Taiwan’s exports to mainland China, Hong Kong hit record high as semiconductor demand fuels cross-strait trade

Taiwanese official says US sanctions have led to a significant increase in mainland demand for Taiwan’s chips, and strong demand will continue until the mainland’s chip technology is upgraded
Additionally, foreign-owned factories based on the mainland still need to purchase chips from Taiwan

China trade

Mia Nulimaimaiti

Published: 8:30pm, 10 Jan 2022

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The value of Taiwan’s exports to mainland China and Hong Kong hit an all-time high of US$188.9 billion in 2021, thanks to the resilient demand for the island’s computer chips, according to the latest data released by the island.

Taiwan’s finance ministry said the total was a 24.8 per cent increase from 2020.

It included US$125.9 billion worth of exports to the mainland, marking a rise of 22.9 per cent from the previous year and almost double the 11.9 per cent growth rate seen in 2020.

For December, figures show that Taiwan’s exports of electronic components and audiovisual products to the mainland increased by 23.3 per cent and 19.9 per cent, respectively.

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“The mainland announced that they want to make their own chips, but they can’t; their procurement of related goods from us has not decreased,” an official with Taiwan’s finance ministry told the Post, speaking on condition of anonymity and referring to mainland China’s self-sufficiency efforts in chipmaking.

Meanwhile, Taiwan’s exports to Hong Kong rose 28.7 per cent to US$62.98 billion in 2021, compared with a 21.5 per cent growth rate in 2020.

The official said that Washington’s economic sanctions have led to a significant increase in mainland demand for Taiwan’s chips, and that the strong demand is likely to continue until the mainland’s chip technology is upgraded.

He added that another major reason for the increased demand is that foreign-owned factories based on the mainland still need to purchase chips from Taiwan.

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“The impact of the pandemic has diminished,” he said, “and the economy is booming compared with last year. Many new technologies are emerging, and these have led to the increased demand for chips from the mainland.”

In its statement, Taiwan’s finance ministry also said the island has expanded its manufacturing capacity since last year, and robust exports are expected in the first quarter of 2022.

Analysts with TrendForce said market demand in the global chip industry may have reached US$89.7 billion last year, and they estimate that Taiwan accounted for 64 per cent of that total.

The US-based International Data Corporation predicts that demand for personal computers in China will continue to grow due to pandemic-induced work-from-home arrangements, and the research firm expects 60.01 million PC units to be sold in China this year. That would further drive up demand for chips on the mainland.

Since Tsai Ing-wen of the Democratic Progressive Party became Taiwan’s president in May 2016, cross-strait relations have remained strained. Given the impact of the pandemic on global supply chains, Taiwan has accelerated its investment diversification away from the mainland, while exports to the mainland have increased.

China has long viewed Taiwan as a breakaway province and has vowed to take control of the island, by force if necessary.

Taiwan’s Ministry of Economic Affairs said the value of the island’s investments in mainland China fell by 14.5 per cent, year on year, to US$4.79 billion in the first 11 months of 2021.

On November 18, Taiwan opened a de facto embassy in Lithuania, prompting Beijing to immediately downgrade its diplomatic relations with Lithuania. And early last month, the US and Taiwan discussed cooperating on a new trade framework.