U.S. NOW TOP MARKET FOR TAIWAN EXPORTS

Hi-tech hub shipped more to Americans in first quarter than to mainland, in what analysts see as sign of a shift in supply chains led by Washington

The United States has surpassed mainland China as Taiwan’s top export destination this year, in a sign that supply chain decoupling has made a palpable shift towards Western-allied markets.

Taiwan’s US$26.625 billion worth of exports shipped to the US in the first quarter beat the US$22.407 billion sent to mainland China, International Trade Administration data shows.

Mainland China has led the US as the top destination for Taiwan’s exports every year for the past decade, although the gap with the mainland fell last year to less than US$20 billion from more than US$45 billion the previous year.

Many foreign-invested importers of Taiwanese goods in mainland China, including those in the market for components for phones and PCs that were assembled for re-export, had moved operations to Southeast Asia or further afield because of trade schisms between Beijing and Washington, analysts said

US officials have placed import tariffs on goods from China since 2018, while also restricting American business with many of its technology firms.

The US Department of Commerce’s Bureau of Industry and Security updated its export controls in 2022 to stop China from obtaining advanced semiconductors, technology and related equipment, with the controls further tightened a year later.

The Joe Biden administration also signed an executive order in August that curbed investment in semiconductors, quantum information and artificial intelligence (AI) in “countries of concern”, including China.

The US is also offering Taiwan chip makers, among the world’s most advanced, incentives to set up plants in the country.

Taiwanese exports to the 10-nation Association of Southeast Asian Nations reached US$22.281 billion in the first quarter of 2024, up by 33.4 per cent year on year.

The Asean bloc is an up-and-coming factory region that is seen as relatively neutral towards China and the US.

“This, I think, is a shift in supply chains,” said Darson Chiu, a fellow with the Taiwan Institute of Economic Research.

“There are some Taiwanese exports that had gone to China that are now going to Southeast Asia.”

Investors from Taiwan with factories in mainland China once loomed larger as importers of Taiwanese parts, but US-China trade friction plus cross-strait tensions have prompted some operators to leave, while others have been deterred from starting operations.

Cross-strait Taiwanese investment hit a 22-year low of just more than US$3 billion in 2023, according to the island’s Ministry of Economic Affairs.

Taipei’s relations with Washington have strengthened, especially since late 2022 when former House speaker Nancy Pelosi defied warnings from Beijing and visited Taiwan.

Tech hardware made up 31.7 per cent of the island’s overall exports in the first quarter.

US importers had “lifted” Taiwan’s shipments of chips, while mainland China required fewer Taiwanese semiconductors because it was developing its own domestic industry, Moody’s Analytics economist Harry Murphy Cruise said.

Mainland chip production “surged” by 40 per cent in the first quarter to meet demand for electric vehicles, he added.

On the mainland, hesitant consumption, unemployment, falling home prices and perceived overcapacity in some industrial sectors had further eroded trade with Taiwan, analysts said.

“This shift is due to the strategic plan that the US wants to construct a US-led world supply chain and market order,” said Hu Jin-li, a professor with the Institute of Business and Management at the National Yang Ming Chiao Tung University in Taipei.

Mainland China, meanwhile, was trying to form a global supply chain that was sheltered from any US intervention, Hu added.

American demand for Taiwanese chips would “remain robust” until efforts at reshoring semiconductors to the US matured, Murphy Cruise said.

Demand for other hi-tech hardware was also surging, said George Xu, director of Asia-Pacific sovereign ratings with Fitch Ratings.

“Taiwan’s record-high merchandise exports to the US in the first quarter of 2024 have been propelled by surging shipments of information and communications technology products manufactured and assembled on the island,” Xu said.

He pointed to growing demand from large US tech firms for AI-related products, such as high-performance servers and cloud computing equipment, in which “Taiwanese suppliers dominate the global market”.

Exports to the US have been propelled by surging shipments of [IT] products GEORGE XU, FITCH RATINGS