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Trip report: Taiwan in transformation – the power of adaptability
There’s never a bad time to visit Taiwan: it is beautiful, friendly and efficient. The prosperity that its world-leading semiconductor industry has created was clear throughout our recent visit to the island, during which we met 16 companies in Taipei, Hsinchu and Taichung.
Our trip came at a particularly fascinating time in the island’s economic and political evolution. Taiwan stands at the epicentre of the global semiconductor industry, producing almost 70% of the world’s semiconductors and more than 90% of its most advanced computer chips1. Its success puts it at the heart of the current tensions between China and the United States. And while those tensions pose an immediate challenge to the island’s companies, they also need to confront an underlying demographic challenge.
One of most striking comments we heard during our visit was made by a senior manager at Delta Electronics, who observed that “When I was born, the birthrate in Taiwan was roughly 450,000 babies per year. Today the birthrate is a third of that.” That places Taiwan at the top of the list of countries with the lowest fertility rates in the world2. The resulting decline in the island’s population is astonishing.
Countries with the lowest fertility rates
Because this demographic shift has coincided with a boom in economic activity3, it has resulted in a heightening war for talent4. Almost every company we met during our visit mentioned the challenge they face in recruiting employees.
If they are to thrive amid this geopolitical uncertainty, as well as dealing with demographic challenges and responding to increasingly sophisticated competition from mainland China, Taiwan’s companies need to adapt and diversify.
Adaptation: companies are shifting to more complex products and integrated solutions
In terms of technology, Taiwan has historically been a powerhouse in manufacturing electrical and industrial components. Increasingly, however, competition from China – and changing trends in demand – mean companies need to adapt and evolve. Many of the companies we met on our trip have been transforming their businesses and shifting away from commoditised components and towards higher margin ‘integrated solutions’ used in artificial intelligence (AI), cloud computing, and industrial automation. Companies such as Voltronic Power, MediaTek, Advantech, and Chroma ATE have, to varying degrees, been on this journey, growing closer to their customers whilst strengthening their pricing power and building their competitive advantages. Given the current geopolitical uncertainties, pricing power and adaptability are two vital traits we look for.
Delta Electronics demonstrates adaption in action
Family-owned Delta Electronics is one of the world’s leading providers of power and thermal-management solutions. Its history of innovation has enabled it to stay ahead of its competitors and to repeatedly reposition itself to take advantage of the next structural growth opportunity. It began life in the 1970s by producing simple power components for TVs, fans and then PCs. Over the years it consistently invested in R&D and demonstrated its adaptability in allocating capital, moving away from commoditised products and towards more complex systems with higher barriers to entry. It entered the mobile phone market in the 2000s before diversifying into the electric vehicle (EV) and automation businesses around a decade ago.
More recently, it has begun to shift capital away from its EV segment and to reallocate it to data centres, industrial automation and smart energy solutions. Even as it moves up the product-complexity spectrum, it is keeping an eye out for M&A opportunities. With net cash on its balance sheet equivalent to 7% of its market capitalisation and its investments in R&D rising to 10% of sales5, Delta appears well placed to keep riding the waves of technological innovation.
Diversification: companies are strengthening their supply chains and finding new talent
While many Taiwanese companies are undertaking structural shifts in their product offering, many are also looking to expand production overseas to strengthen their supply chains, tap into new talent pools and to reduce the impact of tariffs. We visited TSMC shortly after it announced their decision to invest USD100 billion in the US6. Many other companies were considering similar options. While these geographic shifts will impose costs in the short term, it is hoped it will result in greater diversification and stronger supply chains over the long term. Voltronic Power is one company that has already demonstrated this process in action.
Voltronic Power exemplifies supply-chain flexibility
Founded in 2008, Voltronic makes uninterruptable power supplies (UPS) for tier-1 customers such as Schneider, Emerson and Eaton. Its focus on building trust through exceptional customer service and product quality exemplifies two of the qualities we look for.
Voltronic not merely survived the first Trump tariff era – it thrived. In 2017, it set up new production facilities in Vietnam within a matter of months. Since then, its net margins have risen from 14% to 18%, its sales have more than doubled and its supply chain is stronger7. Who knows what the impacts of the tariffs will be this time around, but we believe Voltronic has the leadership and the experience to navigate these uncertain times.
Taiwan’s high-quality companies can thrive in today’s uncertain environment
We do not shy away from the fact that Taiwan currently finds itself at the centre of a difficult and rapidly evolving geopolitical situation. Equally, our task as long-term investors remains the same today as it was before President Trump’s latest attempt to reconfigure the global economy. Our focus remains on finding high-quality companies, run by exceptional people, who have the experience, long-term horizons and cultural attributes to ride the demographic, political and technological waves. Our latest visit to Taiwan reassured us that it remains home to an array of companies exhibiting precisely those qualities.
Lorna Logan
June 2025
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