Breakingviews - Taiwan's tech edge will cushion U.S. policy tumult

Nan Shan Plaza (L) and Taiwan's landmark building Taipei 101 are pictured through the window of an airplane, in Taipei, Taiwan August 19, 2018.

HONG KONG (Reuters Breakingviews) - Taiwan’s technology know-how should provide a diplomatic edge. TSMC, the $560 billion chipmaking powerhouse, showcases the island’s clout in international supply chains and beyond. That bodes well for bilateral trade and investment flows, even as geopolitical uncertainties mount.

Taiwan Semiconductor Manufacturing is leading a rebound in the trade-dependent economy. Strong demand for semiconductors worldwide, combined with President Tsai Ing-wen’s successful containment of Covid-19, helped boost exports to a record $345 billion in 2020. TSMC, the world’s largest contract chipmaker, grew annual sales by a quarter, to $48 billion, with more financial results due out later on Thursday. Its shares have surged 75% over the past year, thanks to a relentless march on rivals in developing cutting-edge chips for everything from 5G smartphones to self-driving cars.

A chaotic presidential transition in Washington, however, has dampened the mood in Taipei, where Tsai has benefited from fresh U.S.-China tensions under President Donald Trump. American arms sales to Taiwan topped $5 billion in 2020, according to Reuters, while diplomatic engagements have been at their strongest in years. Outgoing Secretary of State Mike Pompeo last week announced he was lifting restrictions on contacts between U.S. officials and their Taiwanese counterparts. The unprecedented move prompted fierce condemnation from Beijing, which claims the democratic island as its own territory.

It’s no wonder that over half those polled in Taiwan favoured a Trump re-election, according to an October survey conducted by the Taiwan Public Opinion Foundation. President-elect Joe Biden is likely to be less antagonistic to China. Fears that he would roll back support for the island were heightened on Tuesday when a planned visit by the U.S. ambassador to the United Nations was cancelled. The decision may be part of the transition to the incoming administration but follows another postponed trip by a senior U.S. official in November.

The two economies are nevertheless growing closer, particularly as the United States seeks to develop advanced technologies at home. Intel may soon outsource chip production to TSMC, joining a long list of American giants like Apple and Qualcomm that rely on Taiwanese components. Those sorts of ties can withstand political ructions.


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