Whether it’s tapioca balls or computer chips, Taiwan is reaching out to the United States and away from China, the world’s No. 2 economy that threatens take over a democratically governed island by force if necessary.
That led the world’s largest maker of computer chips, which run everything from medical equipment to mobile phones, to announce last month it would increase investment in the United States after support from the Biden administration. Soon after, the Taiwanese semiconductor company said it was ending its two-decade operation in mainland China amid global race for advantage in the field of high technology.
These changes during 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. The shift also occurs as China’s economic growth has been weak and global companies are looking to diversify their operations following supply chain disruptions during the pandemic.
In a striking illustration of this shift, the US displaced mainland China as the top destination for Taiwanese exports in the first quarter of the year for the first time since early 2016, when comparable data became available. In the first three months, the island exported $24.6 billion worth of goods to the United States, compared with $22.4 billion to mainland China, Taiwan officials said.
Meanwhile, the island’s investment in mainland China fell to its lowest level in more than 20 years, falling nearly 40% to $3 billion last year from a year earlier, according to Taiwan’s Ministry of Economic Affairs. However, Taiwan’s investment in the US has increased ninefold to $9.6 billion in 2023.
Washington and Taipei signed a trade agreement last year and they are now in talks about the next phase. US lawmakers have also introduced legislation to end double taxation for Taiwanese businesses and workers in the US.
“Everything is motivated … by a desire to build Taiwan’s deterrence and resilience, all in support of maintaining the status quo and deterring China from the temptation to take … action against Taiwan,” Assistant Secretary of State Daniel Krietenbrink said.
The world’s largest computer chip maker TSMC announced last month that expand your investments in the USA It comes as the Biden administration pledged up to $6.6 billion in incentives that would enable the company’s Arizona facilities to produce about one-fifth of the world’s most advanced chips by 2030.
In addition to investing in the US, TSMC is investing in Japan, a staunch supporter of the United States in the region. Foxconn, the Taiwanese conglomerate known as Apple’s main contractor, is ramping up production capacity in India, while Pegatron, another Taiwanese business that makes iPhone and computer components, is investing in Vietnam.
King Yuan Electronics Corp., a Taiwan-based semiconductor testing and packaging company, said last month it would sell its $670 million stake in a facility in the eastern Chinese city of Suzhou. KYEC cited geopolitics, a US ban on exporting advanced chips to China and Beijing’s policy of achieving self-sufficiency in technology.
“The environmental environment for semiconductor manufacturing in China has changed and market competition is becoming increasingly fierce,” KYEC said in a statement.
Exports of semiconductors, electronic components and computer equipment from Taiwan to the United States more than tripled from 2018 to reach nearly $37 billion last year. It’s not just technology: Between 2018 and 2023, the island more than tripled its exports of tapioca and tapioca substitute, key ingredients in boba milk tea, to the United States, and also supplied more fruits, tree nuts and farmed fish.
The recent trade data reflects “Taiwan and the U.S. strategy to redirect that trade in an attempt to reduce risks from China,” said Hung Chan, a non-resident senior fellow at the Atlantic Council’s Geoeconomics Center.
The share of Taiwanese exports to mainland China and Hong Kong fell from about 44% in 2020 to less than one-third in the first quarter of 2024. It was “a very big movement,” 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 tried to balance its claims to the island with favorable economic and trade policies, seeking to promote closer ties that could make Taiwan’s secession more difficult.
When the independent 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, especially in Southeast Asia. Unhappy Beijing turned to its economic leverage to try to subjugate Taiwan.
He restricted travel to the island by tourists from the mainland and suspended imports of Taiwanese seafood, fruits and snacks. In 2021, China banned pineapples grown in Taiwan over biosecurity concerns, hurting Taiwanese farmers whose exported fruit was almost all sent to the mainland.
Ralph Cossa, president emeritus of the Honolulu-based foreign policy think tank Pacific Forum, said Beijing’s actions had helped push back the island.
Chinese President: “Xi Jinping is tactically smart, but strategically stupid in many of the decisions he makes; His tests of the loyalty of Taiwanese businessmen and other tough business practices and decisions were major contributors to the success of Taiwan’s policy of distancing itself from China, he said.
And this policy will be continued under Lai Ching-te. new president of the island– said Cossa.