contractor, is expanding its manufacturing capacity in India. Similarly, Pegatron, another Taiwan-based company involved in iPhone and computer component production, is making investments in Vietnam.
King Yuan Electronics Corp. (KYEC), specializing in semiconductor testing and packaging, announced its decision last month to sell its $670 million stake in a venture based in Suzhou, China. KYEC cited geopolitical factors, including the U.S. export restrictions on advanced chips to China and Beijing’s pursuit of self-sufficiency in technology, as reasons for this move.
Taiwan’s exports of semiconductors, electronic components, and computer equipment to the United States more than tripled from 2018 to nearly $37 billion last year. This increase reflects a strategic shift by both Taiwan and the U.S. to reduce economic risk associated with China.
Moreover, Taiwan has significantly boosted its exports of tapioca and related ingredients, crucial for beverages like boba milk tea, to the United States since 2018. Additionally, shipments of fruits, tree nuts, and farmed fish have also risen.
Analysts observe that Taiwan’s exports to mainland China and Hong Kong dropped from about 44% in 2020 to less than one-third in the first quarter of 2024, indicating a substantial decline driven by strategic reorientation.
Since the Democratic Progressive Party took power in Taiwan in 2016, the island has pursued policies to enhance economic ties with Southeast Asia and other regional nations, moving away from dependence on mainland China.
