Taiwan's AI boom fuels economy, but not everyone benefits

Taipei, Taiwan – For Li, an engineer at computer maker ASUS, the AI wave sweeping Taiwan has made the tech sector more dynamic than ever.

Taiwan is a semiconductor powerhouse, producing about 90% of the most advanced chips used in top AI models like ChatGPT and Claude. “I feel Taiwan's tech and computer industry is becoming more vibrant,” Li, who requested anonymity, told Al Jazeera, referring to events like the Computex exhibition held from June 2 to June 6.

However, Li worries the fruits of the AI frenzy are not being shared fairly. “Most non-tech industries don't seem to feel the benefits; things haven't been evenly distributed,” Li explained, noting that many former classmates outside tech are not as well-off.

Taiwan's economy is growing at an enviable pace. GDP rose 8.63% in 2025, and the first quarter of this year saw a jump of 13.69%. Exports soared 34.9% last year to $640.7 billion, with more than two-thirds being tech-related goods and services.

The semiconductor industry alone accounts for over 20% of Taiwan's GDP, according to U.S. trade data, with most output from TSMC (Taiwan Semiconductor Manufacturing Company), whose major clients include Nvidia and Apple. TSMC alone represents more than 40% of the value of Taiwan's stock market.

The rapid economic boom raises concerns about over-reliance on AI growth. Taiwan's Central Bank Governor Yang Chin-lung has warned of a “K-shaped economy,” where some sectors grow quickly while others stagnate.

The semiconductor industry, though vital to the economy, is not the largest employer. The sector employs only about 300,000 people in a workforce of 11 million, according to data from Dachrahn Wu, Director of the Taiwan Economic Development Center at National Central University. The broader electronics and IT manufacturing sector employs about one million, compared with roughly seven million workers in services.

Heavy reliance on a single industry marks a shift from the “Asian Tiger” era from the 1960s to the 1990s, when Taiwan's economy was driven by hundreds of thousands of small and medium-sized enterprises (SMEs). “From the 1970s to the 1990s, economic growth focused on small and family-run businesses, the 'living-room factory' model where family businesses produced a component for consumer goods,” said James Lin, a historian specializing in Taiwan's postwar economic transformation. “Benefits from that period were more widely distributed. In contrast, today wealth inequality is rising as land becomes expensive and large corporations like TSMC attract most foreign investment instead of small companies.”

Alicia Garcia Herrero, chief Asia-Pacific economist at investment bank Natixis, said Taiwan's economic model risks creating a “dual society,” where the tech sector sucks in talent, capital, and resources at the expense of other industries. “It's very difficult if you are not in semiconductors in Taiwan right now,” Garcia Herrero said, pointing to low wages for non-tech workers and rising business costs.

Some challenges are beyond Taiwan's control, including tariffs by U.S. President Donald Trump. These tariffs partially exempt semiconductors but hit non-tech exporters. “Traditional manufacturing faces higher tariffs compared with rivals like South Korea, Japan, or Southeast Asian countries because we cannot sign free-trade agreements,” said Chao-Hsi Huang, Vice President of Taipei School of Economics.

Critics also fault the government for a weak local currency, which makes exports more competitive but reduces consumer purchasing power. The government denies currency manipulation but admits to intervention to smooth “volatility” when the Taiwan dollar fluctuates sharply. After two decades of stagnation in the 2010s, wages are rising again, though unevenly. Average real wages increased 1.4% in 2025, and median wages rose 1.35%. However, 70% of workers earn less than the average, skewed by nearly double-high wages in the tech sector.

For people frustrated by stagnant wages, the surging stock market offers some solace. Thanks to the AI boom, the Taiwan Stock Exchange (TWSE) more than doubled in value from 2019 to 2025, reaching $2.2 trillion, according to HSBC. Regulatory changes in 2020 made it easier for small investors to buy fractional shares, encouraging more people to participate. In January, TWSE reported 13.77 million trading accounts, equivalent to 60% of the population, and called the exchange a “platform for inclusive prosperity and shared growth.”

Though more equitable than neighbors like Singapore, Hong Kong, or China, wealth inequality in Taiwan has risen over decades. In 1980, Taiwan's Gini coefficient (a measure of income distribution, where 0 is perfect equality) stood at 0.308, on par with Norway at the time. By 2024, the Gini had risen to 0.341 — lower than many countries but still a significant increase. “I feel the benefits of economic growth have not been evenly distributed,” said Ryan, a tech engineer. “Some industries or asset owners benefit significantly, but office workers often just see soaring prices and housing costs, without life becoming easier.”

Wei-ting Yen, a research assistant at Academia Sinica, said the semiconductor and stock market booms help some but increase anxiety for others. In a survey of 1,195 voters last month, 40% described their household finances as “worrisome” or “very worrisome” due to rising living costs, especially housing. “I think subjectively, they worry because they can't accumulate assets, can't afford to buy a house or apartment,” Yen said. “Housing prices and the stock market are skyrocketing, but for people without money to invest in those options, it only adds disappointment and anxiety.”