US-China tech war helps drive Taiwanese semiconductor investment in mainland, despite tensions

Despite a chorus of voices in Washington calling for tougher restrictions on China, Taiwanese tech companies are expanding operations in the mainland

Taiwanese investment rose 29.9 per cent year on year to US$330 million during the first quarter of 2021, according to official Chinese data

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Taiwan’s semiconductor manufacturing dominance has given it new geopolitcal leverage. Photo: Reuters

Published: 7:30pm, 12 May 2021Updated: 2:21pm, 13 May 2021

Global demand for semiconductors used in everything from computers to cars is proving a boon to Taiwanese manufacturers, who are ramping up investment in mainland China despite cross-strait tensions and an increasingly heated tech war between Washington and Beijing.

Taiwanese investment in the mainland rose 29.9 per cent year on year to US$330 million during the first quarter of 2021, Ma Xiaoguang, a spokesman for the Taiwan Affairs Office of China’s State Council said last week. Over the same period, 1,195 Taiwanese-funded companies were established in the country, a year-on-year increase of 33.4 per cent.

The surge in investment highlights the delicate geopolitical balance Taiwanese manufacturers must strike, protecting existing business interests in the mainland while ensuring they do not get offside with increasingly hawkish voices in Washington who are calling for stricter technology sanctions on Beijing.

“Taiwanese exporters really benefited from the US-China trade war because they were able to sell to the US while avoiding tariffs on their products even as some supply chains shifted,” said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit (EIU). “Taiwanese companies in the near term still see a lot of opportunity.”

The Taiwanese are investing on the mainland because they already have a presence there, making it easy for them to expand their production lines

Iris Pang

But as China aims to produce 70 per cent of the semiconductors it uses by 2025, Taiwanese firms do not want to abandon their mainland operations either, even amid growing belligerence from Beijing towards President Tsai Ing-wen in Taipei, analysts said.

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