AI Growth Skews Taiwan Economy

Taiwan's economy is experiencing a divergence, with the AI sector booming while traditional manufacturing lags. The AI-driven export surge is primarily fuelled by demand for semiconductors and high-performance computing components. This has led to a reallocation of capital towards advanced manufacturing and tech innovation, benefiting companies like TSMC, which is a key supplier to tech giants such as Nvidia and Apple.

TSMC's revenue has seen significant growth, driven by advanced wafer shipments. The company is expanding its AI cloud infrastructure, purchasing additional GPUs and targeting substantial annualised AI cloud run rate. This AI boom has triggered a sector rotation within Taiwan's semiconductor ecosystem, with foundries outperforming memory and packaging sub-sectors.

However, not all sectors are benefiting equally. Some Taiwanese smartphone component providers are facing increased competition and being phased out of supply chains due to price sensitivity. This disparity raises concerns about the overall health and balance of Taiwan's economic growth, despite the impressive performance of the AI sector.