The TAIEX yesterday surged 1.19 percent, or 153.04 points, to a high of 13,127.47 as investors expected US president-elect Joe Biden to bring normalcy to the US economy and push for the passage of a COVID-19 stimulus bill to inject fresh funds into the battered US economy. That bodes well for Taiwan’s export-oriented economy, as the US remains the world’s biggest consumer of goods and one of the nation’s major trade partners.
The world is watching every move Biden’s team makes, as the effects would be significant and could create a major shift in supply chains.
Biden is unlikely to back down on a US-China technology rivalry, but he might take a more flexible and rational approach by reopening trade talks with Beijing. He has repeatedly challenged the use of punitive tariffs on Chinese imports by US President Donald Trump’s administration.
It is believed that Biden would target different sectors to ease a trade deficit with China. He might still take a tough stance on China’s excessive subsidies for state-owned companies, theft of Internet technologies, 5G technology dominance and intellectual property protection.
However, he agrees with Trump on reviving US manufacturing and has pledged to bring back more manufacturing jobs to ease the country’s dependency on China. Biden’s team has said it wants to ensure the future is “made in America by all of America’s workers,” which is similar to Trump’s promise of bringing back overseas manufacturing jobs with tax breaks for domestic production.
What does Biden’s victory mean for Taiwanese companies, some of which have made China their manufacturing hub over the past decades? Since efforts to revive US manufacturing would continue under Biden, Taiwanese technology companies should carry on diversifying production. Higher trade barriers and the shift away from single-country production would continue to make reshaping supply chains irresistible. The COVID-19 pandemic underscores the importance of realigning supply chains and localizing production, as the threat of virus-related lockdowns and factory closures looms.
Local electronics makers, including Apple suppliers Pegatron and Wistron, are likely to accelerate their deployment of new production lines at home and in countries such as India and Vietnam, where labor costs are lower.
As for Taiwan Semiconductor Manufacturing Co (TSMC), some wonder whether the world’s biggest contract chipmaker would follow Hon Hai Precision Industry in drastically scaling down its US$12 billion plan to build a factory in Arizona given that Trump was denied a second term.
TSMC has been in talks with the Trump administration to build an advanced factory to make 5-nanometer chips by 2024, a move that analysts said was prompted by escalating US-China trade tensions. TSMC said that government incentives would help reduce higher manufacturing costs in the US. The investment, unveiled in May, is estimated to create 1,600 jobs in the US, the chipmaker said at the time.
Taiwanese green energy firms and companies in the electric-vehicle supply chain should also keep an eye out for business opportunities under a Biden administration. Biden supports reducing greenhouse gas emissions and has outlined a US$2 trillion plan to combat global warming. The plan would significantly escalate the use of clean energy in the transportation and construction sectors.
As long as Taiwan is the world’s second-biggest exporter of solar cells — and is quickly expanding its presence in solar power generation systems — it has a good chance to capitalize on this opportunity.
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