Taiwan's Wealth Surpasses South Korea's, Driven by 4.55% GDP Growth and Semiconductor Boom

Taiwan's total wealth is expected to surpass that of South Korea this year, marking the first time in over two decades that this has occurred. This shift is largely attributed to the rise of Taiwan Semiconductor Manufacturing Company (TSMC), which has significantly reshaped the economic landscape of Asia. According to the latest predictions, Taiwan's GDP growth rate for 2025 is projected to reach 4.55%, an increase from the 4.45% estimated in August. Following this growth trajectory, Taiwan is poised to surpass South Korea's per capita GDP by 2025, a year earlier than previously anticipated by the International Monetary Fund (IMF). Currently, Taiwan's per capita GDP is estimated to be around $38,000, which is half of Singapore's level but higher than Japan's and rapidly closing the gap with South Korea.

This transformation is driven by the global demand for semiconductors, fueled by the AI boom. The global chip shortage during the pandemic elevated the status of Taiwanese companies, with leaders from Europe and America seeking to secure semiconductors crucial for economic operations. The launch of ChatGPT further accelerated the growth of companies like TSMC and Foxconn, which now handle the assembly of most AI-related chips and servers globally. In contrast, South Korea's economic pillar, Samsung Electronics, which accounts for 11% of the country's economy, is facing challenges in the advanced process competition. South Korea's economy grew by less than 1% in the second quarter, with an expected annual growth rate of 0.9%. The Bank of Korea's governor, Lee Chang-yong, has repeatedly warned that structural issues such as low birth rates and an aging population have reduced the potential growth rate to around 1%.

Bloomberg Economics notes that while South Korea has a broad industrial base with struggling traditional sectors like petrochemicals, Taiwan's high concentration in technology benefits more from the AI boom. In August, Taiwan's export volume surpassed South Korea's for the first time, a significant milestone given that South Korea's population and overall GDP are more than double that of Taiwan. The rapid appreciation of the New Taiwan Dollar against the US Dollar, driven by exporters' early settlements and market speculation about the government's willingness to let the currency rise for trade negotiations, has further widened the per capita GDP gap between the two regions. The New Taiwan Dollar has appreciated by about 9% against the US Dollar this year, compared to a 6% increase for the South Korean Won.

However, Taiwan's economy also faces challenges. Over-reliance on a single industry, particularly with the increasing share of US exports, could turn its strength into a vulnerability, especially in the context of geopolitical risks in the Taiwan Strait and strained relations with mainland China. Chen Wu-tsu, chief economist at Taipei-based Yuanta Securities, points out that limited resources make it difficult for Taiwan to diversify its industries. The region needs to promote the transformation of traditional industries into high-tech supply chain segments and explore mechanisms for redistributing the profits of technology companies to achieve balanced development.