The proportion of exports from Taiwan to China is decreasing, and Taiwanese capital and businesses are gradually distancing themselves from China. In contrast, Taiwan’s export proportion to the United States has increased significantly.
On May 8, the Ministry of Finance of the Republic of China announced the preliminary customs export statistics for April, showing that the monthly export value to the United States exceeded 10.16 billion U.S. dollars for the first time, reaching 10.16 billion U.S. dollars, an 81.6% year-on-year increase. The trade surplus with the United States reached 6.38 billion U.S. dollars, all three figures set new monthly records.
Tsai Mei-na, Director-General of the Ministry of Finance Statistics Department, stated that information and communication technology products and electronic components are the two main engines driving Taiwan’s exports to the United States. This is mainly attributed to the continued high demand for artificial intelligence applications and the recent efforts by the US government to bring back the manufacturing and production capacity of advanced chips to the United States, which has led to an increase in demand for Taiwanese goods.
In April, Taiwan’s exports to China and Hong Kong amounted to 11.3 billion U.S. dollars, a decrease of 11.3% year-on-year. Tsai Mei-na analyzed the factors behind this, stating that besides the slower recovery of domestic demand in China, some businesses have relocated their production bases from China due to the ongoing global supply chain restructuring. Additionally, the chain effect of US-related bans has led to a continuous decrease in China’s demand for electronic components from Taiwan.
In the first four months of this year, Taiwan’s export landscape has shown significant changes. The proportion of exports to China and Hong Kong accounted for 30.7% of total exports, the lowest in the same period in 22 years; meanwhile, the proportion of exports to the United States increased to 23.5%, reaching the highest level in the same period in 24 years; and the proportion of exports to the Association of Southeast Asian Nations (ASEAN, covering ten countries) reached 19.5%, also the highest in years.
This shifting trend has been apparent in the past few years.
Over the past decade, mainland China has been Taiwan’s largest export destination. Prior to 2021, Taiwan’s exports to China had long accounted for around 40%, reaching a peak of 43.9% in 2020. However, the proportion of exports to China dropped to 38.8% in 2022, and further to 35.2% in 2023.
Since the US-China trade war in 2018, Taiwan’s export proportion to the United States has been steadily increasing, rising from 11.8% in 2018 to 17.6% in 2023. For the first time last year, the export proportion to the United States caught up with ASEAN, ranking as Taiwan’s second-largest export market. “United States” has become a key term driving Taiwan’s export growth.
In the first quarter of this year, the United States temporarily surpassed mainland China, becoming Taiwan’s largest export destination. Taiwan’s exports to the US in the first quarter amounted to 24.625 billion US dollars, exceeding the 22.407 billion U.S. dollars to mainland China.
During this process of give and take, Taiwan’s economy has not only been unaffected but has also seen its stock market repeatedly hitting new highs. In early April, Taiwan’s stock index reached nearly 20,800 points. On May 9, the index peaked at 20,734 points.
Over the past thirty years of China being the world’s factory, Taiwanese companies have played a crucial role. After the 1990s, a large number of Taiwanese companies went to China, known as the “Go West” strategy. In the top 100 exporting companies in mainland China in 2020, there were 31 Taiwanese companies; among the top ten exporters, six were Taiwanese companies.
However, with the sharp decline in the Chinese economy and the increasingly tense geopolitical situation, Taiwanese companies are now making new choices.
The Mainland Affairs Council, the body responsible for cross-strait affairs in the Republic of China, released the investment amount and proportion chart for mainland China on February 18. The chart showed that Taiwanese investments in mainland China have steadily declined, from 83.8% in 2010 to 11.4% in 2023, hitting a historic low last year.
The Mainland Affairs Council stated that in response to geopolitical turmoil and escalating US-China trade and tech wars, Taiwanese businesses have adjusted their global layouts to reduce investment in China and increase investments in the United States, Europe, Japan, and New Southbound countries to diversify production risks.
On April 26, Taiwan’s semiconductor packaging and testing company King Yuan Electronics announced that it would sell 92% of its stake in its subsidiary in Suzhou, China to a Chinese partner. This move is equivalent to withdrawing from the Chinese packaging and testing market.
King Yuan Electronics stated that due to the impact of geopolitical tensions on the global semiconductor supply chain and US restrictions on Chinese semiconductor technology and the ban on certain products, changes have occurred in the semiconductor manufacturing ecosystem in China, making the market competition increasingly fierce. Taking into account the environment in which King Yuan Technology operates and considering more effective strategic planning for future operation and financial resource utilization at King Yuan Electronics, the Board of Directors decided to withdraw from semiconductor manufacturing operations in China at this time.
King Yuan Electronics also mentioned that it would concentrate resources on Taiwan’s semiconductor manufacturing supply chain to create higher revenue and profit growth potential.
After King Yuan Electronics announced its withdrawal from China, its stock price hit the daily limit the next working day.
Previously, several Taiwanese contract manufacturers such as Quanta, Foxconn, Pegatron, and Wistron had already shifted their investments to Vietnam.
The decreasing dependency of Taiwan on China implies a weakening influence of the Chinese Communist Party on Taiwan. However, China’s demand for Taiwan has not weakened, especially in the high-tech field. About 90% of the world’s advanced semiconductor chips are manufactured in Taiwan.
In March, the Ministry of Economic Affairs of the Republic of China held a meeting in Taoyuan, northern Taiwan, with 20 leaders from the information and communication technology industry. The Ministry of Economic Affairs stated that Taiwan produces 83% of global servers; for artificial intelligence servers, this percentage rises to 90%; and excluding US brand suppliers, it is 100%.
The core of the US-China tech competition now involves three major areas: semiconductors and microelectronics, quantum information technology, and artificial intelligence. As the US and mainland China gradually drift apart, Taiwan seems to have chosen sides.
In December last year, the authorities in Taiwan, the Republic of China, announced the “National Key Technologies List.” This list includes technologies in five major areas: defense, space, agriculture, semiconductors, and information security. Among them, semiconductor-related technologies cover IC manufacturing processes below 14 nanometers and heterogeneous integration packaging technology (wafer-level packaging technology, silicon photonics integration packaging technology, and special necessary materials and equipment technology).
The Legislative Yuan of the Republic of China passed amendments to the “National Security Law” in May last year, stipulating that no one can steal national key technologies for foreign, Chinese, Hong Kong, Macau, and overseas hostile forces, with violators facing up to 12 years of imprisonment and fines based on illegal gains. Key technology personnel receiving government subsidies meeting certain criteria require permission to go to China.