Taiwan investment in the U.S. surges

Mark O'Neill January 31, 2023 09:42

As the Sino-U.S. technology war intensifies and cross-straits relations worsen, Taiwan companies are increasing rapidly their investment in the United States.

In the 2018-2022 period, Taiwan investment in the U.S. was US$8.3 billion in 378 projects compared to US$2.2 billion in 346 projects in the 2013-2017 period. In the 2018-2022 period, Taiwan investment in the mainland was $27.5 billion in 2,503 projects, down from US$49.4 billion in 2,381 projects in the 2013-2017 period.

Of the 2018-2022 investment in the U.S., 73 per cent was in manufacturing, with 63 per cent in electronics, 14 per cent in wholesale and retail and nine per cent in finance and insurance. The three states which attracted the most investment were California, Arizona and Texas.

Driving this change are policies of the U.S. government to rebuild manufacturing at home, a need to diversity production sites and be close to American clients and anxiety over cross-straits relations and the direction of economic policy in China.

Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council, said that Taiwan firms were likely to expand their footprints outside of China, including the U.S., Vietnam, Singapore and Japan.

But investing in the U.S. is no simple matter. Companies must find suitable land, workers and skilled technicians, introduce the Taiwan work culture and deal with complicated regulations that may alter with changes in state and national government.

The largest investment is Taiwan Semiconductor Manufacturing Company’s first U.S. plant in Phoenix, Arizona, at a cost of US$12 billion. Its suppliers are also setting up production in Arizona to provide goods and components to the new TSMC factory.

Delta Electronics has bought a plant with 11,200 square metres in Plano, on the outskirts of Dallas, Texas. It supplies equipment to auto manufacturers. It chose Texas because it has weak unions and has cheap green electricity that is exempt from state taxes. Plano is also close to the main production bases of AT& T, Verizon, Cisco and Texas Instruments.

Delta wants to take advantage of the US$2.3 billion offered by three Acts of the Biden administration to electric vehicles, telecommunications and energy infrastructure. Disbursement of the money is linked in part to the degree of production within the U.S.

In 2016, Everest Textile invested NT$2 billion in Forest City, North Carolina, with production beginning in 2018. General Manager Ye Ching-lai said that 60 per cent of his customers were in the United States.
Everest Textile bought an old factory in Forest City, which has a population of 7,000, and converted it, sending 100 staff from Taiwan. In 2021, the factory’s revenue was NT$10 billion. “While the scale of production is smaller than plants in Asia, our delivery time to customers is less than half the two months needed from Asian suppliers,” he said.
In the first two years, the factory lost money because it could not compete with the lower prices offered by Asian competitors. Then Ye switched to cloth for more specialised items, including uniforms for the U.S. military and uniforms used in the fight against Covid.

In 2020, the plant became profitable for the first time. He also cut the workforce from 340 to just over 200 and used overtime when needed.

Excellence Optoelectronics founded in the Hsinchu Science Park invested NT$400 million in 2017 in a plant in Grand Rapids, Michigan to produce LED lighting for automobiles. It looked at seven locations in the U.S. and selected Grand Rapids for its proximity to major U.S. automakers in the Detroit region.

Last November the company said that the plant would lose money in 2022 because of the impact of the Covid pandemic and a shortage of semi-conductors that had forced its customers to reduce production of cars. The company expects to turn a profit in 2023 and certainly in 2024.

But setting up in the U.S. is not a simple matter, as Foxconn has discovered in Wisconsin. In 2017, its then CEO Terry Gou signed an agreement with the governor to invest US$10 billion in a manufacturing campus with 20 million square feet and create 13,000 jobs. The state of Wisconsin would provide US$3 billion in subsidies. President Donald Trump himself attended the ground-breaking ceremony. The firm planned to make LCD screens.

But, five and a half years later, Foxconn has constructed only four buildings. It has abandoned plans to make the LCD screens, saying it cannot compete with cheaper models made in China and that the investment climate in Wisconsin had changed dramatically, with the election of a Democrat governor replacing the Republican one who signed the deal.

-- Contact us at [email protected]

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.