Taiwan Soars On AI Boom But Two-Tier Economy Risks Run Deep

2025-08-29 01:06:51

(MENAFN- Asia Times) Taiwan has a habit of surprising the world.

In the second quarter of this year, its economy roared ahead by 8% compared with a year earlier-the fastest pace in four years. That number alone would be enough to turn heads, but the context makes it even more remarkable.

Taiwan is not a resource-rich country, nor does it enjoy the geopolitical breathing space of a large domestic market. Instead, it thrives on agility, on building industries that are both indispensable and nearly impossible to replicate. Today, that edge is sharper than ever because of one thing: artificial intelligence.

The AI revolution is everywhere these days, and the hype is often louder than the reality. But in Taiwan's case, the reality is striking. Nvidia's most recent earnings showed that global demand for AI chips remains very strong, even if not quite as sky-high as some investors had hoped.

Behind every one of those chips lies a Taiwanese success story. The country has become the workshop of the AI revolution, and as a result, its economy is riding a wave unlike anything it has seen since the early smartphone era.

Economists have had to scramble to keep up; Taiwan's GDP growth forecast for 2025 has been revised upward to 5.2%, nearly double what was expected just a few months ago. This surge is not evenly shared, though, and that is where the story becomes complicated. At the heart of the boom are a handful of companies.

TSMC, Taiwan's crown jewel company, has built a global near-monopoly in producing the high-performance computing chips that AI systems need to function. Foxconn, too, has managed to shift from being a symbol of the old consumer electronics supply chain to a key supplier of cloud and networking gear. These firms are not just winners-they are indispensable actors in the emerging new global economy.

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