The Impacts of the American-Chinese Trade War and COVID-19 Pandemic on Taiwan’s Sales in Semiconductor Industry

Abstract

The following paper deals with the American Chinese trade war and its impacts on Taiwan’s economy, particularly sales in Taiwan’s semiconductor industry. Indeed, trade tensions impact global supply chains, especially in the semiconductor industry, since its supply chain is highly globalized and dependent on many companies in various countries. Hence, the industry is susceptible to trade disruptions. With the largest microchip manufacturer TSMC, Taiwan is one of the key players in the fabrication of microchips. It has strong cultural, geographical, and economic ties to China and, on the other hand, strong economic and military relations to the United States. A trade war between those two countries is an enormous future challenge for the island. However, this paper proves that trade tensions had a lower-than-expected impact on Taiwan’s economy and the microchip industry. Due to capital that diverted from China to Taiwan and investments from Taiwanese companies in other countries like the USA. Additionally, Taiwan handled the Covid-19 pandemic extraordinarily well and therefore did not have any significant economic restrictions in the domestic market. Now it depends on the future action steps of the Taiwanese industry and government. If Taiwan manages to steer outgoing companies from China to Taiwan, the island could emerge as the surprise winner of the trade dispute. For this purpose, the paper gives concrete recommendations on how to increase the attractiveness for FDI through tax benefits or infrastructure investments.