German Firms Splash Out billions on Taiwan Supply Chain, Largely in Semiconductors and Chemicals

· The value of German imports from Taiwan rose from €10.1 billion (US$10.7 billion) in 2019 to €12.2 billion in 2021, and they totalled €8 billion in the first half of 2022

· German chemical companies are stepping up their supplies of “pure and important” chemicals for the clean production of semiconductors, Limberg added, and “based on the feedback we get, we see substantial growth”.

· German chemicals supplier Merck last year announced a €500 billion, five-year investment in Taiwan, mainly in semiconductor production.

· German firms also consider Taiwan to be among the “booming markets” for offshore wind projects because offshore waters “are some of the most attractive areas” for this type of energy, Limberg said.

· Sustainable and reliable business-to-business exchanges have been cultivated between Taiwan and Germany during the pandemic, and trade keeps widening

· With the global economy in flux, ‘quicker and more intensive’ talks have also been taking place between German and Taiwanese firms in the realm of renewable energy

German companies have expanded their supply-chain links with Taiwan over the past three years, particularly in tech, to overcome global Covid-era challenges in securing materials for core industries such as the automotive sector, according to the European country’s chief representative in Taipei.

They are ordering more semiconductors from Taiwan – the world’s leading manufacturer of computer chips – and supplying Taiwanese hi-tech firms with more chemicals used in manufacturing, said Axel Limberg, chief representative and executive director of the German Trade Office Taipei.

Companies from Europe’s largest economy are also looking for ways to work more closely with untapped Taiwanese suppliers of machinery and bicycles, among other industries.

“We have seen during the Covid crisis how important supply chains are and how diversity is key to creating sustainable and reliable supply chains,” he said. “A lot of Taiwan companies are working on a national level but without international exposure, so that’s an opportunity for us.”

The value of German imports from Taiwan rose from €10.1 billion (US$10.7 billion) in 2019 to €12.2 billion in 2021, and they totalled €8 billion in the first half of 2022, according to data from the economic development agency Germany Trade and Invest. And figures from the Taiwan Bureau of Trade show that exports to Germany were worth US$8.172 billion in the first 11 months of this year.

In the chip space, Limberg said, German companies are “in close contact with the Taiwan industries to increase orders”. He said German machinery and automotive firms particularly need the components to build their products.

The spread of Covid-19 in mainland China, commonly referred to as the world’s factory, sparked mass business closures in early 2020 and parts of 2022, snarling transport and putting some factory work on hold.

Mainland China’s trade in goods with Germany was worth €245.4 billion (US$260 billion) last year, higher than in 2020. And last month, German Chancellor Olaf Scholz and President Xi Jinping vowed to deepen economic cooperation.

German chemical companies are stepping up their supplies of “pure and important” chemicals for the clean production of semiconductors, Limberg added, and “based on the feedback we get, we see substantial growth”.

German chemicals supplier Merck last year announced a €500 billion, five-year investment in Taiwan, mainly in semiconductor production.

German exports to Taiwan rose from €7.8 billion in 2019 to €9.3 billion last year. Taiwan data places the figure at US$12.838 billion from January to November this year. Investments from the European country grew from €2.5 billion in 2018 to €3.16 billion in 2020.

Talks are ongoing between Germany and Taiwan, with an eye toward arranging future cooperation, Limberg said. He said both sides are holding “quicker and more intensive” talks now, compared with two years ago, about the joint development of hydrogen renewability.

The term describes hydrogen made from renewable energy, and it helps advance environmental goals in Europe.

“I would say, if you implement hydrogen technology, it helps the industry to be less dependent on energy imports, and in Taiwan we see enormous [business potential],” he said.

German firms also consider Taiwan to be among the “booming markets” for offshore wind projects because offshore waters “are some of the most attractive areas” for this type of energy, Limberg said.

Other countries have looked to Taiwan as well amid the Sino-US trade war and the mainland’s coronavirus controls.

Alternative trade routes covering Taiwan will help Germany avoid being “severely impacted” again by a hit to conventional supply chains, said Tony Phoo, an economist with Standard Chartered Bank in Taipei.

“It’s to not be dependent too much on just a single or just a few sources for their key components, parts or materials,” Phoo said.