An Uncertain World and Challenges to Taiwan’s Machinery Industry

By President Tommy Hsu of Taiwan Association of Machinery Industry

When looking back on 2024, the global economy saw poor performance due chiefly to the shadow of inflation and the speculations about Fed interest rate hikes, plus the ongoing Russia-Ukraine war, lasting geopolitical conflicts, and disappointed mainland China’s economic performance. All these factors kept global consumption market lukewarm and, thus, hurt economic momentum.

According to statistics complied by Taiwan Association of Machinery Industry (TAMI), Taiwan’s machinery industry as a whole shipped US$29.27 billion worth of machines throughout 2024, approximately inching down 0.6% from 2023’s US$29.44 billion. Of the 2024 exports, electronics equipment, inspection instrument, and machine tool were the top three categories, posting a 4.0% and a 3.6% growth, and a 14.8% slump, respectively. Machine tool suffered the steepest decrease of all Taiwan’s machinery sectors mostly because of geopolitical issues. Taiwan’s machinery industry generated total revenue of NT$1.2 trillion (US$41.37 billion at US$1:NT$29) in 2014, close to 2023’s turnover.

The United States and mainland China are the top two export destinations for Taiwan-made machines, together accounting for roughly half of the Taiwan exports. For a long time, the mainland has been the largest market for Taiwan-made machines, absorbing US$10.23 billion, or 30.9%, of the Taiwan exports in 2021. The value, however, fell to US$8.98 billion, or 25.9%, in 2022 and further to US$6.93 billion, or 23.5%, in 2023.

The American market also represented 23.5% of Taiwan’s machinery exports in 2023, marking the major watershed of market shift of the Taiwan industry. In 2024, America unseated mainland China as the No.1 market for Taiwan-made machines, constituting 24.6%, or US$7.19 billion, of the Taiwan exports while the mainland took up 23.4%, or US$6.86 billion, in the same year.

Quick Statistical Report of Taiwan’s Exports and Imports of Machinery, Jan.-Jun, 2025

1. Export

(1) Taiwan’s general export value for June 2025 was US$53.32 billion, increasing 33.7% year on year with added US$13.4 billion in shipments. When converted to Taiwan currency, the value was around NT$1.59 trillion, which represented a 23.5% surge from the same period of last year. The cumulative general value from Jan. through June was US$283.26 billion, jumping 25.9% from the comparable period last year with an additional shipment of US$58.31 billion. Denominated in Taiwan currency, the accumulated value was NT$9.04 trillion, soaring 26.4%.

(2) Taiwan’s machinery exports for June hit US$2.73 billion, adding 3.7% from US$2.63 billion registered in the same period of last year. Calculated in Taiwan currency, the value, however, represented a decrease of 4.2% year on year at NT$81.5 billion.

(3) Throughout the first half of this year, Taiwan’s machinery industry shipped US$14.92 billion worth of machines, a gain of 5.3% from the same period of last year. In Taiwan currency, the value was around NT$476.7 billion, rising 5.7% year on year.

(4) The top three categories that Taiwan’s machinery industry exported throughout the first half of this year were inspection instruments, which accounted for 17.6% of the Taiwan industry’s total with a value of US$2.62 billion and increased 12.4% from the comparable period of last year; electronic equipment, which made up 16.0% with a value of US$2.38 billion and inched down 0.1% from the first half of last year; and machine tool, which composed 6.8% with a value of US$1.01 billion and lost 5.8% from the same period of last year.

(5) The top three export destinations for Taiwan’s machinery in the first half of this year were the United States, which imported 26.6% of the Taiwan industry’s total exports with a value of US$3.97 billion; mainland China, which absorbed 22.9% with a value of US$3.41 billion; and Japan, which accounted for 8.0% with a value of US$1.19 billion.

Taiwan’s machinery exports saw an increase of 3.7% year on year in June this year alone based on US dollar denomination, growing for five consecutive months and resulting in a cumulative 5.3% growth for the first half of this year. However, the June value was down 4.2% from the same month of last year when calculated in NT dollar, which has recently surged much against US dollar in value only to hurt Taiwan’s export.

America and mainland China are Taiwan’s top two markets for machinery, with the Taiwan exports to the mainland increasing a moderate 1.1% year on year in the first half of this year to US$3.41 billion whereas the exports to America soaring 16.3% in the meantime to US$3.97 billion. The Taiwan exports to America jumped 19.0% in May and 23.6% in June as a result of the Trump Administration’s 90-day tariff pause ended on July 9, which has caused a surge in shipments as businesses rush to bring goods into the U.S. before tariffs increase.

Recently, NT dollar has surged against the US dollar much higher than any other Asian currencies did. In April, the Taiwan currency surged almost out of control before the go-go trajectory slowed down. The currency saw its new low point even hit NT$28.793 in July 4 after revaluing through the NT$30 benchmark in June. When analyzing major Asian currencies from April 1 through July 8, NT dollar surged as much as 12.4%, South Korean won rose 6.7%, Japanese yen gained 2.1% and the Chinese yuan increased1.3%, badly hamstringing Taiwan’s machinery industry both in export orders and profitability.

America has so far announced reciprocal tariff rates against some of its trading partners, with a July 8 list showing that South Korea and Japan were both slapped with a 25% rate and the rest on the list with rates similar to Trump Administration’s April announcement.

America has put off the July 9 deadline for negotiations until August 1 so that its trading partners have more time to negotiate with it on tariffs, but that also means Trump Administration is still likely to change its tariffs from original rates, a lingering uncertainty that will definitely keep clouding economic and trading relations among nations. On the other hand, America has yet to announce tariff rate against Taiwan, but the considerable revaluations of NT dollar in recent weeks has dealt a heavy blow to Taiwan’s machinery industry, which will definitely suffer further if the Trump Administration’s tariff rates against Taiwan turn out to be higher than that against South Korea and Japan.

2. Imports

(1). In June this year, Taiwan’s overall imports amounted to US$41.26 billion, a gain of 17.3% from the same period last year with added value of US$6.07 billion. Denominated in Taiwan currency, the value was NT$1.23 trillion, up 8.3% from the comparable period last year. Throughout the first half, the Taiwan imports registered a 20.5% growth year on year with added value of US$38.71 billion to reach US$227.56 billion. In Taiwan currency denomination, the value of NT$2.27 trillion represented a 21.1% increase from the same period last year.

(2) When it comes to machinery sector, the Taiwan import value was US$6.19 billion in June alone, spiking 51.7% from US$4.08 billion registered in the same period last year. In Taiwan currency basis, the value was NT$184.90 billion, soaring 40.1% year on year.

(3) In the Jan.-June period, Taiwan imported US$32.39 billion worth of machinery, up 53.5% from US$21.09 billion it registered for the same period of last year. Calculated in Taiwan currency, the value totaled NT$1.03 trillion, jumping 53.9% year on year.

(4) The top three import categories of machinery throughout the first half were electronic equipment, accounting for 43.8% of all with a value of US$14.19 billion, up 85.9% from the same period last year; inspection instrument, representing 24.4% with a value of US$7.89 billion, surging 80.6% year on year; and turbomachinery, composing 4.0% with a value of US$1.28 billion, a decrease of 28.6% from comparable period last year.

(5) In the Jan.-June period, the top three machinery exporters to Taiwan were Japan, which accounted for 20.5% of all categories of Taiwan’s imported machinery as a whole with a value of US$6.64 billion; the United States, which constituted 17.4% of all with a value of US$5.62 billion; and mainland China, which made up 12.0% with a value of US$3.89 billion.

Challenges to Taiwan’s Machinery Industry

In the past, Taiwan-made machines had been able to snatch up a share of the global market thanks to their high price/performance ratio. However, the Taiwanese manufacturers are now losing this advantage given the revaluation of Taiwan currency, the turmoil from the Trump Administration’s reciprocal tariff, and competition threats from rising economies like mainland China in the global market of mid-to-low performance machines.

In the high-end market, Taiwan-made machinery has seized a share with its high price/performance ratio thanks to the Taiwanese manufacturers’ diligent efforts over the past decades in developing high value-added, intelligent, and tailor-made models to boost their global competitiveness.

Nevertheless, the constant depreciation of Japanese yen has hamstrung the competitiveness of high-performance machine tools from Taiwanese manufacturers. From 2021 through June this year, Japanese yen has devalued as much as 40.8%, far steeper than Taiwan dollar’s 3.4% and South Korean won’s 25.1%, almost erasing the 20-30% price gap previously favorable to Taiwan-made machines against Japan-made machines.

In the mid-to-low market, Taiwan-built machines now can hardly compete with their counterparts from mainland China on the global market given that the mainland Chinese manufacturers are using their overcapacity and the government subsidization as the advantages for their undercutting strategy, not to mention the reality that they have made considerable improvement in quality and processing precision of their machines.

As for the outlook of 2025, Taiwan’s machine-tool industry is estimated to see considerable business from the expected post-war reconstruction projects once the Russia-Ukraine war and the wars in the Middle East end this year as projected.

The Trump Administration’s reciprocal tariffs on almost every country across the world have made global economy more uncertain and global market more cautious. Since early April this year, the Trump Administration has dealt a heavy blow to global economy and multilateral trade systems with its offensive reciprocal tariffs. U.S. Present Donald Trump has paused the tariff levies for 90 days and retained a 10% tariff, but Taiwan’s machinery sector still feels threatening as it heavily depends on overseas market.

Recently, Taiwan dollar has revalued steeply, with its value having soared 11.5% from April 1 through June 25. In the meantime, South Korean won had rose 7.5%, Japanese yen 3.0%, and the Chinese yuan 1.3%. For Taiwanese exporters who have insisted retaining their roots in Taiwan, the tariff hikes have badly hurt their profits from U.S.-Taiwan currency exchange.

To maintain Taiwan’s export competitiveness, Taiwan dollar should depreciate and appreciate in sync with other competing currencies and the fluctuation paces should stay close to those of the competing currencies as well.

In the face of the pressures from the reciprocal tariffs and the appreciating Taiwan dollar against greenback, Taiwanese machinery manufacturers need to re-draw their market strategy as well as exploit niche markets and new opportunities, backed up by their differentiation, customization, and grouping operations.