TSMC drives record investment into US, Japan in China decoupling

TAIPEI - Taiwanese companies invested a record amount of money in the US and Japan in 2024 while the figure for China stagnated – highlighting supply chain shifts resulting from tech rivalries and worsening cross-strait ties.

Flows into the US reached US$14.1 billion (S$19.3 billion) in 2024, driving total Taiwanese foreign direct investment to US$48.6 billion, both record highs, according to Bloomberg News calculations based on a statement from the Ministry of Economic Affairs.

The ministry on Jan 15 linked the surge to Taiwan Semiconductor Manufacturing Company’s (TSMC) overseas investments, such as for a plant in the US state of Arizona. 

The expenditures of companies going into Japan, Canada and Singapore also hit records. In contrast, new investments into China rose only slightly to US$3.65 billion in 2024. They accounted for only 7.5 per cent of companies’ total overseas spending – the lowest in data going back to 1991.

The figures come as the Biden administration offers companies like TSMC grants and loans to start production in the US to revitalise American chip manufacturing.

Taiwanese companies are also looking to invest in the US to reduce tensions and avoid any tariffs from US President-elect Donald Trump’s incoming administration.

Also, relations between China and Taiwan have worsened since May 2024, when President Lai Ching-te took charge of the democracy of 23 million people. China views Mr Lai as a “separatist” undermining its goal of bringing the two sides together and has repeatedly ordered major military exercises around the main island to intimidate his government.

TSMC, meanwhile, reported a 57 per cent leap in fourth-quarter profit on Jan 16 as demand surges for advanced chips used in artificial intelligence (AI) processing.

The world’s largest contract chipmaker, whose customers include Apple and Nvidia, posted a net profit of NT$374.68 billion (S$15.6 billion) for the three months to Dec 31, 2024, a record high for any quarter.

TSMC, however, faces headwinds from US government technology restrictions on China and uncertainty about potential Trump tariffs.

The US government said on Jan 13 that it would further restrict AI chip and technology exports, adding to potential issues TSMC could face, though Taiwan and other close US allies will be allowed unlimited access to American AI technology.

Underscoring the tech divide between Washington and Beijing, on Jan 14, the US finalised a rule that effectively bans new personal smart cars from China and Russia.

The US also unveiled a long-awaited executive order on AI, opening the door to leasing federal land for companies that agree to build massive AI data centres. BLOOMBERG, REUTERS