Taiwan's Record-High Exports Reveal Troubling Unbalanced Industry

Industry analysis organization CRIF China Credit Information Service (CCIS) warned three issues unbalancing Taiwan's economy and industry despite last year's export value breaking record highs at US$345.28 billion.

CRIF CCIS factored that Taiwan's exports were too concentrated in intermediate goods, the electronics industry, and high reliance on exporting to China as the top three warning signs. This would mean a skewered development of Taiwan's industries and encouraging a lack of diversification.

Their latest press release pointed out that Taiwan's export trading saw resurge despite a downward trend in the beginnings of the COVID-19 pandemic last year, reporting a 4.9% export growth. CRIF CCIS cited Taiwan's successful pandemic measures that ensured business as usual on the island. Amid the world's pivot to 5G communications, Taiwan's long-term focus on developing related technologies also paid off.

The ongoing China-U.S. trade war had also forced the global supply chain to seek decoupling from China or the U.S., which rather than hindering business, clients instead turned to Taiwan's manufacturing to fulfill orders.

While the Economic Ministry's Department of Statistics offered a positive outlook for Taiwan's exports this year, suggesting another record-breaking stint, CRIF CCIS' warning for the three long-term issues are as the following:

Taiwan's export structure has moved towards intermediate goods since 2002. At that time, intermediate goods made up Taiwan's exports at 66% and increased to 77.1% by 2020. However, other segments, including capital goods and consumer goods, continued a downward trend to only 13.4% and 8.9%, respectively, in 2020.

The press release pointed out Taiwan's pivot to intermediate goods showed a failed transformation of the island's export model, as it continued to rely heavily on OEM and labor division.

The second issue is the heavy reliance on the electronics industry, which made up 39.27% of Taiwan's exports last year. Together with the information, communication, and audio-video products (14.24%), both segments make up over half of Taiwan's exports. CRIF CCIS says this is crucial, as the two industries maintain so much relevance that both could make or break Taiwan's annual export growth.

The over-concentration on two industries had stunted development in other sectors, the press release pointed out. For instance, while Taiwan has made strides in the machinery industry, its export ratio only made up 6.34% last year, a 2.18 percentage point decrease compared to 2002. Optical products also showed a similar downward trend.

Lastly, Taiwan's exports have continued to rely on China -- increasing from 32.3% in 2002 to 43.9% in 2020. In numbers, electronic product orders in 2020 totaled US$161.4 billion, with US$6.35 billion in orders coming in from China, followed by US$4.7 billion from the U.S. CRIF CCIS cited these numbers as a strong indicator that Taiwan's industry would still have a difficult decoupling from China.