Mainland China plays take shine off Taiwan hi-tech as pace of innovation slows

Taiwanese technology stocks are losing their lustre with foreign investors who are now buying Taiwanese shares with a significant presence on the mainland instead.

Investors think such mainland plays have better prospects than the traditional technology shares that in many ways reflect the past rather than the future.

Taiwanese technology companies rose to prominence making components for the likes of Apple, Sony and Nokia and rode the buzz that had consumers standing in long queues to buy the latest trendy gadgets.

Now that iPhones and iPads are not so dominant and competition is intensifying in the global smartphone and tablet market, investors think mainland plays are a better bet.

By market capitalisation, mainland plays rose to 40 per cent of the Taiwanese bourse by the end of last year, the most in 13 years, according to data from JP Morgan, which said this would keep rising. Tech shares, by contrast, fell to below 50 per cent of the market for the first time in nine years.

The mainland plays have a big presence on the other side of the Taiwan Strait and are suppliers for a different group of companies such as Tesla Motors, Nike and Lululemon, a maker of yoga clothing. Sun Art Retail, which has outgunned Wal-Mart on the mainland, is partially controlled by Taiwan's Ruentex.