AI Growth Skews Taiwan Economy

What happened

Taiwan's economy has diverged, with the AI sector booming as traditional manufacturing lags. An AI-driven export surge, fuelled by semiconductor and high-performance computing component demand, reallocated capital towards advanced manufacturing and tech innovation. TSMC's revenue grew from advanced wafer shipments, and the company is expanding its AI cloud infrastructure, purchasing GPUs, and targeting a substantial annualised AI cloud run rate. This caused a sector rotation where foundries outperform memory and packaging, while some smartphone component providers face increased competition and supply chain exclusion due to price sensitivity.

Why it matters

This economic divergence introduces a significant operational constraint by reallocating capital and market focus predominantly towards the AI sector, increasing exposure to market volatility for traditional manufacturing and non-AI-centric semiconductor sub-sectors. It raises due diligence requirements for procurement and supply chain management teams to assess the long-term viability and competitive positioning of suppliers outside the booming AI segment. Financial planning and strategic development teams face an increased burden in forecasting and mitigating risks associated with this concentrated economic growth and potential supply chain disruptions for non-AI components.