Taiwanese Firms Bet Big on Singapore as Geopolitical Tensions Reshape Supply Chains

As geopolitical uncertainties and trade tensions continue to reshape global supply chains, Singapore has emerged as a key beneficiary of a significant investment surge from Taiwanese companies. With billions of dollars flowing into the city-state, particularly in high-tech sectors like semiconductor manufacturing, Taiwan’s pivot away from China is not just a business strategy but a reflection of broader regional and international dynamics. This trend, analysts suggest, is likely to intensify under the renewed uncertainties of a second Trump administration in the United States.

At the forefront of this shift is United Microelectronics Corporation (UMC), Taiwan’s second-largest chipmaker, which is set to commence commercial production at its new US$5 billion fabrication plant in Singapore’s Pasir Ris area in 2026. The facility, positioned next to UMC’s existing plant, will manufacture chips for smartphones, automobiles, and edge artificial intelligence applications. A company spokesperson described Singapore as “a very important hub” for UMC, highlighting the plant’s role in expanding the firm’s regional footprint and its inclusion of the company’s largest research and development centre outside Taiwan, focusing on speciality technologies and advanced packaging.

This investment is part of a broader wave. According to Taiwan’s Ministry of Economic Affairs, Taiwanese investments in Singapore reached US$5.81 billion (S$7.87 billion) in 2024, surpassing investments in China (US$3.65 billion) for the first time since 1991. A striking 87% of these funds were directed towards electronic parts and components manufacturing, predominantly chip fabrication, while another 10% bolstered the financial and insurance sectors. Singapore has now solidified its position as Taiwan’s top investment destination within the Association of Southeast Asian Nations (Asean), capturing over two-thirds of Taiwanese investments in the bloc.

A Strategic Pivot Amid Geopolitical Strain

The redirection of Taiwanese capital towards Singapore and broader South-east Asia is largely driven by the ongoing US-China trade war, frosty cross-strait relations between Taiwan and China, and national security concerns. At its peak in 2010, China accounted for 84% of Taiwanese foreign direct investment, a figure that plummeted to just 8% by 2024. The so-called “China plus one” strategy—where firms maintain a presence in China while diversifying operations elsewhere—has gained traction as Taiwanese businesses seek to mitigate risks associated with over-reliance on the Chinese market.

Singapore, with its politically neutral stance, robust infrastructure, and strong rule of law, stands out as an ideal base. “Singapore offers global businesses stability alongside clear policies and transparent regulatory practices,” a spokesperson from Singapore’s Economic Development Board previously told local media. The city-state also provides connectivity to the fast-growing South-east Asian market, a vibrant innovation ecosystem, and a skilled workforce, making it a strategic gateway for Taiwanese firms eyeing regional expansion.

Dr Chiang Min-hua, an economist and non-resident senior fellow at the University of Nottingham’s Taiwan Research Hub, noted that Singapore’s role as a high-tech manufacturing hub complements Taiwan’s low-tech investments in other South-east Asian countries. “Taiwan’s high-tech investment in Singapore could facilitate the operation of a regional production network,” she said, suggesting a symbiotic relationship between Singapore’s advanced capabilities and the manufacturing hinterlands of neighbouring nations.

Beyond Semiconductors: Financial and Wealth Management Growth

The financial sector is another area witnessing significant Taiwanese interest. Cathay United Bank’s Singapore branch, for instance, plans to double its workforce from 100 to 200 employees in 2025, reflecting both the bank’s own expansion and the growing demand from Taiwanese clients seeking a foothold in the region. Winfield Wong, chief executive of the bank’s Singapore unit, told local media that Taiwanese businesses view Singapore as a critical base for foreign exchange trading and a testbed for new initiatives scalable across South-east Asia.

Singapore’s status as an Asian financial centre also attracts Taiwanese wealth management players. “Singapore is seen as reliable and politically stable,” said Kristy Hsu, director of the Taiwan Asean Studies Centre at Chung-Hua Institution for Economic Research in Taipei. Major Taiwanese banks like Taipei Fubon Bank and E.Sun Commercial Bank have established a presence in the city-state, while reports indicate a rising interest from Taiwan’s ultra-wealthy in setting up family offices to safeguard their assets.

Cultural familiarity, including shared linguistic ties, further enhances Singapore’s appeal. As Catherine He, head of research for Singapore at Colliers, put it, “Singapore is relatable to the Taiwanese in terms of culture, such as language,” alongside its efficient processes and infrastructure.

The Trump Factor and Future Uncertainties

The return of Donald Trump to the White House in 2025 introduces additional layers of complexity to this investment trend. Trump’s transactional approach to foreign policy, including threats of tariffs up to 100% on Taiwanese semiconductors and a recent 10% tariff on all Chinese imports announced on 1 February, has heightened concerns among Taiwanese firms. Beijing’s retaliatory economic measures against the US further complicate the landscape, making China a less attractive investment destination due to its slowing economy and tense cross-strait relations.

“Trump’s support of Taiwan is more conditional on its financial and defence commitments to the US than resolute,” warned Catherine He. Analysts suggest that Taiwanese companies will continue to hedge against geopolitical uncertainties by diversifying supply chains away from China, with Singapore poised to benefit. Dr Chiang added, “The Trump administration is unlikely to soften its policy towards China, and Taiwan’s investment shift away from China will continue.”

Trump’s past statements, including suggestions that Taiwan should pay for US protection, have also rattled confidence. If such policies materialise, they may accelerate the relocation of critical industries like semiconductor manufacturing to politically stable hubs like Singapore, though the economic impacts of potential tariffs remain speculative and unconfirmed at this stage.

Building a Regional High-Tech Ecosystem

Singapore’s emergence as a high-tech hub is further evidenced by other major projects. In December 2024, Vanguard International Semiconductor Corp, backed by Taiwan Semiconductor Manufacturing Co, and Dutch chip designer NXP Semiconductors broke ground on a US$7.8 billion factory in Tampines to produce 12-inch wafers, with production slated for 2027. Such developments not only create high-value jobs locally but also position Singapore as a linchpin in the global semiconductor supply chain—a sector critical to everything from consumer electronics to automotive industries.

The strategic importance of semiconductors cannot be overstated, especially as edge AI and smart technologies drive demand for advanced chips. UMC’s new facility, with its focus on speciality technologies, underscores Singapore’s role in fostering innovation. The company spokesperson’s assertion that the plant will “generate numerous high-value jobs locally” points to tangible economic benefits for the city-state, though exact figures remain undisclosed.

Challenges and Opportunities Ahead

While the influx of Taiwanese investment is a boon for Singapore, it is not without challenges. The city-state’s high operational costs and competitive labour market could pose hurdles for firms accustomed to lower expenses elsewhere in South-east Asia. Additionally, as Taiwanese companies diversify across the region, Singapore must maintain its edge over emerging competitors like Vietnam and Thailand, which offer lower labour costs and growing industrial bases.

Nevertheless, Singapore’s unique combination of stability, connectivity, and innovation positions it favourably. For Taiwanese firms, the city-state serves as both a safe haven amid geopolitical storms and a launchpad for broader regional ambitions. If current trends hold, particularly under the shadow of US-China tensions and potential policy shifts in Washington, this partnership could redefine South-east Asia’s role in global supply chains.

For now, as UMC prepares to power up its Pasir Ris plant and Cathay United Bank expands its footprint, Singapore stands as a testament to the region’s growing economic clout. Whether this momentum can be sustained amid evolving global dynamics remains to be seen, but the city-state’s trajectory as a hub for Taiwanese investment appears firmly set.