Taiwanese Firms Must Diversify From China Despite Structural Limits: Experts

Why It Matters

The shift reshapes Taiwan’s supply‑chain resilience and positions it for higher‑value tech growth, while highlighting limits of moving away from China’s industrial ecosystem.

Key Takeaways

• Taiwanese firms gradually moving manufacturing out of China
• Shift targets Southeast Asia, India, higher‑value AI, semiconductors
• Core component production remains concentrated in China
• Political‑economic system limits full diversification from China
• Global fragmentation challenges Taiwan's supply‑chain resilience

Pulse Analysis

Taiwanese corporations are reassessing their China‑centric manufacturing base as geopolitical tensions and tighter regulations mount. Scholars at a Taipei forum described the move as a long‑cycle adjustment, with firms steadily shifting production to Southeast Asian hubs and India. The relocation aims to lift Taiwan up the value chain, emphasizing artificial‑intelligence applications and semiconductor design rather than low‑margin assembly. This strategic pivot reflects both risk mitigation and a desire to capture higher‑margin tech markets. The move also aligns with Taiwan’s broader ambition to reduce dependency on any single market.

Nevertheless, experts warn that diversification faces structural headwinds. While final assembly can move to India or Vietnam, core component engineering and complex supply‑chain integration remain entrenched in China, as illustrated by Apple’s continued reliance on Chinese factories. Beijing’s ability to mobilize resources quickly and resolve technical challenges at scale is difficult for other jurisdictions to emulate. Consequently, the notion of a single “next destination” is overly simplistic, and firms must balance relocation with the need to retain critical capabilities. Moreover, supply‑chain resilience will require joint ventures that blend Chinese scale with partner nations’ agility.

For Taiwan, the path forward hinges on securing resilient production nodes and forging cooperative networks across the fragmented global economy. Policymakers are urged to incentivize R&D in high‑value sectors, streamline cross‑border logistics, and mitigate talent shortages that could impede offshoring efforts. By aligning supply‑chain diversification with strategic technology investments, Taiwan can transform geopolitical risk into a competitive advantage, positioning itself as a pivotal hub between China’s manufacturing depth and the emerging markets of Southeast Asia. Such a balanced approach can attract foreign direct investment, reinforcing Taiwan’s role in the global tech ecosystem.

Taiwanese firms must diversify from China despite structural limits: Experts

02/10/2026 11:56 AM · By Chao Yen‑hsiang

From the left, Academia Sinica research fellow Wu Jieh‑min, former WTO Ambassador for Taiwan Cyrus Chu, author Patrick McGee, and DSET CEO Jeremy Chang discuss the relationship between Taiwanese companies and Beijing’s political‑economic system at a forum in Taipei Monday night. CNA photo Feb. 10, 2026

Taipei, Feb. 10 (CNA) – Taiwanese firms are undertaking a long‑term shift away from manufacturing in China, but experts warned Monday that Beijing’s political‑economic system makes full independence from the mainland’s industrial ecosystem a distant goal.

At a forum in Taipei Monday night, Wu Jieh‑min (吳介民), a research fellow at Academia Sinica, said Taiwanese capital is undergoing what he described as a “long‑cycle” adjustment, with firms gradually relocating manufacturing out of China in response to rising geopolitical and regulatory risks.

Wu said the shift toward Southeast Asia and India allows Taiwan to reposition itself higher up the value chain, focusing on sectors such as artificial intelligence and semiconductors rather than labor‑intensive assembly of commoditized goods.

Whether Taiwan can turn its current economic momentum into a durable advantage will depend on its ability to secure key production nodes and cooperation networks within an increasingly fragmented global economic order, he said.

However, Patrick McGee, author of Apple in China, cautioned that the idea of a clear “next destination” replacing China is often overstated, citing the Apple supply chain as an example of the limits facing diversification efforts.

“I really think there isn’t a next destination. China is going to continue to be the next destination.”

He argued that enthusiasm surrounding India largely reflects the relocation of final assembly, while core engineering capabilities and critical component manufacturing remain concentrated in China. In addition, China’s capacity for rapid, system‑wide mobilization allows firms to resolve complex technical challenges in ways that are difficult to replicate in countries such as India or Vietnam, he said.

Former WTO Ambassador for Taiwan Cyrus Chu (朱敬一) said these constraints reflect a fundamental incompatibility between market economies and China’s Leninist political system, under which the ruling party exerts control across society and the economy.

In such a system, Chu said, market mechanisms governing competition, trade, and regulation must ultimately serve political objectives, rather than operating independently. As a result, he argued, a fully integrated global trading system cannot function seamlessly across both liberal market economies and Leninist regimes.