‘No. 1 in Asia’ growth yet workers feel poverty… Taiwan ‘IT miracle’ with stark contrasts - 경향신문

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Racing alongside the iPhone and, under the motto ‘AI Island’, pushing to make the AI supply chain hubQ1 growth this year at 13.7%, the highest in 39 years… outpacing both South Korea and JapanLabor income share in IT manufacturing is half of South Korea… other industries and domestic demand keep shrinkingInvestment tilts to finance over consumption, worsening sentiment… “solo lead in GDP within five years” outlook faces variables

In 1993 the World Bank released a report titled ‘The East Asian Miracle’. In it, the World Bank called South Korea, Taiwan, Hong Kong, and Singapore, which achieved rapid growth in the 1970s~1980s, the region’s ‘Four Asian Tigers’. Thirty-three years later, this past April, the International Monetary Fund (IMF) economic outlook drew attention. It projected that by 2031 Taiwan’s per capita gross domestic product (GDP) would reach 56,000 dollars, surpassing South Korea and Japan by more than 10,000 dollars. Taiwan’s Economic Daily News reported, “TaiwanKorea GDP war: Taiwan, which outpaced South Korea in per capita GDPwill the gap widen further in five years?”

Domestic reactions were even more provocative. Some South Korean YouTubers flooded the platform with videos in the vein of “Korea is doomed”. The Chosun Ilbo said, “With TSMC, Taiwan in five years … will ‘play in different waters’ from South Korea”. Will Taiwan, as in the IMF scenario, be the country that achieves the greatest economic success in East Asia five years from now? We examined the bright and dark sides of Taiwan’s economy.

The economic indicators Taiwan is releasing this year are a quarterly “surprise”. Taiwan’s Directorate-General of Budget, Accounting and Statistics announced that first-quarter growth was 13.7% year-on-year. This is the highest growth rate in 39 years. Last year as well, Taiwan achieved strong growth of 8.7%, overwhelming South Korea, which grew 1.0%, and Japan, which grew 1.1%.

According to the IMF, Taiwan’s per capita GDP was 39,490 dollars last year, surpassing South Korea (36,230 dollars). It was 22 years after being overtaken by South Korea. Earlier, in 2023, it caught up with Japan for the first time. Ten years ago it was difficult to foresee Taiwan overtaking South Korea and Japan. In 2012 Taiwan’s per capita GDP was 21,260 dollars, less than South Korea (26,600 dollars). Compared with Japan (49,660 dollars), it was less than half.

Taiwan, which had grown rapidly on the back of solid small and medium-sized enterprises, fell into deep stagnation in the 2000s. China’s rapid growth, driven by low wages, hollowed out Taiwan’s industries. Low value-added SMEs centered on contract manufacturing struggled to compete with South Korea’s big businessled economy.

Taiwan, mired in low wages, low inflation, and low growth, sought an exit in information technology (IT). Upon taking office in May 2016, President Tsai Ing-wen championed building the “Silicon Valley of Asia”. Apple’s rapid ascent came as a once-in-a-lifetime opportunity for Taiwan’s economy. Apple chose TSMC as its semiconductor supplier instead of Samsung Electronics, which had become a smartphone rival. Leveraging this, TSMC aggressively reinvested in research & development (R&D) and advanced equipment, and after clearing Apple’s exacting quality and security requirements, wooing by U.S. Big Tech such as Nvidia, AMD, and Google began. A wide range of related manufacturerscamera lenses, substrates, casessupplying the iPhone grew in tandem.

President Lai Ching-te, who took office in 2025, is pressing the ‘AI flywheel’ under the motto ‘AI Island’, aiming to make Taiwan an indispensable core hub in global AI innovation and supply chains. Taiwan is assessed to have successfully built a semiconductor ecosystem spanning foundries (contract manufacturing) such as TSMC and UMC, system semiconductors such as MediaTek, Novatek, and Realtek, and packaging players such as Rewegwang, Sintek, and Junghwa Precision Tech.

Lee Seung-woo, head of research at Eugene Investment & Securities, said, “While South Korea has driven its semiconductor industry with two large memory chip companies, Taiwan, led by TSMC, has built out a robust semiconductor ecosystem,” adding, “Overshadowed by memory results, South Korea is already trailing Taiwan significantly in semiconductor industry segments.”

Perceived poverty behind the flashy ‘No. 1 in Asia’ title

On April 30, the Economic Daily News asked, “TaiwanKorea GDP showdownwon in growth rate, but lost in the economy people feel?” Taiwan’s Apple Daily also ran a piece on the 12th titled, “Despite overtaking Japan and South Korea in GDP, why do people feel poor?” The warmth of dazzling growth is not spreading across Taiwanese society as much as imagined.

According to Taiwan’s Ministry of Finance Customs Administration, last year Taiwan exported 640 billion dollars, a record high. Semiconductors (32.7%) and servers/computers (28.7%) accounted for 61.4% of the total. Exports make up about 70% of GDP. This shows how much non-IT sectors and domestic demand have been squeezed, concentrating the fruits of growth in a few areas.

There is also criticism that income is not sufficiently distributed even within semiconductors. According to the Bank of Korea, the labor income share in IT manufacturing is 28.4% in Taiwan, only about half of South Korea’s 49.1%. Looking at labor costs as a share of revenue, TSMC, which makes chips, is around 10%, similar to major South Korean companies such as Samsung Electronics, SK hynix, and Hyundai Motor, but electronics component production/assembly firms such as Asus, Quanta, and Foxconn are only 3%~5%.

Bank of Korea analysis shows Taiwan’s average monthly wage is 64,000 New Taiwan dollars (about $2,230 (2,900,000 KRW)), about 70% of South Korea over the same period ($3,230 (4,200,000 KRW)). Lee Jun-ho, head of the China economy team at the Bank of Korea, said, “Since 2024, as demand for AI chips has spread, exports of IT products have more than doubled while non-IT products have stagnated, sharply widening the production gap between IT manufacturing and non-manufacturing,” adding, “Moreover, compensation gaps are large even among IT firms, so disparities are persisting within households.”

A hallmark of Taiwan manufacturing is that profits are distributed to shareholders via the stock market rather than to employee wages. On top of that, high foreign ownership means a smaller share stays at home. In TSMC’s case, foreign ownership exceeds 70%, far above Samsung Electronics at around 50%. This means a significant portion of wealth flows into foreign pockets.

As capital accumulated domestically is reinvested in finance rather than spent, sentiment deteriorates further. Apple Daily reported, “Behind the flashy title ‘No. 1 in Asia’, ‘perceived poverty’ is widespread among the public,” quoting an expert who said, “About 80% of Taiwanese assets are concentrated in financial assets such as stocks and funds, so those who could not climb aboard the investment express inevitably feel poverty that runs counter to the data amid the double burden of prices and housing.”

Will ‘Miracle Taiwan’ be tripped up by geoeconomics?

Many expect the semiconductor boom underpinning Taiwan’s growth to continue at least through the first half of next year. This is because data center investment by Big TechGoogle, Amazon, Meta, Microsoftaiming to seize the AI market contiues at a level seven to eight times semiconductor makers’ capital expenditures. The International Finance Center said in a report on the 18th, “This year the capital expenditure growth rate of major hyperscalers (large-scale cloud service providers) is expected to reach 61%,” adding, “Many expect the semiconductor upcycle to continue even in 2027.” In the short term, interest rate hikes and concerns about AI overinvestment exist, but they do not break the broader trend.

Experts say the five-year outlook for Taiwan’s economy should focus more on ‘geoeconomics’ than on the business cycle. Depending on how the United States frames its strategy on Taiwan in negotiations with China, semiconductor hegemony could shift wholesale. U.S. President Donald Trump said after a summit with Chinese President Xi Jinping, “Taiwan stole America’s semiconductor industry for years” and “it would be good if all the semiconductor manufacturers in Taiwan came to the United States.” The remarks are causing major political economy ripples in Taiwan as well, as they can be heard to mean the United States could siphon off Taiwan’s semiconductor industry and then abandon Taiwan.

Growing the semiconductor industry in Taiwan has been important economically but also necessary for security. Taiwan has pursued a ‘Silicon Shield (Silicon Shield·silicon shield)’ strategy to secure an irreplaceable semiconductor supply chain so great powers would defend Taiwan from China.

The U.S. government is concentrating investment in Intel’s foundry. Apple has also, for the first time in a decade, sought foundry capacity from Intel and Samsung, shaking TSMC’s monopoly. In a Fortune interview on the 18th, President Trump said, “If I had been president when (TSMC) started bringing chips in from China, I would have imposed tariffs to protect Intel,” adding, “If so, Intel would have taken all that business and Taiwan would not have existed.”

In January the United States demanded 500 billion dollars of semiconductor investment and relocation of 40% of production processes as conditions for lowering Taiwan’s tariff to 15%, the same level as South Korea and Japan. It has warned that tariffs of 100% could be imposed if such promises are not kept.

Kim Heung-gyu, director of the U.S.China Policy Institute at Ajou University, said, “Geoeconomically, it is becoming increasingly difficult for the United States to defend Taiwan as a core interest against China,” adding, “At the same time, since it has no intention of handing Taiwan’s capabilities to China, this will be a major variable for the future of Taiwan semiconductors.”