The little island of Taiwan has become one of the brightest spots in the Asian economy. In fact, the Taiwanese stock market is going through the roof. On Friday, Taiwan’s Taiex Index made huge gains, flirting with a record high. The benchmark has risen by around 22% this year and has outperformed most Asian peers.
Li Fang-kuo, a stock market expert said, “Taiwan stocks may rise further next year due to strong economic performance, better virus controls and Taiwan’s key role in the global supply chain.” So, while China keeps on planning a military invasion into Taiwan, the island nation keeps shining in the world economy. You may wonder what the secret of Taiwan’s stupendous growth is and how it hurts China.
Semiconductor- the secret of Taiwan’s bullish stock market
The growing enthusiasm for semiconductors or so-called “chips” is triggering the record performance of the Taiwanese stock market.
The semiconductors are the “new oil” for the 21st century. They are omnipresent in your life, even though you may not realise it. It is used in the mobile phone or laptop on which you are watching me right now. They are also used in cars and other automobiles, and fighter aircrafts and other defence equipment. So, the 21st-century world cannot function without them.
Presently, the retail markets are bullish on semiconductor companies despite global supply chain disruptions, which is helping lift stocks of Taiwanese chipmakers.
Taiwan- a world leader in semiconductors
When it comes to chips. There is no match for Taiwan. The island nation holds 63% of the global semiconductor market share. Yes, a small island with an area of just over 35,000 sq km controls more than half of the world’s semiconductor market.
And in terms of semiconductor technology, Taiwan outplays even the United States of America. The island nation accounts for 92 percent of the world’s capacity to make “nodes” of 10 nanometres or below.
And China is way behind. The country has tried raising an indigenous semiconductor industry but has failed terribly. Tsinghua Unigroup, the leading Chinese chip giant, too is ridden in debt and at odds with the Chinese government.
Much of Taiwan’s dominance in the semiconductor industry is attributable to Taiwan Semiconductor Manufacturing Co or TSMC, the world’s largest foundry.
Taiwan making merry with its semiconductors
With the Pandemic forcing people to spend more time at home, there has been a sharp increase in consumer electronics demand. And this could further embolden demand for semiconductors. This means a great Christmas for Taiwanese chipmakers who supply up to 90 percent of the semiconductors applied by the American tech companies.
In fact, countries across the world are struggling to overcome Pandemic-induced supply chain disruptions in the semiconductor market. Japan and India have already invited TSMC to manufacture semiconductors on their soil. Meanwhile, the chipmaker is also considering setting up an advanced plant in the US, as per Nikkei Asia.
Taiwan growing at China’s expense
It would be devastating for China to see Taiwan expand its semiconductor empire into the most developed nations in the world. And worse still, Taiwan is growing at China’s expense.
While countries are pouring lots of money into the Taiwanese tech and semiconductor sector, they are also pulling all their money out of the Chinese tech sector.
Chinese President Xi Jinping has been cracking down on tech giants for the past one year, which is wiping billions out of the Chinese stock markets. Why is he doing so? Well, because Jack Ma had once met Trump and Xi thinks he is an American agent.
Well, that’s what the CCP seems to propagate though there are deep-rooted issues like the Shanghai Faction in the CCP, which is hated by Xi but supported by tech entrepreneurs. But that’s a discussion for another day. All you need to know is that Xi cracked down on Chinese tech giants quite unapologetically, so much so that tech traders were reported to have lost $1.5 trillion in China.
And as investors realised that investing in Chinese tech stocks wasn’t worth it, they pulled out their money from those stocks and all that money is now getting funnelled into Taiwanese chipmakers. Taiwanese semiconductor companies are now expanding, while the Chinese tech companies are losing.
Taiwan’s semiconductor industry and China’s collapsing tech stocks are now bridging the military gap between Taipei and Beijing. In fact, the PLA might have to hold its horses now, because Taiwan’s “silicon shield” is too hard to breach.