Taiwan's manufacturing sector is experiencing a significant shift, with a record-breaking 52.9% of export orders produced domestically in 2025. This marks a substantial increase from the previous year and a notable decline in the share of production in China and Hong Kong, which fell below 30% for the first time. The Ministry of Economic Affairs (MOEA) attributes this trend to the US-China trade tensions, prompting Taiwanese businesses to relocate production back to Taiwan or expand operations elsewhere.
The rise in domestic production is closely tied to the strong demand for artificial intelligence (AI) and cloud computing, driving growth in semiconductor manufacturing and server orders, which are predominantly produced in Taiwan. This shift has led to a 1.6 percentage point increase in the domestic production ratio from 2024. Meanwhile, the share of production in China and Hong Kong has decreased by 6.9 percentage points, falling to 26.2%, while the ASEAN region has seen a 2.1 percentage point rise to 11.3%, with Vietnam leading the way at 4.5%.
The survey also reveals that self-production, including output by subsidiaries and affiliated companies, remains the dominant category, accounting for 78.4% of export orders, though this share has decreased by 4.2 percentage points from the previous year. Outsourced production has increased to 11.5%, driven by a higher reliance on contract manufacturers by smartphone and laptop makers. Purchases from other manufacturers have also risen to 10.1%, reflecting higher order volumes at semiconductor distributors.
Of the 2,779 companies surveyed, 28.9% have overseas production, with customer requirements (51.7%), lower costs (47.9%), and easier access to local materials (32.2%) cited as the primary reasons. Goods made overseas are primarily resold to third countries (71.5%), followed by local sales (22.1%) and shipments back to Taiwan (6.5%).
The share of China and Hong Kong-made goods exported to the US has decreased by 4.7 percentage points to 14.8%, as US-bound production shifts to Taiwan and other locations. ASEAN, led by Vietnam, remains the top destination for new and expanded production lines, with two-thirds of relocated lines moving out of China and Hong Kong.
This transformation in Taiwan's manufacturing landscape has significant implications for the global economy. It highlights the impact of geopolitical tensions on supply chains and the strategic importance of diversifying production bases. As Taiwanese businesses adapt to the changing landscape, the country's manufacturing sector is poised to play a crucial role in the global market, offering a more resilient and adaptable approach to production.
