Foreign Firms Boost Emergency Plans in Taiwan Even as Investment Confidence Hits New Highs

Beyond the Headlines: A Complex Risk Calculus

Foreign companies operating in Taiwan are increasing their contingency preparations at levels not seen in previous years, even as the vast majority remain committed to expanding their presence on the island. According to the American Chamber of Commerce (AmCham) in Taiwan’s 2026 Business Climate Survey, 46% of respondents are now revising business continuity plans to strengthen resilience, marking a notable increase from 40% last year. Yet this heightened vigilance stands in stark contrast to the overwhelming optimism revealed in the same report: 92% of foreign firms intend to maintain or increase their investments in what has become the world’s most critical semiconductor manufacturing hub.

This apparent contradiction captures the delicate balance international businesses must strike as they navigate one of the world’s most consequential geopolitical flashpoints. Democratically governed Taiwan, which Beijing claims as its own territory and has vowed to reunify with China by force if necessary, faces intensifying military pressure from the People’s Liberation Army (PLA). Despite these tensions, the island’s irreplaceable role in global technology supply chains appears to be keeping capital flows steady even as corporate boards approve emergency evacuation protocols and supply chain redundancies.

“Companies choose to stay in Taiwan despite these geopolitical concerns and it’s not because things are easy, it’s because companies are getting better to manage these risks with resilience planning and business operation planning,” AmCham Taiwan Chairperson Anita Chen told reporters in Taipei during the survey’s release. “National security topped the list of foreign companies’ perceived risk to business operations,” the chamber noted, though only 7% of surveyed firms reported significant disruptions last year from tensions in the Taiwan Strait.

The AmCham Survey: Planning for Uncertainty

The annual survey, conducted shortly before China held its most recent round of war games around Taiwan in late December, drew responses from 206 of the chamber’s 411 eligible members. The timing proved significant, as Beijing’s military exercises (codenamed Justice Mission 2025) would demonstrate the very scenarios that have prompted foreign firms to update their emergency protocols. Personal anxiety about increased military activities remained unchanged at three on a five-point scale, suggesting that while companies are preparing for worst-case scenarios, day-to-day operations continue with a measure of psychological adaptation to the recurring displays of force.

The disparity between risk perception and operational reality highlights what security analysts call the “Taiwan paradox.” While the potential for conflict represents an existential threat to regional stability, the actual disruption to business operations has remained remarkably limited. This has allowed firms to maintain confidence in Taiwan’s economic fundamentals, particularly its dominance in advanced semiconductor manufacturing, while simultaneously building buffers against potential crises.

Taiwan’s government has repeatedly emphasized the economic benefits of closer ties with the United States, specifically pressing for the passage of a double taxation agreement currently stalled in the US Senate. AmCham Taiwan President Carl Wegner expressed cautious optimism about the deal’s prospects, noting that from his conversations in Washington, “2026 looked like a good year with positive potential” for approval. Such an agreement would eliminate tax barriers and likely encourage even greater bilateral investment flows.

The Silicon Shield: Why Investment Continues Despite Risks

To understand why 92% of foreign firms remain committed to Taiwan despite acknowledging national security as their top concern, one must examine the island’s singular position in the global economy. Taiwan Semiconductor Manufacturing Company (TSMC) alone dominates the manufacturing phase of the semiconductor industry, capturing over half of the global foundry market. Today, only TSMC and South Korea-based Samsung possess the capability to sustainably operate cutting-edge 5-nanometer fabrication facilities, making Taiwan indispensable to everything from artificial intelligence development to 5G infrastructure and autonomous vehicles.

This technological dominance creates what analysts refer to as a “silicon shield” – the idea that Taiwan’s critical role in global supply chains provides a deterrent against conflict, as any disruption would devastate the world economy. The US National Security Council has reportedly estimated that a Chinese attack resulting in the loss of TSMC would cause a $1 trillion disruption to the global economy. FBI Director Christopher Wray warned in 2022 that an invasion would “represent one of the most horrific business disruptions the world has ever seen,” noting that potential sanctions against China would harm the global economy “at a much larger scale” than those imposed on Russia following its invasion of Ukraine.

US actions against Chinese technology giant Huawei illustrate Taiwan’s strategic centrality. When the US Commerce Department added Huawei to its Entity List in 2019 and amended export controls to restrict semiconductor acquisitions, TSMC was compelled to dramatically alter its customer relationships with Huawei, which had been a massive buyer of advanced chips. This demonstrated how Taiwan’s economic decisions are increasingly intertwined with US-China technology competition, a reality that has only intensified as Taipei recently blacklisted Huawei and Semiconductor Manufacturing International Corp (SMIC), prompting Beijing to threaten “forceful measures” in response.

Military Pressure and Regional Security Responses

The security environment surrounding Taiwan has grown increasingly complex. China staged large-scale military exercises in December 2025 as a direct response to a recent $11 billion US arms package for Taiwan. Taiwan’s National Security Bureau reported that 2025 saw a record 3,570 Chinese military aircraft incursions into Taiwan’s surrounding airspace, marking an unprecedented pace of military harassment designed to test Taiwanese defenses and exert political pressure.

The regional implications extend beyond Taiwan’s shores. Japan has unveiled plans to evacuate more than 100,000 civilians from its remote Sakishima islands, located near Taiwan, in the event of conflict. Under these contingency protocols, ships and planes would mobilize to transport residents and tourists to Kyushu and other western Japanese prefectures within six days. Japan’s Defense Ministry has also announced plans to deploy surface-to-air missile units on Yonaguni island, situated just 100 kilometers from Taiwan, and has begun constructing temporary underground shelters stocked with two weeks of supplies.

These preparations reflect growing concern among US allies about Washington’s commitment to the region. President Donald Trump has complained that the US-Japan security treaty is nonreciprocal, stating in March 2025 that “We have a great relationship with Japan, but we have an interesting deal with Japan that we have to protect them, but they don’t have to protect us.” Such comments have prompted allies to develop more independent contingency plans while simultaneously increasing their own defense spending.

Inside Corporate Contingency Planning

What does revising business continuity plans actually entail for foreign firms in Taiwan? According to security consultants and compliance experts, preparations range from supply chain diversification to detailed personnel evacuation protocols. At the most basic level, companies are mapping alternative sourcing strategies for semiconductor components, identifying backup manufacturing sites outside the region, and stress-testing their logistics networks against potential blockade scenarios.

More sophisticated preparations involve tabletop exercises simulating various conflict scenarios. Global Guardian, a security consultancy, has recently conducted such exercises with Fortune 1000 companies to model best- and worst-case outcomes. These simulations address critical questions: How quickly can nonessential personnel be evacuated once hostilities appear imminent? What triggers should prompt immediate departure rather than a wait-and-see approach? How can companies maintain access to financial assets outside China and Taiwan if banking systems are disrupted?

You don’t want to be starting that planning the week before an invasion, when you’re starting to see the White House saying it’s coming. You want to be doing that now and buying down your risk and making those decisions in advance.

Rob Joyce, the National Security Agency’s head of cybersecurity, emphasized this urgency to corporate audiences, noting that compliance teams and in-house counsel must prepare for unprecedented disruptions. A war in Taiwan would trigger immediate compliance challenges across multiple domains: sanctions and export controls, anti-bribery regulations under the Foreign Corrupt Practices Act, cybersecurity vulnerabilities, and government procurement requirements.

Economic Warning Signs and Intelligence Indicators

Analysts at the Center for Strategic and International Studies (CSIS) have identified specific economic indicators that might signal Beijing’s intentions regarding Taiwan. Short-term warning signs could include the imposition of stronger cross-border capital controls, rapid liquidation of Chinese assets held abroad including sales of US bonds, suspension of critical mineral exports, or restrictions on outward travel for Chinese elites. However, these measures carry risks for Beijing, as they could reveal intentions prematurely and trigger hoarding or market panic.

China has already undertaken multiyear steps to insulate its economy from external vulnerabilities, including efforts to reduce dependency on US dollars for international finance, stockpiling critical commodities, and mandating that state entities move away from foreign software. These actions mirror Russia’s pre-2022 “fortress Russia” strategy of accumulating international reserves and diversifying away from dollar assets. However, as CSIS analysts note, if observers failed to interpret Moscow’s economic measures as primary indicators of an impending invasion, policymakers should be skeptical that similar warning signs from China would be treated as evidence of military intentions.

Domestic Political Gridlock Complicates Defense

Ironically, as foreign firms increase their contingency preparations, Taiwan’s own defense modernization faces significant political obstacles. President Lai Ching-te has proposed a special defense budget of roughly $40 billion over eight years to fund new missile defenses, long-range precision weapons, and unmanned systems. However, opposition parties controlling the legislature have blocked the bill at least eight times since December 2025, demanding greater transparency regarding specific procurement plans.

This domestic gridlock carries international implications. The Trump administration has pressured Taiwan to increase defense spending to 5% of GDP by 2030, up from the current level of approximately 2.4%. The American Institute in Taiwan (the de facto US embassy) has explicitly supported Lai’s special budget, with Director Raymond Greene stating that “What Taiwan’s service members need now are the tools to accomplish their mission.” Analysts worry that delays in Taipei could fuel doubts in Washington about Taiwan’s resolve to defend itself, potentially undermining the very security guarantees that help stabilize the investment environment.

Strategic Ambiguity and the Trump Doctrine

The Trump administration’s 2026 National Defense Strategy (NDS) has introduced new elements of calculated ambiguity into the regional security equation. The document promises a muscular “denial-based defense” along the First Island Chain but conspicuously omits specific commitments regarding Taiwan, creating a “blank space” designed to preserve diplomatic maneuvering room. This strategic silence aims to maximize executive leverage while maintaining deterrence, though critics argue it risks creating confusion among allies and potential adversaries alike.

The NDS elevates military-to-military communications with China’s PLA to a strategic priority, seeking to prevent accidental war through “strategic stability.” However, this approach faces structural challenges. Beijing has historically viewed silence as a weapon, cutting off diplomatic channels during periods of high tension (such as following Nancy Pelosi’s 2022 visit to Taiwan) and refusing crisis hotline calls during the 2023 Chinese surveillance balloon incident. As former Indo-Pacific coordinator Kurt Campbell noted, hotlines with Beijing tend to “ring endlessly in empty rooms.”

The Decoupling Dilemma

For multinational corporations, the gradual decoupling of US and Chinese technology sectors presents both risks and opportunities. More than half of the world’s top 1,600 companies face elevated risk from their “entanglement” in China, according to estimates from institutional investors. Technology companies in particular must navigate an environment where commercial relationships increasingly become subject to political calculations.

Some firms have already begun strategic shifts. Google and Apple have moved some manufacturing operations from China to Vietnam amid concerns about geopolitical risk and China’s former COVID-Zero policies. However, complete decoupling remains impractical for many sectors given Taiwan’s irreplaceable role in semiconductor manufacturing. As one security analyst noted, the question for most companies is not whether to leave Taiwan, but how to prepare for scenarios where they might need to evacuate personnel on short notice while maintaining some operational continuity.

Key Points

• 46% of foreign firms in Taiwan are revising business continuity plans, up from 40% last year, according to AmCham Taiwan’s 2026 survey
• Despite security concerns, 92% of companies plan to maintain or increase investment in Taiwan, driven by its dominance in semiconductor manufacturing
• National security has overtaken other concerns as the top perceived risk for foreign businesses operating on the island
• Only 7% of surveyed firms reported significant business disruptions from Taiwan Strait tensions last year
• Japan has unveiled evacuation plans for 100,000 civilians from islands near Taiwan, while Tokyo warns Japanese companies they would be “on their own” in a conflict scenario
• Taiwan’s proposed $40 billion special defense budget remains stalled in the opposition-controlled legislature, raising questions about military preparedness
• Economic indicators such as capital controls, asset liquidations, and export restrictions could serve as early warning signs of potential military action
• The Trump administration’s 2026 National Defense Strategy maintains strategic ambiguity regarding Taiwan while pursuing “denial-based defense” along the First Island Chain