AGP Executive Report

US-Taiwan Trade Momentum: AmCham’s Doorknock trip says Washington backs Taiwan, but wants “tangible deliverables” after the ART deal, pushing for more investment, stronger semiconductor/AI ecosystems, energy security and an end to double taxation. Taiwan-US Security & Deterrence: Taiwan reported PLA aircraft and PLAN vessels operating around the island, underscoring ongoing cross-strait pressure as drills and cyber threats remain in focus. Semiconductor Tech Push: Taiwan researchers and TSMC-backed work highlight a 0.42-nanometer interface breakthrough aimed at moving transistors beyond silicon—another sign of the R&D race behind AI demand. AI & Cyber Risk: Taiwan says AI-assisted autonomous attacks targeted government systems, adding urgency for banks and public services to harden defenses. Regional Connectivity: Australia says all Pacific Islands Forum members are now connected to global undersea cable networks, with Taiwan included in delivery partnerships—boosting trade and digital access. Supply Chain Recognition: Dimerco chairwoman Catherine Chien won a 2026 Women in Supply Chain Trailblazer award, spotlighting leadership in logistics networks. Market Watch: Singapore’s non-oil exports rose 24.2% in July on strong AI-related electronics demand, though forecasts were missed. Policy Shock for Drones: Trump’s new drone tariffs could reshape Taiwan’s drone exports and push buyers toward “non-red” supply chains.

AI & Cybersecurity: Taiwan says it was hit by “abnormal” AI-assisted cyberattacks, with reports describing autonomous AI agents breaching government systems—raising new concerns for digital defenses. Defense & Cross-strait Risk: Taiwan completed major military exercises as fears of a China invasion grow, while China’s “salami-slicing” tactics and heightened PLA activity keep the security backdrop tense. Semiconductors & Packaging: TSMC signaled it’s open to customers shifting away from CoWoS constraints, suggesting advanced packaging is becoming less of a closed moat even as AI demand tightens capacity. Tech Business: Apple is reportedly skipping the standard iPhone 18 launch, with Pro and “iPhone Ultra” expected first—potentially reshaping Taiwan-linked supply plans. Economy & Markets: Taiwan’s average annual income hit a record NT$763,000 in 2025, and emerging-market assets rose as investors bet on softer US rates—supporting risk appetite. Education & Talent: Taiwan’s scholarship and internship push for Indian students continues under the Taiwan Experience Education Programme, targeting AI, semiconductors and robotics partnerships. Infrastructure & Mobility: Taiwan welcomed Japan-built N700ST Shinkansen trainsets, while Danjiang Bridge opens to ease traffic and connect communities across the Tamsui River.

AI Boom Lifts Taiwan Outlook: Taiwan’s statistics office raised its 2026 GDP growth forecast to 11.05%, a 39-year high, driven by global AI demand and stronger exports (goods and services seen up about 21%) plus higher private investment. Budget Deadlock Ends: Taiwan’s legislature finally approved the 2026 central government budget after a record 266-day delay, cutting about US$93B total spending and trimming key allowances while still funding priorities like drone development. Windows License Costs Hit PC Prices: Microsoft reportedly increased Windows OEM licensing fees by 7%–10% for some PC makers, adding to already strained supply chains and potentially pushing laptop and desktop prices higher. Defense Procurement Under Pressure: Taiwan’s counter-drone fixed-site program faces audit scrutiny over gaps against newer Chinese drone frequencies and limited coverage of BeiDou-3, with delays and component shortages blamed. China Military Activity Near Taiwan: Taiwan detected 11 PLA aircraft sorties and 8 PLAN vessels around the island early Sunday, with most crossing the median line into the ADIZ. Transport & Industry: Taiwan High Speed Rail welcomed Japan’s new N700ST trainsets at Kaohsiung Port, with commercial service targeted for July 2027.

Taiwan’s AI-led growth debate: Taiwan’s 2026 GDP growth forecasts have jumped to around 10%—but many ordinary people say they’re not feeling it yet, even as chip and server demand tied to AI keeps pushing activity. TSMC in focus: Investors are weighing whether TSMC’s latest guidance and AI-driven sales momentum are already “priced for perfection,” with the company also signaling big capex plans. Semiconductor supply chain pressure: South Korea’s July data shows memory exports surging while logic chips slip—an AI buying pattern that underscores the industry’s shift toward bandwidth-hungry memory. Open compute push for faster AI networking: An OCP coalition published a 300-page blueprint to speed adoption of co-packaged optics, targeting Q4 specs. Local tech security: Taiwan prosecutors indicted a Nanya engineer accused of trying to steal DRAM process know-how using a hidden 360-degree camera. Transport & infrastructure: Taiwan High Speed Rail will review fares after new trains start in July 2027, potentially ending a 20-year freeze. Energy costs watch: State oil supplier CPC kept gasoline and diesel prices steady next week despite higher crude, absorbing losses as the Iran situation drags on. Global trade risk: The White House alleges China uses a “shadow transshipment network” via dozens of countries, including India, to dodge US tariffs—an issue that could ripple through regional supply chains. Regional geopolitics: US carrier redeployments tied to the Iran fight are raising questions about deterrence in the western Pacific as China shows more assertiveness.

China-Tariff Evasion Crackdown: A new White House report names Taiwan among countries tied to a China-linked tariff-evasion network, with Taiwan’s finance ministry saying it’s tightening rules for exporters. Crypto Compliance Push: Taiwan’s Cabinet approved amendments to the Anti-Money Laundering Act to criminalize unauthorized digital-asset services and stablecoin issuance, with heavy penalties for money-laundering cases. Market Flows: MSCI raised Taiwan’s weighting in key indexes, lifting emerging-markets exposure to 26.85% and expected to draw fresh foreign capital—though analysts warn it could also mean more volatility. AI Boom, Debt Risks: Young Taiwanese investors are increasingly borrowing to chase AI-led stock gains, raising concerns about leverage amplifying losses. Semiconductor Sentiment: US 13F filings show institutions trimming some megacap tech while staying net buyers of semiconductors and AI infrastructure. Global Trade Pressure: US tariffs of up to 100% on imported drones deepen US-China tech decoupling, with knock-on effects for supply chains and allies. Regional Context: Japan’s defense white paper frames a protracted conflict scenario as China intensifies pressure in the Indo-Pacific.

US Drone Tariffs: President Trump signed a Section 232 order imposing 100% tariffs on “sensitive” drones and certain components, with 25% levies on smaller models; allied suppliers including the EU, Japan, South Korea and Taiwan face a capped 15% rate, effective Sept. 3 (with some component duties later). Trade Crackdown: In parallel, a White House report alleges a “shadow transshipment network” helping China evade tariffs via more than 40 countries, flagging India and several EU states as high-risk hubs. Taiwan Tech & Security: Taiwan says AI agents were used in autonomous cyberattacks on government systems, compromising accounts and extracting personnel data—raising fears of a new era of AI-driven cyberwarfare. AI-Driven Growth Theme: Taiwan’s economy is being positioned to grow fastest in four decades on AI demand, while Quanta Computer and Quantinuum announced a deal to build industrial-scale quantum computing infrastructure. Talent & Policy: Taiwan’s foreign graduate stay-for-jobs approvals jumped to 3,239 after a January policy change. Business & Markets: Apple’s Houston Advanced Manufacturing Center will start making the first US Mac mini by end-2026; APWC reported Q2 revenue of $136.6m, up 8% year-on-year. Local Life: New Taipei will restrict traffic around Tamsui’s Danjiang Bridge and Fisherman’s Wharf during fireworks on three Sundays; two hikers died and one was critically injured after hornet attacks in Kenting.

US–China Trade & Tariffs: President Donald Trump signed a proclamation imposing tariffs of up to 100% on imported drones and certain components, with a 15% rate applying to drones and parts from the EU, Japan, South Korea and Taiwan, and a 25% rate on smaller drones; the move takes effect Sept. 3 for drones, with some components later, as Washington cites national security and supply-chain dependence. AI & Semiconductors: Nvidia’s plan to mobilize over US$500 billion in third-party financing for AI data centers is expected to further entrench its global dominance and pressure China’s chip competitiveness; separately, China’s SMIC says AI-driven demand is lifting peripheral chip needs and won’t cut prices despite weaker phone and auto markets. Taiwan Cybersecurity: Taiwan reported an “abnormal” AI-assisted cyberattack using autonomous agents that targeted government systems over several days, raising alarms about the next phase of cyberwarfare. Taiwan Economy & Industry: Nanya Technology is quadrupling 2027 capital spending to about NT$200 billion (US$6.2B) as DRAM demand surges, including a major new DRAM fab in New Taipei. Cross-strait & Security: Taiwan detected multiple PLA aircraft sorties and PLAN vessels around its territory, while the island also ran mobile-network disruption drills simulating an internet blackout amid China threat concerns. Banking: DBS said Hong Kong head Sebastian Paredes will retire next year, with leadership changes affecting DBS Taiwan. Diplomacy & Business Ties: Taiwan and St. Vincent and the Grenadines marked 45 years of relations, with both sides signaling deeper cooperation and more business exchanges.

AI & Cybersecurity: Taiwan says it was hit by “abnormal” AI-assisted cyberattacks, with officials and experts describing an autonomous, multi-agent campaign that mapped government systems, compromised accounts, and targeted critical sectors including energy and nuclear safety. Defense Readiness: Taiwan staged air-raid and “urban resilience” drills, including throttling mobile internet and forcing businesses and drivers to follow evacuation rules. Trade Policy: The Trump administration flagged dozens of economies—including Taiwan, the EU, Japan, South Korea, India, Canada and Mexico—as higher risks for helping China evade tariffs via transshipment, and plans an AI-enabled “detective border” for customs screening. Foxconn/AI Manufacturing: Hon Hai said it will boost 2027 capex and expand AI-related manufacturing in Ohio, while reporting strong Q2 profit growth tied to AI server demand. Apple Supply Chain: Pegatron indicated the base iPhone 18 may be delayed to early 2027, with Pro models shipping in autumn. Shipping: Yang Ming posted a sharp Q2 profit jump on an early peak season driven by tariff and energy-cost shifts.

AI Cybersecurity: Taiwan’s Ministry of Digital Affairs says it detected AI-assisted cyberattacks on government agencies from overseas last month, starting July 20, but affected bodies “handled” the incident; the attacks used AI agent-assisted tools and targeted dozens of accounts. Cross-strait Security: Taiwan also reported heightened Chinese military activity, with 18 PLA sorties, 11 PLAN vessels and 3 official ships detected around the island, 15 crossing into Taiwan’s ADIZ. Semiconductor Ecosystem: SEMI Taiwan highlighted how AI-driven chip complexity is pushing testing and metrology to the center stage ahead of SEMICON Taiwan, while Critical Manufacturing will showcase an MES-to-intelligence platform for intelligent semiconductor operations. Foxconn Earnings: Hon Hai posted record Q2 net profit of NT$59.97bn (+35% YoY), with cloud and networking now over half of revenue, boosted by AI server demand. Index Moves: MSCI’s August review left Southeast Asia with no additions to global standard indexes, while removing Sembcorp, Ayala Land and GoTo from key benchmarks. Finance & Markets: Global focus stays on US inflation as Asian stocks track sentiment; meanwhile Norway’s sovereign wealth fund reported a record first-half profit of $184bn, helped by tech gains including Taiwan Semiconductor.

AI Cybersecurity: China-linked hackers used open-source AI agents to run a “near-autonomous” intrusion campaign against Taiwanese government networks, compromising at least 85 accounts and stealing 2,500+ personnel records over four days, with attackers shifting tactics when blocked. Semiconductor & AI Supply Chain: Foxconn posted a 35% jump in Q2 profit on surging demand for AI servers for data centers, and said AI infrastructure is driving growth as it plans more production capacity in Mexico and Texas. Advanced Manufacturing for Chips: Critical Manufacturing will showcase an MES-powered industrial operations platform at SEMICON Taiwan 2026, aiming to help semiconductor makers move from connected factories to AI-supported production. Chip Investment in Japan: Sony and TSMC set up a $4.69B image-sensor JV in Japan, with volume production targeted for 2029, combining Sony’s sensor tech leadership with TSMC’s advanced process know-how. Local Business & Labor: Uber Eats will change its “stacked orders” payment formula in Taiwan after a labor ruling, expected to raise courier pay by NT$4–6 per order and adjust rewards starting Aug. 17. Market Watch: Taiwan’s stock story is tied to the broader AI trade and upcoming US CPI, with investors watching inflation for direction on rates and tech/semis sentiment.

Semiconductor Investment: Sony and TSMC agreed to pour JPY747bn (about $4.7bn) into a next-gen smartphone image sensor venture in Kumamoto, with mass production targeted for 2029, adding capacity near an earthquake-hit site. Geopolitics & Trade: Taiwan’s Mainland Affairs Council strongly condemned China’s planned mid-August naval drill with Indonesia in waters east of the island, calling it a sovereignty infringement and a regional security threat. AI Hardware & Markets: Bloomberg reports foreign investors are favoring Taiwan over South Korea after July’s AI selloff, citing steadier earnings and less volatility; Taiwan drew $1.7bn of net inflows so far this month. Supply-Chain Risk Management: Analysts warn that upcoming U.S. Section 301 tariffs could raise import costs 15%-30%, pushing companies to stockpile now as shortages can also come from port delays, overseas outages, or single-source suppliers. Security & Privacy Tech: Taiwan researchers unveiled an ultra-thin (0.42nm) interface approach to improve atomically thin MoS2 transistors, while separate research suggests ordinary WiFi could be used to identify people with near-perfect accuracy—raising surveillance concerns. Local Crime: Malaysian police arrested 12 people for allegedly robbing a Taiwanese YouTuber and impersonating police officers in Cheras, with losses estimated at RM35,000.

Semiconductor Deal Watch: TSMC and Sony confirmed a $4.69 billion joint venture in Japan to make next-gen smartphone image sensors in Kumamoto, with mass production targeted for 2029—Sony leads core tech while TSMC supplies advanced process know-how. Supply-Chain Pressure: TSMC reportedly has about $1 billion of finished A20 Pro wafers stuck because Apple’s wafer-level packaging needs mobile DRAM that’s delayed amid a broader memory crunch, raising near-term iPhone 18 Pro supply risk. US Compliance Push: U.S. lawmakers urged tighter customer verification for foundries like TSMC to block loopholes that let sanctioned Chinese firms obtain advanced logic chips via third-party fronts. AI Infrastructure in Taiwan: The Open Compute Project summit is drawing AI hardware and data-center players to Taipei, focusing on open standards for scalable, interoperable infrastructure. FinTech for Chips: At an Asia FinTech Alliance event in Taipei, industry leaders said stablecoins and faster settlement can speed payments across semiconductor and AI supply chains. Wage Reality Check: Taiwan data shows over 70% of workers earn below the average wage in H1 2026, with officials pointing to job mix shifts and foreign industrial labor. Metro Expansion: New Taipei’s Sanying Line will run full hours (6 a.m.-midnight) from Aug. 16, after strong early ridership during trials. Regional Business Ties: TECO in Manila expanded its consular hall to handle rising Taiwan-Philippines exchanges, including more migrant workers and students.

Semiconductor & capital markets: Silicon Motion priced an upsized $1.0 billion convertible senior notes offering due 2031, signaling continued funding appetite for NAND/SSD supply chains. AI hardware momentum: TSMC’s July revenue jumped 44.7% YoY to $14.5 billion on AI-driven demand, keeping Taiwan’s chip rally in focus. Big tech supply chain bets: Sony and TSMC plan a roughly $6.3 billion image-sensor venture in Japan, underlining Taiwan’s role in next-gen physical AI components. Defense & deterrence: Taiwan’s coast guard drills featured a missile-capable Anping-class ship loaded with Hsiung Feng anti-ship missiles, while the broader US push for “flexible realism” aims to harden denial-defense across the first island chain. Geopolitics meets business: Oil prices rose as hopes for a Hormuz deal faded, pressuring equity sentiment and rate expectations across Asia. Mobility & urban safety: A smoking power bank incident on Taipei Metro’s Bannan Blue Line prompted emergency train transfers and an investigation. Gaming & digital services: Blomics launched web-based MMORPG “EOS RED Rebirth” in Taiwan, Thailand and the Philippines using instant-play HTML5 access. Crypto policy abroad: Thailand introduced a 0% crypto capital gains tax for licensed platforms through 2029, aiming to attract regional activity.

AI Chips & Semiconductors: Microsoft is planning to significantly ramp production of its next-gen Maia 300 AI chips, reportedly discussing manufacturing capacity with TSMC for delivery in 2027, as Big Tech seeks alternatives to Nvidia amid supply and cost pressure. TSMC Momentum: TSMC reported July revenue of NT$467.58 billion, up 44.7% year-on-year, extending strong AI-driven demand and reinforcing its >40% growth outlook. Image Sensor Push: Sony and TSMC plan to invest about ¥1 trillion (around $6.3B) in a joint image-sensor chip venture in Kumamoto, Japan, targeting commercial production as early as 2029. Defense Budget & Drones: Taiwan is preparing a record NT$1.1T defense budget for 2027, but lawmakers have already moved to strip key items—especially domestically produced drone funding—raising questions about deterrence effectiveness. Crisis-Readiness Drills: Taiwan’s Han Kuang NBC exercise included a scenario where “spy-delivered” toxic gas disrupts armored movement, while a separate mobile network throttling drill showed how much the economy depends on uninterrupted data services. Trade & Logistics: The WTO says global goods trade growth is being offset by a surge in AI-enabling electronics, and air cargo demand is increasingly localized around AI server supply chains.

Taiwan-Japan Economic Security: President Lai Ching-te met a Japan Forum for Strategic Studies and Formosa Republican Association delegation, urging deeper cooperation in trade, high-tech industries and “social resilience” as Taiwan’s 2026 defense spending tops 3% of GDP and Han Kuang drills run through Aug. 14. Defense Budget Watch: Taiwan’s Cabinet is set to propose a record 2027 defense budget of over NT$1.1 trillion (about +16%), pushing spending past NT$1T for the first time and keeping it above 3% of GDP. China Pressure & Air/Sea Activity: Taiwan’s MND reported 1 PLA aircraft sortie and multiple PLAN/official vessels around the island, with one aircraft entering the southwestern ADIZ. Semiconductor Investment: Sony and TSMC plan a ¥1 trillion (about $6.3B) joint image-sensor venture in Kumamoto, targeting mass production as early as 2029 and aiming at smartphone and “physical AI” applications. Biotech Collaboration: HanchorBio signed an MoU with NTU’s Professor Sung-Liang Yu team under the Taiwan Cancer Moonshot to accelerate biomarker-driven precision immunotherapy. Corporate/Market Signals: Taiwan stocks edged higher, led by select financials and tech names, as investors tracked global rate expectations. Diplomatic Ties with Business Angle: Saint Vincent and the Grenadines PM Godwin Friday is visiting Taiwan for 45 years of ties, with an investor roundtable and focus on agriculture, the blue economy and technology.

Taiwan Exports Outlook: Taiwan’s Ministry of Finance expects outbound sales momentum to keep rolling into the second half, with exports forecast to top US$850 billion in 2026 after July exports jumped 32.9% to US$75.3 billion. Energy Policy: CPC and Formosa Petrochemical said they will keep domestic gasoline and diesel prices unchanged for the week, marking a second straight week of stability. Public Markets & Capital: Franklin Templeton named Rene Buehlmann as Head of Asia Pacific, effective Sept. 21, overseeing growth across markets including Taiwan. Defense Budget: Taiwan is set to approve a record 2027 defense budget exceeding NT$1.1 trillion, with a further NT$240 billion in a special budget, signaling a sharper readiness push. Military Tech & Drills: Taiwan’s Han Kuang exercises are highlighting drone and counter-drone tactics tied to gray-zone pressure, while an “embedded reporter” approach aims to balance press access with operational security. Scam Enforcement: Kaohsiung police arrested three Malaysian nationals and one Hong Kong suspect as alleged “money mules” recruited via scam rings. Global Finance: A Taiwan public-sector pension fund plans to expand offshore exposure by allocating about US$200 million per mandate to third-party managers for global stock access.