Fund Spotlight: Capturing Taiwan’s AI opportunities beyond TSMC

• Taiwan as a core AI market: The dominant position of TSMC underpins Taiwan’s equity market performance, but the country also benefits from a deeply integrated AI ecosystem, allowing growth to diffuse across the broader semiconductor and technology supply chain.

• Active positioning: The LionGlobal Taiwan Fund maintains an 88% allocation to the technology sector. It underweights TSMC and selectively invests in mid-cap technology leaders to capture differentiated alpha opportunities across the AI value chain.

• Strong alpha generation: The fund has outperformed the MSCI Taiwan Index over both year-to-date and one-year horizons, driven by its exposure to diversified technology names such as Unimicron Technology and Chroma ATE.

• Attractive for Singapore investors: The strategy offers SGD-denominated exposure with SRS eligibility, providing tax efficiency.

• Access to broadening AI themes: The fund is well positioned to capture the expansion of AI investment beyond semiconductor leaders into the wider hardware and supply chain ecosystem.

Taiwan has emerged as one of the standout equity markets in 2026 year-to-date, delivering resilience in the face of Middle East driven energy shock while riding the powerful tailwinds of the AI supercycle.

As of 22 April 2026, the TWSE Index has delivered a strong year-to-date return of 29.7%, significantly outperforming both the MSCI Asia ex Japan Index (13.8%) and the S&P 500 Index (3.7%). Taiwan’s total market capitalisation has also surpassed USD 4 trillion, overtaking the UK to become the world’s seventh-largest equity market (all returns in SGD terms unless otherwise stated).

The engine of growth: AI at the core of Taiwan’s economy and equity market

At the core of Taiwan’s strength lies its unrivalled position in semiconductor manufacturing, led by Taiwan Semiconductor Manufacturing Company (TSMC). As the backbone of the global AI ecosystem, TSMC fabricates advanced chips for industry leaders such as NVIDIA, Apple, Broadcom, and Advanced Micro Devices. According to Counterpoint Research, TSMC holds an estimated 74% share of the global foundry market, supported by strong demand for its N3 and N4 process technologies. This dominant position reinforces its structural leadership, which remains difficult to challenge over the medium term.

The company’s latest results underscore this outperformance. In 1Q26, TSMC’s profits surged 58% year-on-year, marking a fourth consecutive record quarter. Advanced nodes (7nm and below) contributed 74% of wafer revenue, with sub-3nm alone accounting for 25% - a level unmatched globally. Gross margins expanded to 66.2%, up 740 basis point from a year earlier, supported by strong AI-driven demand and high utilisation rates. The company has also guided for full-year 2026 revenue growth of more than 30% in USD terms.

Beyond corporate earnings, Taiwan’s national trade data reinforces the same narrative. March 2026 exports surged 61.8% year-on-year to USD 80.2 billion, with shipments to the US more than doubling. The message is clear: the AI-driven semiconductor cycle is not just a company story, it is a national growth engine.

Looking ahead, continued hyperscaler investment, next-generation node development (2nm and below), and the broadening adoption of AI across enterprise applications are likely to sustain this momentum. For investors seeking targeted exposure to the AI hardware supercycle, Taiwan remains a structurally compelling market.

LionGlobal Taiwan Fund: Leaning into the AI supply chain

Managed by Lion Global Investors, part of the OCBC Group, the LionGlobal Taiwan Fund brings over 25 years of experience navigating Taiwan’s market cycles, from the Global Financial Crisis to COVID-19 and now the AI boom.

The fund runs a concentrated portfolio. Technology accounts for 88.3% of the portfolio (Figure 1), reflecting a clear thesis: Taiwan’s equity story is fundamentally a technology story.

Figure 1: The fund invests 88.3% of its assets in technology sector

While TSMC remains the largest holding (9.4%), the fund is significantly underweight relative to the MSCI Taiwan Index (59.0%) (Table 1). This is a deliberate strategy. Rather than mirroring the index, the manager allocates capital to under-researched, high-quality mid-cap companies deeply embedded in the AI supply chain, where alpha opportunities are often overlooked.

Table 1: The fund maintains an underweight position in TSMC, seeking alpha through other technology stocks.

Top 10 holdings	GICS Sub-sector	*YTD returns	Fund weight	Benchmark weight
Taiwan Semiconductor Manufacturing	Semiconductor Foundry	11.8%	9.4%	59.0%
Delta Electronics	Electronic Components	40.6%	7.5%	3.7%
Unimicron Technology Corporation	Electronic Components	98.2%	6.2%	-
Gold Circuit Electronics	Electronic Components	22.8%	4.6%	-
ASE Technology Holding	Semiconductor OSAT / Packing and testing	28.6%	4.2%	1.5%
Chroma ATE Inc	Semiconductor Equipment	85.4%	3.9%	-
Jentech Precision Industrial	Semiconductor Equipment	35.6%	3.8%	-
Powertech Technology Inc	Semiconductor OSAT / Packing and testing	6.0%	3.4%	-
Global Unichip Corp	Semiconductor ASIC design	-0.1%	3.3%	-
Asia Vital	Technology Hardware & Components	29.3%	3.2%	-
YTD returns are in SGD terms as of 31 March 2026. Source: Lion Global Investors. Bloomberg Finance L.P., iFAST Compilations. Holding data as of 28 February 2026.

What differentiates the fund is its deep, on-the-ground understanding of where value is being created across the AI hardware stack:

• Power infrastructure: Delta Electronics:
  Delta Electronics’s next-generation power solutions carry 2.5 to 3 times the content value of previous generations, supporting margin expansion. In 1Q26, the company delivered strong results, with revenue growing 34% year-on-year, driven by surging demand for AI server power supplies and liquid cooling systems.

• Thermal management: Asia Vital & Jentech
  As AI chips move toward 1,800W–2,000W+ thermal design power, Asia Vital Components’s copper microchannel cold plates have become a critical requirement for next-generation NVIDIA platforms. The company delivered near 130% year-on-year earnings growth in 2025 and plans to expand cold plate production capacity fivefold through 2026.
  
  
  Similarly, Jentech Precision Industrial reported strong 2025 earnings growth of nearly 50%, supported by rising demand for its high-end heat spreaders, which are increasingly essential for protecting dense, high-value AI chips.

• Custom silicon design: Global Unichip
  As hyperscalers such as Amazon and Google shift away from off-the-shelf GPUs toward custom chips, known as application-specific integrated circuits (ASICs), Global Unichip Corp has emerged as a key enabler in this transition. As an affiliate of TSMC, it benefits from early access to advanced process nodes such as 3nm, allowing it to secure high-margin design projects that were previously out of reach for traditional design houses. The company has reported 107% sales growth in January and high double-digit sales increase in February and March 2026.

• Advanced packaging: ASE Technology
  As Taiwan Semiconductor Manufacturing Company advances toward 2nm and 1.4nm process nodes, it has increasingly outsourced lower-end CoWoS (Chip-on-Wafer-on-Substrate) packaging processes to specialist assembly providers, with ASE Technology emerging as a key beneficiary. In 2025, ASE Technology delivered 48% year-on-year earnings growth, reflecting strong demand for packaging solutions.

Performance: strong near-term outperformance

The fund’s positioning has translated into strong recent performance. As the AI rally broadened beyond TSMC into the wider supply chain, the fund delivered significant outperformance, generating +14.0% excess return year-to-date and +5.7% over one year versus the benchmark (Table 2).

However, the longer-term picture is more nuanced. Over 3- and 5-year horizons, the fund slightly underperforms the index by roughly 2% annually, largely due to its structural underweight in TSMC during periods when the stock dominated market returns.

Table 2: The Fund has demonstrated strong alpha generation in the near term

	YTD	1Y Annualised return	3Y Annualised Return	5Y Annualised return
LionGlobal Taiwan SGD	22.9%	72.5%	29.9%	13.9%
MSCI Taiwan Index	8.9%	66.8%	31.6%	15.9%
Excess return vs. benchmark	14.0%	5.7%	-1.7%	-2.0%
All returns in SGD terms, gross of fees. Data as of 31 March 2026.

When compared with the Franklin FTSE Taiwan ETF, our recommended ETF for Taiwan, the fund has delivered consistent outperformance over the past five years on a gross return basis, highlighting the value of its active positioning.

That said, fees remain a key consideration. The fund’s expense ratio of 1.91% is significantly higher than the ETF’s 0.19%, creating a meaningful hurdle. In effect, the manager must generate substantial and sustained alpha to justify a fee that is 10 times higher. Encouragingly, this has been achieved in the near term. Across YTD, 1-year, and 3-year periods, the fund’s excess returns have comfortably exceeded the fee differential (Table 3), suggesting that active stock selection has added tangible value in the current environment.

Over a longer 5-year horizon, while the fund still outperforms on a headline basis, the margin narrows once fees are taken into account, potentially resulting in slight net underperformance versus the ETF.

Table 3: The fund has delivered consistent outperformance relative to our recommended ETF

	YTD	1Y Annualised return	3Y Annualised Return	5Y Annualised return
LionGlobal Taiwan SGD	22.9%	72.5%	29.9%	13.9%
Franklin FTSE Taiwan ETF (Recommended ETF)	12.0%	54.9%	24.2%	12.2%
Excess return vs. recommended ETF	10.9%	17.6%	5.8%	1.7%
All returns in SGD terms, gross of fees. Data as of 31 March 2026.

From a risk management perspective, the fund’s drawdown profile is broadly in line with its benchmark. The most challenging period was in 2022, when a combination of rising global inflation, aggressive interest rate hikes, a cyclical downturn in electronics demand, and heightened cross-strait tensions weighed heavily on equity markets. During this period, the MSCI Taiwan Index declined 29.9%, while the fund fell slightly more at 32.9%, reflecting its higher concentration in smaller technology names.

In comparison, the Franklin FTSE Taiwan ETF demonstrated relatively better downside resilience, with a smaller decline of 28.0% during the 2022 downturn. This is largely attributable to its more diversified composition, featuring more exposure to financials and industrial stocks relative to the LionGlobal fund. By tracking the FTSE Taiwan RIC Capped Index, which limits individual constituents to a maximum weight of 20%, the ETF avoids excessive concentration in single names. This structural diversification helps cushion downside risk during periods of market stress.

Key reasons to include LionGlobal Taiwan SGD in your portfolio

For investors prioritising cost efficiency, holding USD-denominated assets, and seeking broad market exposure with good downside management, the Franklin FTSE Taiwan ETF remains a compelling core allocation.

However, for Singapore-based investors, the case for the LionGlobal Taiwan Fund is more differentiated.

SRS eligibility provides access to tax-advantaged retirement investing, features not available through US-listed ETFs.

Most importantly, for investors seeking active participation in the broadening AI opportunity set, the LionGlobal Taiwan Fund stands out as a high-conviction strategy. Its targeted exposure to emerging leaders across Taiwan’s AI supply chain positions it to capture alpha beyond benchmark heavyweights, offering a more dynamic way to participate in the next phase of Taiwan’s AI-driven rally.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.