Regional analysts say Taiwan’s recent surge in exports despite a global economic downturn is most likely due to an increase in orders from Chinese tech firms that hope to depend less on the United States in the wake of trade and regulatory disputes.Chinese technology hardware firms are stockpiling semiconductors made in Taiwan because Taiwanese factories produce some of the world’s most advanced chips, as shown by a 6% jump in exports from July through September, the analysts believe. China has separately announced plans to become a tech powerhouse but hasn’t perfected chips for 5G technology.Taiwan and China are meanwhile locked in a political dispute. China claims sovereignty over the island, which rejects China’s design for unification and over the past four years has pushed companies to rely less on the Chinese market. The two sides have been self-ruled since the 1940s.“They know they’re not yet able to produce at least the highest-end semiconductors needed for 5G, so Taiwan has a huge role to play because that’s what they do the best, and I don’t think they’re going to give up on that for whatever political, geopolitical reasons,” said Alicia Garcia Herrero, chief Asia-Pacific economist with the French investment bank Natixis. “It’s just too juicy.”  Tech hardware is Taiwan’s top China-bound export, while information and communication technology gear make up half of Taiwan’s total exports.Over the third quarter, $27.2 billion of Taiwan’s $90 billion in exports went to China, Bureau of Foreign Trade data show, and Chinese importers bought more than one-third of the $32.9 billion in exports from the category that covers semiconductors.September export data alone reflected “rush shipments” from Taiwan to the giant Chinese telecom firm Huawei Technologies and China’s biggest chip factory Semiconductor Manufacturing International Corp., Taiwan government-backed Central News Agency says. The new Huawei Mate 40 Pro smartphone is held for a photo, in London, Wednesday Oct. 21, 2020.Taiwan Semiconductor Manufacturing Co., or TSMC, is the world’s largest contract chipmaker with some of its most advanced technology. In the third quarter this year, 22% of TSMC’s net revenues came from China, up from 21% in the previous quarter and 20% in the July-September period of 2019, a company publicist said. Exports pushed Taiwan’s GDP growth in the most recent quarter up 3.3% year-on-year, and the government forecasts a 1.56% GDP increase this year. Both figures would contrast sharply to the International Monetary Fund forecast of a 4.9% global economic fall this year, led by some of the world’s biggest economies.Third-quarter data in Taiwan tracked a tightening of U.S. restrictions on Huawei, which President Donald Trump’s government considers a national security threat. Those orders came amid a nearly 3-year-old Sino-U.S. trade dispute and before the U.S. presidential election, all spelling uncertainty for China.“A lot of these goods are being sold in China because China is actually stockpiling inventory, and the reason for stockpiling is the recent state of Sino-U.S. relations — not just Huawei, but there are a lot of uncertainties for the whole industry,” said Brady Wang, an analyst in Taipei with the market intelligence firm Counterpoint Research.Chinese firms still traditionally look to Silicon Valley for upstream technology.In a statement Tuesday on the sale of a smartphone unit, Huawei said its consumer product lines had been “under tremendous pressure as of late” because of “a persistent unavailability of technical elements needed for our mobile phone business.”Chinese tech firms are trying anyway to depend less on foreign supplies and ideas, a trend that analysts describe as self-reliance. Growth in local talent and “constant advances” in research ability show China is already an “influential innovation power in the world”, domestic news website Chinanews.com reported in October 2019. The report cites “accelerated leapfrogging” since 2011 and says China is “moving from an important technological country in the world to a world tech powerhouse.”China eventually hopes that it can make everything it needs domestically, Wang said. But he said it will depend on foreign ideas and supplies for a while. “in the process they’re clear they can’t go to the United States for that,” Wang said.“Self-reliance from China doesn’t mean full self-reliance because they’re not yet ready and I think that’s going to boost in a way that semiconductor industry even further in Taiwan,” Garcia said.U.S. President Donald Trump’s curbs against Chinese tech, with no signs of abating under President-elect Joe Biden, raised the urgency for China to rely more on itself, said Song Seng Wun, an economist in the private banking unit of Malaysian bank CIMB. “I suppose it’s a wake-up call because of four years of the Trump Administration and that it doesn’t look like even if there’s a change of administration that the policy will be changed significantly,” Song said.China accelerated Taiwan’s export growth in another way over the first nine months of the year: Exports received by American firms grew by 7% year on year as the importers “shifted from China to alternative suppliers to avoid U.S. tariffs,” London-based forecasting and consulting firm Capital Economics said in an October 30 research note.Taiwan owes another part of its boom to the quick control of COVID-19, meaning no shutdowns in early 2020. China bounced back in March from the worst of its outbreak and production has hummed along normally since then.
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