The economic downturn and local political instability sparked a 73 percent surge in China investment by Taiwanese high-tech companies last year, according to a report issued yesterday by the Taipei Computer Association (TCA) and the Chinese-language E-Business Weekly.
The past two months have seen investment across the Taiwan Strait slowing, however, thanks to signs of an economic turnaround and more cooperation among politicians, according to the association, the largest information-technology industry association in Taiwan with over 4,000 member companies.
The association said over half the nation's tech firms are now invested in China, up sharply from last year. Of the firms already in operating there, 45 percent reported that the production value of their China operations outstripped that of factories in Taiwan last year.
"These are surprising numbers, I don't know how they came up with them ... [but] it sounds unreasonably high," said an official at the Ministry of Economic Affairs who preferred to maintain anonymous.
The association sent surveys to all of its members and received 423 back, a response rate of around 11 percent. Officials at TCA would not give an exact number of members.
China has grown in importance to Taiwan over the years, both as a place to set up manufacturing plants and as a trade partner.
Exports to China accounted for 19.6 percent of Taiwan's total export trade value last year, according to the ministry.
Many firms operating in China are not making money, according to the report. It said 81.7 percent of the nation's high-tech firms did not turn a profit in their China operations last year, up slightly from 77.1 percent the year before.
It also indicated Taiwanese firms need to boost R&D spending before they are overtaken by China in terms of manufacturing expertise.
Over half of the components, semi-finished products and other materials China-based companies formerly required from their Taiwanese parent company or partner are now easy to find in China, it said, up from only a third last year.
Frank Huang (
Huang, also head of Powerchip Semiconductor Corp (
Such a withdrawal would send shockwaves through the market, since the shares of Taiwan's two leading chip firms, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電), make up nearly 20 percent of the entire value of Taiwan's stock market.
A foreign analyst who requested anonymity said a failure to allow chipmakers to invest in China might impact share prices in the short term, but not in the long run, unless the government continues to drag its feet.
Local companies believe now is the time to set up older plants in China to take advantage of cheap land and labor and a growing market there.