Taiwan Business Brief – September 2022

Offshore wind was a major contributing factor to the drastic increase in FDI during the first seven months of 2022.


Account Surplus, NTD Dip; CPI Hikes

Taiwan’s current account surplus fell to its lowest in five quarters during Q2, as imports of semiconductor equipment, mineral products, and COVID-19 preventive items experienced a sharp increase, the Central Bank said. 

Data compiled by the Bank showed that the surplus in Taiwan’s current account, which mainly measures the exports and imports of goods and services, fell by US$2.99 billion in Q2 2021 to US$26.55 billion, the lowest level since Q1 2021, when the figure stood at US$25.96 billion. 

Taiwan also reported a net fund outflow of US$24.36 billion in its financial account in the second quarter. This was the 48th consecutive quarter of net fund outflow. [According to the Central Bank, the net fund outflow was mainly caused by portfolio investments abroad as insurance firms expanded their investment in debt securities.] Meanwhile, non-residents’ portfolio investment saw a net fall of US$12.97 billion in Q2.  

The Taiwan dollar fell to the lowest rate against the U.S. dollar in more than two years in August as the Central Bank scaled back its intervention to allow the currency to weaken. Economists said the currency would likely see further weakness in the short term, although Taiwan’s healthy economy is expected to limit the fall. 

Wu Meng-tao, an economist with the Taiwan Institute of Economic Research (TIER), said he was not surprised that the Taiwan dollar dropped below the NT$30 threshold after foreign institutional investors withdrew large funds from the region for greenback-denominated assets. A downtrend for the Taiwan dollar will continue as the interest rate gap between the U.S. and Taiwan widens, he added. 

According to the Directorate of Budget, Accounting and Statistics (DGBAS), the Consumer Price Index (CPI) rose by 3.36% year-on-year in July, breaking the inflation warning line of 3% for the fifth consecutive month this year. Food prices experienced the most significant hike at 7.18%, as suppliers passed higher costs onto customers. Core CPI, a more reliable price tracker that excludes volatile items, rose 2.73%, above the 2% acceptable to the Central Bank. 

Offshore Wind Investment Major Boost For FDI

The amount of foreign direct investment (FDI) in Taiwan approved by the government rose by about 200% year-on-year in the first seven months of 2022, thanks to funds pledged for Taiwan’s offshore wind power development. 

Approved FDI during the January-July period totaled around US$9.69 billion (NT$290.90 billion), up 201.84% compared to a year earlier, while the number of approved FDI applications fell 7.04% year-on-year to 1,426, according to Investment Commission figures. 

According to the commission, the push for green energy development that has drawn foreign capital was a significant factor in the expansion of approved FDI, with three applications for wind power investment accounting for nearly 43% of the total FDI during the period. Between January and July, the commission approved applications from Denmark’s Ørsted Wind Power TW Holding A/S and CI CI II Changfang K/S, as well as Netherlands-based NP Hai Long Holdings B.V. Meanwhile, companies from countries under Taiwan’s New Southbound Policy secured approval to invest US$1.52 billion in Taiwan, an increase of 328% from the year before. 

GlobalWafers’ U.S. Plant to Break Ground in November 

Taiwan-based GlobalWafers Co. announced on August 18 that a planned 12-inch silicon wafer plant in Texas would break ground in November, following the passage of the U.S. CHIPS and Science Act. The company, which is the world’s third-largest supplier of silicon wafers, was waiting for the passing of the CHIPS Act to move ahead with its US$5 billion investment in Sherman City, Texas. 

On the same day, a Facebook post by the American Institute in Taiwan (AIT) said its Director Sandra Oudkirk had met with GlobalWafers Chairperson and CEO Doris Hsu the day before to discuss the firm’s Texas investment plan and strategies. “We recognize the crucial role Taiwan plays in global supply chains, especially in critical technologies like semiconductors, and we will continue to work together to ensure these supply chains remain safe and secure,” the Institute said in the post. 

GlobalWafers said that in addition to investing NT$55 billion in the first phase of the Sherman facility, it would invest another NT$45 billion in international expansion. Currently, GlobalWafers operates 16 locations in Taiwan, the U.S., China, Japan, Denmark, Poland, South Korea, Italy, Malaysia, and Singapore. 

E Ink Unveils Expansion Plans 

E Ink Holdings Inc. on August 17 announced capacity expansion projects in Taiwan and China. The company, the world’s largest e-paper display supplier, will invest NT$3.31 billion (US$110.4 million) in Taoyuan’s Guanyin District and NT$3.25 million (US$479,400) at its facilities in China’s Jiangsu Province. 

According to E Ink, the second half of the year will see sequential growth in sales and net profit as major retailers around the world accelerate the installation of electronic shelf labels (ESLs), which will counteract the falling demand for e-reader and e-note products.