By Austin Babb and Jason Wu
Economic Diversity Through New Tech
In a recent interview with the Central News Agency (CNA), Minister of Economic Affairs Wang Mei-hua noted that in addition to Taiwan’s robust semiconductor industry, the rise of 5G and electric vehicles (EV) offer an opportunity for the island’s economy to diversify. Taiwan’s exceptional handling of COVID-19 and decent economic growth in 2020, as well as its reputation as a trusted, reliable supply chain partner, make it an ideal location for expanding production of components for these new technologies.
Taiwan is already a major supply chain source for U.S. EV giant Tesla. Taiwan offers the ability to provide small-volume, high-variety manufacturing to the company. In addition to Tesla, the EV industry boom has increased demand for electronic components, an area where Taiwan is quite strong. Around 30 Taiwanese companies, including Pegatron, Delta Electronics, and Fukuta Electric and Machinery Co., have become suppliers for Tesla.
In addition, Hon Hai Precision Industry Co. (Foxconn), Taiwan’s largest contract manufacturer, has also made its entrance into the EV market. The company announced on January 19 that more than 400 firms have joined its MIH Open Platform for EV development. The platform is aimed at promoting collaboration in the EV industry to resolve potential bottlenecks. Foxconn also recently announced a joint venture with local automaker Yulon Group to manufacture EVs, part of its goal of gaining a 10% share of the global EV market by 2027.
In addition, Taiwan has several advantages as a supplier in the global rollout of 5G, especially considering the growing demand for “clean networks” free of Chinese-made equipment. Minister Wang stated in the CNA interview that 5G “will open up business opportunities for Taiwanese network communications firms, manufacturers of servers and terminal equipment, and telecoms.”
Taiwan FDI Drops Due to COVID
The Investment Commission (IC) of the Ministry of Economic Affairs stated on January 20 that foreign direct investment (FDI) in Taiwan fell to US$9.14 billion in 2020, down 18.3% from the year before. A total of 3,418 FDI projects were approved by the government in 2020, a decrease of 17% from 2019. However, the IC said that while total investment dropped last year, the figure constituted the sixth highest on record.
According to the UN Conference on Trade and Development statistics, FDI decreased by 40% worldwide in 2020. The IC notes that the comparatively moderate decrease in Taiwan is due to the island’s successful response to the COVID-19 pandemic, which countless countries around the world are still struggling with. The commission considers this a vote of confidence by foreign investors in Taiwan.
On a micro level, 90 Chinese firms were approved to invest in Taiwan in 2020, a 37% drop from 2019. However, this decrease in the number of investing firms did not impact total FDI from China, which increased by an impressive 30% last year.
The IC also approved 475 applications by Taiwanese firms to invest in China last year, down 22.1% from 2019. However, the commission reported that total investment in China rose 41.5% in 2020, while total outward FDI by Taiwanese firms surged 72.3%.