As US President Donald Trump’s tariff policies create uncertainty for the global economy and disrupt the established trade order, Taiwanese companies are focusing on what they can control — recalibrating their overseas expansion plans and accelerating internal innovation efforts to pursue new regenerative opportunities. Despite the challenges, there could be positive outcomes from the thorny issue of the tariffs.
Taiwan’s small and medium-sized semiconductor companies are following the lead of Taiwan Semiconductor Manufacturing Co in establishing smaller-scale production lines and sales offices in the US, not only to mitigate the effects of the tariffs, but also as an initial step to tap into the US market.
For local companies such as leading flat-panel display makers AUO Corp and Innolux Corp, a different strategy is being pursued to address tariff challenges. Both firms expect the impact of Trump’s tariffs to be limited, as the US accounts for only about 10 to 20 percent of their total sales, and most of their products are not directly exported to the US. To further rein in cost increases, some companies have adopted free-on-board (FOB) transaction terms to better manage the ever-changing import levies.
Rather than calculating the cost of establishing US-based manufacturing, AUO and Innolux have expressed no interest in expanding production to the US, citing high labor costs and thinner margins. Instead, they are focusing on their core strategies of shifting away from commodity flat-panel products and moving into higher-value-added segments, including next-generation display technologies such as microLED, which offer better cost-efficiency.
AUO is positioning itself as a total solutions provider, especially in auto intelligent cockpit operating systems, after acquiring Germany’s Behr-Hella Thermocontrol GmbH. It is also accelerating its overseas diversification, targeting untapped opportunities in Europe and Southeast Asia, where countries continue to support free trade. These efforts build on AUO’s manufacturing diversification into Vietnam, India, Europe and Mexico over the past few years.
Meanwhile, Innolux is expanding into the semiconductor sector, leveraging its panel-manufacturing know-how. The company expects to ship its first batch of chips using its panel-level packaging technology by the end of this year after several delays.
Taiwanese companies in traditional sectors such as machine tools, bicycles and textiles should take advantage of the current environment to shift away from heavy reliance on China’s market and its relatively low labor costs.
The nation’s major machine tool makers have paused shipments to the US as they negotiate with customers over how to share the tariff burden. Trump’s 32 percent “reciprocal” tariff, combined with a 10 percent levy on Taiwanese imports, is a sharp increase from the previous 4.7 percent, posing a severe challenge for companies whose average gross margins are only 20 to 25 percent.
The US is Taiwan’s second-largest export market for machine tools, accounting for 17.2 percent of total shipment value in the quarter ended March 31, behind China’s 26.8 percent, Taiwan Machine Tool and Accessory Builders’ Association data show. Facing the higher tariffs, some machine tool suppliers with lower exposure to the US market are considering withdrawing from it entirely and shifting their focus to European and Asian markets — a strategy also under consideration by local PC vendors.
Amid the evolving global tariff environment and trade landscape, local manufacturers are striving to navigate the challenges with agile operation and proactive decisionmaking to seize new business opportunities the trade-related changes present.
There is optimism that they can weather this difficult period, just as they did during the COVID-19 pandemic, provided that they take advantage of the current timing to expand globally, step by step.
