How Taiwan overtook China as Singapore’s top trading partner

Driven by artificial intelligence (AI), Taiwan overtook mainland China last year to become Singapore’s largest trading partner. Bilateral merchandise trade between Singapore and Taiwan reached a record high, with exceptionally strong growth momentum. Economists interviewed believe that the robust growth in bilateral trade is likely to continue, meaning that Taiwan is well positioned to retain its status as Singapore’s largest trading partner this year.

In 2025, total bilateral trade between Singapore and Taiwan surged 46% to approximately S$170 billion (US$131 billion), propelling Taiwan from fourth place in 2024 to become Singapore’s largest trading partner, overtaking mainland China, which had held the top position for many years. Malaysia ranked third, while the US and Hong Kong came in fourth and fifth, respectively.

Indonesia was Singapore’s sixth-largest trading partner in 2025. South Korea and Japan ranked seventh and eighth, respectively, with bilateral trade growth accelerating to more than 8% and 5%.

Malaysia also overtakes mainland China

This year, the strong growth in Singapore-Taiwan trade has shown signs of further acceleration.

According to calculations by Lianhe Zaobao (LHZB) based on data from Enterprise Singapore, total bilateral trade between Singapore and Taiwan jumped 90% year-on-year in the first five months of this year to approximately S$127.4 billion, more than the roughly 50% year-on-year increase recorded during the same period in 2025.

Notably, Malaysia overtook mainland China in the first five months of the year, pushing China into third place among Singapore’s trading partners. The rankings of the other economies remained unchanged.

Semiconductor trade momentum to continue

DBS senior economist Chua Han Teng told LHZB, “This reflected Singapore’s robust electronics exports, driven by global AI-related tailwinds and deeper integration into the AI ecosystem, amid solid external demand for memory chips and server-related products.”

He added, “This trend has also been supported by strong electronics trade with Taiwan — an upstream leader, key beneficiary and strategic player in the AI supercycle — which is likely to be sustained at least in the near term amid positive AI-driven dynamics.”

UOB associate economist Jester Koh said that Singapore’s non-oil domestic exports (NODX) to Taiwan surged 37.4% in 2025, far outpacing the 4.8% increase in Singapore’s total NODX. He said, “This demand was initially driven by the rise of generative AI and subsequently broadened with the expansion into agentic AI. Semiconductors likewise dominate Taiwan’s exports to Singapore.”

In the first five months of this year, Singapore’s NODX to Taiwan increased by 57%, once again surpassing the growth rate of 18% for Singapore’s total NODX during the same period.

Koh said, “This growth momentum could be sustained through at least the third quarter of 2026, as hyperscalers and tech companies have announced sizeable capital expenditure plans for the year, which are likely to lift demand for memory and computing chips, as well as related infrastructure.”

Growing trade with AI economies

Since 2019, Taiwan’s position as one of Singapore’s main trading partners has risen steadily, leaping from fourth place that year (and a significant gap between it and third place) to first place in 2025.

In response to queries from LHZB, a spokesperson for the Ministry of Trade and Industry (MTI) said that the AI boom has driven strong growth in merchandise trade between Singapore and economies such as Taiwan. The spokesperson pointed out that as a small and open economy, Singapore maintains extensive trade and investment links with a wide range of economies.

In the first quarter of 2026, Singapore’s total merchandise trade (including domestic exports, re-exports and imports) grew by 25.6% year-on-year. During this period, Singapore’s total merchandise trade with various economies grew across the board.

The spokesperson commented, “In particular, given the interconnected nature of the semiconductor value chain, the AI boom has contributed to strong merchandise trade growth between Singapore and other economies similarly embedded in the value chain, including Taiwan and South Korea.”

Growth driven by rising chip prices

As the development of AI relies on chips, Song Seng Wun, an economic adviser at the Singapore Digital Asset Exchange, noted that through TSMC and its tightly integrated ecosystem, Taiwan produces the most advanced chips used in servers and supercomputers that power ChatGPT, Claude and all other large language models.

Since total trade is calculated in nominal prices, the explosive growth in Singapore-Taiwan trade stemmed from price effects. Driven by the AI industry’s strong demand for chips, global semiconductor prices have risen, thereby pushing up the nominal total of related trade.

Francis Tan, chief Asia strategist at Indosuez Wealth Management, pointed out that the explosive growth in Singapore-Taiwan trade has also benefited from a complementary semiconductor ecosystem shared by both sides.

Taiwan dominates the front-end foundry wafer manufacturing, producing over 90% of the world’s advanced chips. Meanwhile, Singapore accounts for about 10% of the global chip market, and historically has held an advantage in back-end assembly, advanced packaging and testing.

Circular, compounding multiplier effect

Tan said that the constant, iterative shipping of wafers and chips at different stages of production between the two places also created a compounding multiplier effect on total trade volume. This is known as production fragmentation — the key factor driving trade growth.

Due to surging demand for personal computers, electronic components, and computer peripherals, Singapore’s non-oil re-exports (NORX) to Taiwan grew by 146% in 2025. Additionally, driven by exports of specialised machinery and semiconductor manufacturing equipment, Singapore’s NODX to Taiwan grew by 37.4% in 2025.

Data provided by MTI showed that merchandise trade between Singapore and Taiwan achieved significant growth in the first quarter of this year, primarily driven by re-exports to Taiwan (up 185.7% year-on-year), followed by imports from Taiwan (54.2%) and exports to Taiwan (43.4%).

Downside risks persists

Tan said, “The ‘China+1’ strategy, due to China-US tensions, has fuelled global tech companies’ need and urgency to diversify supply chains. Consequently, Taiwan and Singapore have emerged as major beneficiaries, creating a tech corridor to safeguard intellectual property and supply reliability.”

As for downside factors, UOB’s Koh pointed out that against the backdrop of the Middle East conflict, significant left-tail risks remain. Material disruptions to critical semiconductor inputs, such as helium, bromine and sulphur, could slow down semiconductor production.

He added, “Hyperscalers and tech companies may delay the development of new data centres and the deployment of AI-related capital expenditure due to high energy requirements, potentially leading to knock-on effects on financial markets.”

This article was first published in Lianhe Zaobao as “AI浪潮推动 台湾料连续两年成新加坡最大贸易伙伴”.

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