Taiwan – How to Invest in Asian Tech Companies? [Guide]

Taiwan has been in the news a lot in recent months. However, most often it is not economic news, but political. This island is a bone of contention between the local Taiwanese government and the authorities of the People's Republic of China. The Taiwanese government believes that it is not subject to the legislation that is set in mainland China. In turn, the People's Republic of China believes that Taiwan is part of One China. Sometimes there is a dispute between the People's Republic of China and Taiwan. There have been three major crises when tensions between the island and the mainland were very strong. In the 50s, the People's Republic of China twice shelled islands located close to mainland China, but they belonged to Taiwan. During the first crisis, the People's Republic of China occupied the island of Yijiangshan. The third crisis broke out in the mid-90s, but ended quickly. In recent years, the People's Republic of China has often carried out maneuvers around Taiwan.

Taiwan is no ordinary island in Asia. It has an important geopolitical location, but the region's position on the world stage is also crucial. This is especially true for the global supply chain and the high-tech sector, where chips play a leading role. So is Taiwan a safe place to invest funds?

Taiwan – Economy

The official name of Taiwan is the Republic of China, where most of its inhabitants live in Taiwan. The population of this practically unrecognized country on the international stage is about 23,5 million people. The population is therefore smaller than Poland, but it is located on an area more than 9 times smaller. A few decades ago, the Republic of China was one of the Asian tigers. This small country has become an example of how, thanks to the industriousness of its citizens and skillful fitting into the supply chain, incredible social development can be achieved. According to data IMF in Taiwan, GDP per capita after adjustment for purchasing power parity is $79,0 thousand, which gives it 11th place in the world. For comparison, South Korea is in 26th place with an index of USD 62,9 thousand, while Japan is in 36th place with a score of USD 53,1 thousand. Meanwhile, Poland is in 38th place with a score of USD 51,6 thousand. As you can see, Lech Wałęsa's words about “Second Japan” may come true in the case of our country, but the problem will be to become “The Second Taiwan”. Importantly, such a high level of development was achieved with a small public debt. It is therefore a prime example of conservative management of the state budget.

Taiwan is an area that has been based on trade for decades. This can be seen in Statista data - according to this portal, the trade to GDP ratio has exceeded 118%, which is World Bank a comparable result to Poland (110%) and well above the world average (63%). Therefore, a trade blockade of the island could cause unimaginable losses to the economy.

Our titular "hero" has undergone incredible development. In the 50s, Taiwan's economy was based mainly on agriculture. It is now a world leader in semiconductor marketThe jewel in the crown is Taiwan Semiconductor Manufacturing Company, which supplies advanced chips to the electronics sector. It is a key company for the global economy. In addition to semiconductor production, Taiwan has a strong position in the development electronic equipment. Among the famous brands we can mention: Acer, Asus and HTC. In addition, it is developed LED and LCD display production industry.

In 2023, exports amounted to USD 433 billion, while imports amounted to approximately USD 352 billion. The most important trading partners were the following countries and economic areas:

• China,
• United States,
• Japan,
• European Union.

Exports are dominated by products with high added value. These are both układy scaloneAnd consumer electronics. The extent to which Taiwan's economy is linked to mainland China is evidenced by the fact that approximately 35% of exports go to China and Hong Kong. But only 15% to the United States. It seems that Taiwan can easily be forced into broader cooperation with the People's Republic of China by means of economic sanctions. However, by imposing an embargo on Taiwan, China will deprive itself of key components needed for the development of advanced technologies. If we look at imports, interestingly, China accounts for only 19% of imports, which is interesting because China is located very close geographically to Taiwan.

The service sector plays an important role in the Taiwanese economy, accounting for about 60% of GDP. It is therefore an interesting example of a country that has achieved a dominant position in its niche, while also developing very well service sectors, including: financial, logistics, tourism. A strong economy is driving a lot of retail consumption.

What is the future of Taiwan?

Taiwan is not resting on its laurels and is investing heavily in research and development. Particularly large expenditures are being made on the development of projects related to artificial intelligence, IoT and biotechnology. Taiwan is increasingly focusing on implementing a sustainable development strategy, which forces investments in energy.

The Taiwanese government intends to develop artificial intelligence (AI), 5G technology and the Internet of Things (IoT) in the coming years. This is an ambitious plan that will lead to the creation comprehensive infrastructure, which will enable the development of smart cities and industry. Another element of the transformation is energy - currently 20% of energy comes from renewable energy sources. Particular emphasis is placed on development solar and wind energy. The country aims to create a friendly regulatory environment for financial innovation, including the introduction "regulatory sandbox" for fintechs.

An important strategy is the so-called “New Southbound Policy”. It is one of Taiwan's key plans to diversify its trading partners. The policy aims to strengthen economic and cultural ties in Southeast Asia, South Asia, and Australia and New Zealand. This is aimed at greater economic integration with South Asia.

Taiwan and the Risk of Conflict with China

We will mention once again the risk of a potential confrontation between the People's Republic of China and Taiwan. At the 79th UN General Assembly, Wang Yi, or  The Chinese Foreign Minister mentioned that there is no “gray area” or “room for ambiguity” regarding China’s representation. He stated that Taiwan is:

“An inalienable part of China's territory.”

The minister mentioned that the full unification of China will be achieved and that Taiwan will eventually return to the motherland's embrace. So this is a dangerous turn that could end in stronger friction between Taiwan and the People's Republic of China.

How to invest in the Taiwanese market?

You can invest in the Taiwanese market through several different types of instruments. These include:

• derivatives (e.g. CFDs) on leading stock indices,
• individual selection of shares,
• ETFs with exposure to Taiwan.

Stock indices

First, let's take a closer look at the Taiwan Stock Exchange (TWSE). The stock exchange itself was established in 1961 and began operations in February 1962. Its headquarters are located in the country's capital, Taipei. Currently, in addition to the main market (Main Board), the so-called Taiwan Innovation Board, which is intended for technology start-ups or those with an innovative business model. The exchange is currently open from 9:00 to 13:30 local time.

The stock exchange alone lists around 900 companies, which is a huge number for such a small economy. The most important indices of the Taiwanese stock exchange include:

• TAIEX,
• FTSE TWSE Taiwan 50.

TAIEX extension

The main index of the Taiwan Stock Exchange is TAIEX (The Taiwan Stock Exchange Capitalisation Weighted Stock Index). The aforementioned index was created in 1966 and is the equivalent of the Warsaw WIG index. Between 1986 and 1990, TAIEX experienced a speculative bubble, when its value rose from around 1 points to 000 points. This was partly the result of the PRC opening up to foreign investment, which was supposed to bring Taiwanese companies huge benefits. Interestingly, the aforementioned index returned above 12 only a few years ago.

FTSE TWSE Taiwan 50

FTSE TWSE Taiwan 50 is an index that groups 50 of the largest and most liquid companies included in the TAIEX index. The aforementioned index is created by FTSE Russell, which belongs to the London Stock Exchange. Shares in the index are calculated in free float-weighted capitalization. The index itself was created in 2002 and is treated as a benchmark for blue chip companies. Its main disadvantage is that it has an overrepresentation of one company TSCM, which has over 50% of the share in the entire index. So you can say that FTSE TWSE Taiwan 50 is basically TSCM and the rest. So it is difficult to invest in this index if you want to have exposure to the entire economy.

Projects

Individual stock selection is a time-consuming solution, as it requires learning about business models, company management, and advantages over local and global competition. In addition, access to the market is a problem. There are few brokers who offer direct access to the Taiwanese market. Therefore, the choice is limited. Below we present a selection of the most interesting companies listed on the Taiwanese stock exchange.

Taiwan Semiconductor Manufacturing

The company was founded in 1987. Taiwan Semiconductor Manufacturing Company (TSMC) is a leading global semiconductor manufacturing and design company. TSMC is a key player in the global electronics industry. It specializes in manufacturing chips for customers such as Apple , AMD i Nvidia. TSMC has the ability to create chips in 5nm or 3nm technology. With the development of modern technologies, the demand for the company's products is constantly growing, which requires an increase in investment outlays. The company is expanding production capacity in Japan. The first factory will be launched in Q2024 2027, while the second most likely in XNUMX. In addition, factories are being developed in the USA (in Arizona), Germany and China.

Hon Hai Precision Industry

The company was established in 1974. Hon Hai Precision Industry Co., Ltd., is also known as Foxconn. It is one of the largest smartphone manufacturers in the world. In addition, it also produces components for computers and electronic devices. For many years, Foxconn's largest customer has been Apple , which outsources the company's production of new iPhones. Although the company is headquartered in Taiwan, most of its factories are located on mainland China. The largest factory is located in Zhengzhou. In 2022, over 200 people worked there. Foxxcon is investing heavily in India, where it is moving some of the production of components needed to build iPhones. Additionally, the Taiwanese company recently invested in an American company Indigo Technologies. The aforementioned company operates in the light electric car industry.

Asus

The company was founded in 1989 in Taipei, Taiwan. It is one of the leaders in the production of computers, laptops and broadly understood consumer electronics. However, its beginning was slightly different. Asus focused on the production of motherboards and only then decided to produce not only semi-finished products, but also laptops and computers. Currently, Asus is one of the leading computer brands in the world. Like other technology companies, it is trying to develop in the area of ​​AI and IoT. It is also trying to integrate 5G technology in its products. At IFA 2024, Asus presented new computers from the Copilot + series, equipped with Intel Core Ultra processors.

Wiwynn Corporation

It is one of the important players in the global cloud infrastructure market. This Taiwanese company designs, manufactures and delivers critical components for developing cloud services. These include network equipment, servers, which are used in data centers. Although the company was founded in 2012, it has managed to gain such companies as: IBM, Meta, Microsoft or Amazon. It is worth mentioning that Wiwynn has focused on the AI ​​server market since 2023. The company expects growing demand from leading cloud service providers and intends to expand its production capacity in Malaysia, Mexico, and Taiwan.

Uni-President

Uni-President is engaged in the production and sale of beverages, food products and animal feed. The company was established in 1967 by Kao Ching-yuen in Syuejia. It is one of the largest food producers in Asia. Among the assortment are: dairy, food, tea, coffee, juices, pasta, frozen food, sauces or meat products. The company sells its products in many Asian countries. These include Malaysia, Thailand, the Philippines, South Korea and Japan. A large part of its operations is also concentrated in mainland China. In addition, some sales go to the US, Canada and Australia. The company also has a stake in PCSC, which manages 7-Eleven stores.

PCSC

PCSC (President Chain Store Corporation) was founded in 1987 and is the largest grocery store operator in Taiwan, mainly known for its chain stores 7-Eleven. In addition to retail, PCSC also operates catering, pharmacy and e-commerce businesses. Uni-President is also a shareholder in the company. In 2022, PCSC achieved revenue of NT$317 billion and net profit of NT$10,6 billion.

ETF with exposure to Taiwan

If you don't want to invest in stocks on your own, you can consider using ETFs giving exposure to the Taiwanese market. If you have access to the US stock market, you can  use the following ETF: iShares MSCI Taiwan ETF. If you can't buy it directly, you can use options on this ETF or CFD offerings.

The benchmark for the mentioned ETF is MSCI Taiwan 25/50 Index, which groups the largest companies listed on the Taiwanese stock exchange. The product belongs to Blackrock It is relatively expensive because the annual management fee is about 0,59%. The fund is quite popular, as it has USD 5,9 billion in assets under management. Importantly, unlike the FTSE TWSE 50 index, here TSMC's share is 22%, so it has been limited. Thanks to this, we get broader exposure to the largest Taiwanese companies listed on the stock exchange.

Brokers offering ETFs and stocks

Where can we find Taiwanese companies and ETFs with exposure to the country? More and more brokers have a wide range of stocks and ETFs in their offer. For example, on XTB today we find over 400 ETFs and 3500 shares, almost 3000 ETFs and 19 shares in Saxo Bank and over 10 ETFs and as many as 000 shares in Exante.

Unfortunately, CFDs on Taiwanese indices are practically absent from the offers of Forex brokers.

Broker
Country	Poland	Denmark	Cyprus
Number of shares and ETFs on offer	approx. 400 - ETF approx. 170 - CFDs on ETFs approx. 3500 - shares approx. 2000 - CFDs on stocks 16 exchanges	3000 - ETF 675 - ETF CFDs 19 - shares 8 - CFDs on stocks 37 exchanges	10 – ETF 55 - shares 50 exchanges
Min. Deposit	0 PLN (recommended min. PLN 2000 or USD 500, EUR)	0 PLN / 0 EUR / 0 USD	10 000 EUR
Tool	xStation	SaxoTrader	Exante platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	OPEN AN ACCOUNT	CREATE AN ACCOUNT

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.

Factors to consider before investing

Unlike Canada, Australia, Switzerland, Sweden or other safe destinations, in the case of Taiwan we have the risk of potential friction between Taiwan and the People's Republic of China. In an extreme scenario, the island may be blocked, which will have a tragic impact on the Taiwanese economy. Therefore, it is worth thinking twice before you decide to invest in this Asian country. There are many promising countries in that region that have a safer geopolitical location.

Summary

Taiwan is a very interesting example of how a poor country can, thanks to a well-thought-out strategy and the diligence and entrepreneurship of its own citizens, leapfrog several levels of development. Currently Taiwan is a leading semiconductor producer and has a vibrant and developed economy.. This Asian country has become home to many technology companies, with the most popular ones being TSCM, Asus or Acer. The country is currently planning to use AI revolution to maintain its position as one of the centers of innovation in the world. At the same time, investors should be aware of the risks associated with investing in Taiwan, including geopolitical tensions and dependence on global demand for technology. For those willing to accept these risks, the Taiwanese market offers exposure to the semiconductor sector, which will benefit from growing demand for AI.