From tapioca balls to computer chips, Taiwan is expanding toward the United States and away from China, the world’s second-largest economy, which is under threat Take the democratically governed island if necessary, by force.
That led the world’s largest maker of computer chips – which power everything from medical devices to cell phones – to announce major investments in the US last month Boosted by the Biden administration. Shortly thereafter, a Taiwanese semiconductor company announced it was ending its two-decade presence in mainland China global race to stay ahead in the high-tech industry.
These changes in a time of one Intensifying rivalry between China and the US reflect Taiwan’s efforts to reduce its dependence on Beijing and insulate itself from Chinese pressure while forging closer economic and trade ties with the United States, its strongest ally. Change is also happening China’s economic growth was weak and global companies are trying to diversify after supply chain disruptions during the pandemic.
In a clear example of the change, the US displaced mainland China as the top destination for Taiwan’s exports in the first quarter of the year for the first time since early 2016, when comparable data was available. According to Taiwan’s official data, the island exported $24.6 billion worth of goods to the United States in the first three months, compared with $22.4 billion to mainland China.
Meanwhile, the island’s investment in mainland China has fallen to its lowest level in more than 20 years, falling nearly 40% to $3 billion last year from a year earlier, Taiwan’s Ministry of Economic Affairs said. Still, Taiwan’s investment in the U.S. increased nine-fold to $9.6 billion in 2023.
Washington and Taipei signed a trade agreement last year, and they are now negotiating the next phase. US lawmakers have also introduced a bill to end double taxation for Taiwanese companies and workers in the US
“It’s all motivated by … the desire to build Taiwan’s deterrence capability and resilience, all to help maintain the status quo and deter China from being tempted to … take action against Taiwan,” said Deputy Secretary of State Daniel Kritenbrink.
The world’s largest computer chip maker, TSMC, made the announcement last month expand its US investments to $65 billion. This came after the Biden administration pledged up to $6.6 billion in incentives that would put the company’s Arizona facilities on track to produce about a fifth of the world’s most advanced chips by 2030.
Apart from his US investments TSMC invests money in Japan, a staunch supporter of the US in the region. Foxconn, a Taiwanese company known as Apple’s prime contractor, is building manufacturing capacity in India, while Pegatron, another Taiwanese company that makes parts for iPhones and computers, is investing in Vietnam.
King Yuan Electronics Corp., a Taiwanese company that specializes in semiconductor testing and packaging, said last month it would sell its $670 million stake in a company in the eastern Chinese city of Suzhou. KYEC pointed to geopolitics, the US export ban on advanced chips to China and Beijing’s policy of becoming self-sufficient in technology.
“The environmental environment of semiconductor manufacturing in China has changed and competition in the market has become increasingly fierce,” KYEC said in a statement.
Taiwan’s exports of semiconductors, electronic components and computer equipment to the United States have more than tripled since 2018, reaching nearly $37 billion last year. It’s not just technology: The island more than tripled its exports of tapioca and its substitutes, key ingredients in boba milk tea, to the U.S. between 2018 and 2023, supplying more fruits, nuts and farmed fish.
The latest trade data reflects “the strategy of both Taiwan and the U.S. to rebalance this trade to reduce risk vis-à-vis China,” said Hung Tran, a non-resident senior fellow at the Atlantic Council’s GeoEconomics Center.
The share of Taiwan’s exports to mainland China and Hong Kong fell from about 44% in 2020 to less than a third in the first quarter of 2024. That was “a very big move,” Tran said. “And I think the share (of exports to mainland China and Hong Kong) will probably continue to decline.”
Since the 1990s, Beijing has sought to balance its claim to the island through favorable economic and trade policies, aiming to promote closer ties that could make Taiwan’s secession more difficult.
When the independent-leaning Democratic Progressive Party came to power in Taiwan in 2016, the new government put forward policies Distance of the island from the mainland and strengthen economic ties with other countries in the region, particularly in Southeast Asia. A dissatisfied Beijing used its economic influence to bring Taiwan under control.
It has restricted mainland tourists’ travel to the island and suspended imports of Taiwanese seafood, fruits and snacks. In 2021, China banned Taiwan-grown pineapples for biosecurity reasons, which had devastating consequences for Taiwanese farmers, whose exported fruit almost exclusively went to the mainland.
Ralph Cossa, president emeritus of the Honolulu-based foreign policy research institute Pacific Forum, said Beijing’s actions had helped push the island away.
Chinese President “Xi Jinping is tactically smart but strategically stupid in many of his decisions; His loyalty tests of Taiwanese businessmen and other heavy-handed business practices and decisions contributed significantly to the success of Taiwan’s policy of distancing itself from China, he said.
And this policy will continue with Lai Ching-te, the new president of the islandCossa said.