Taiwan's economy is growing rapidly on the back of surging demand for artificial intelligence (AI) chips, but the gains are not spreading across society. As value concentrates around the semiconductor industry, the number of high-asset holders is rising quickly, while many Taiwanese households say they are not feeling the boom because of high dwelling prices and living costs.
According to Bloomberg on the 5th (local time), the biggest beneficiary of rising demand for AI chips is TSMC. TSMC has emerged as a key company in the global AI Semiconductor supply chain and grown into the most valuable company in Asia. Buoyed by that, Taiwan is cited as one of the fastest-growing countries in the world, and major global banks have raised their growth forecasts for Taiwan in quick succession. UBS projected that the number of millionaires in Taiwan will increase at the fastest pace in the world through 2028.
But such a rise in wealth is not easily felt in daily life. The top 10% by income take 48% of total income, while the bottom 50% get 12%. According to the World Inequality Lab, Taiwan's income concentration is more severe than in the United States. The official Gini coefficient (an indicator of inequality in income distribution) appears low, but the real gap in assets and income is widening rapidly.
Even as wages rise, living conditions are not improving. The average dwelling price in Taipei exceeds 15 times the median household income, a figure higher than in Hong Kong, long considered the world's most expensive city for housing. Analysts say this is fueling a growing sense of relative deprivation among young people and the middle class.
A 30-something engineer working at TSMC said, "My annual salary has risen sharply over the past few years, but my spending patterns have hardly changed." The person allocates about 70% of income to saving and investment, including stocks and real estate. Because high wages in the semiconductor industry are not translating into greater consumption, Taiwan's economy shows a structure in which private consumption is extremely weak compared with exports and investment.
In fact, household consumption contributed only 0.7 percentage point (p) to last year's surge in Taiwan's economic growth. Most of the rest came from net exports and investment. Some also say similar polarization is appearing across Asia, with China posting a record trade surplus and South Korea increasing its reliance on AI exports.
External variables are also increasing Taiwan's vulnerability. President Donald Trump is pressuring TSMC to move about 40% of its production facilities to the United States, a development seen as a threat to a significant portion of Taiwan's corporate tax revenue. Those funds are used for defense and social welfare expenditure, so if the industrial shift materializes, it could burden fiscal operations.
Taiwan's Central Bank pointed to an overreliance on a single industry as a structural problem. Central Bank Governor Yang Chin-long said, "The electronics industry is expected to account for most of this year's increase in gross domestic product (GDP)," adding, "This is not normal growth." As automation and capital expenditure increase, some note that the job-creation effect is also limited.
The political burden is also growing. Academia Sinica warned that income inequality is heightening a sense of relative poverty, and if it is not resolved, the ruling Democratic Progressive Party could be hurt in the 2028 presidential election. With President Lai Ching-te pledging to raise defense spending to 5% of GDP, there are concerns that a downturn in the semiconductor industry could affect securing resources for security as well.
Experts noted, "For Taiwan to sustain AI-led growth, consumption recovery and easing inequality must proceed in parallel." Otherwise, even if high growth is maintained, social discontent and political instability are likely to expand.