AI Boom Creates Stark Economic Divide in Taiwan and South Korea's Chip Powerhouses

A.I. Riches Fuel Economic Divide in Asia's Chip Powerhouses

Meaghan Tobin reported from Taipei, Taiwan, and Catie Edmondson from Seoul. In South Korea and Taiwan, the world's hunger for artificial intelligence has unleashed a boom unlike anything seen in years. The two economies are home to the small cluster of companies that produce the coveted chips A.I. cannot run without. As exports climb to record highs and stock markets soar, the rush to cash in has reached a fever pitch. Seniors are opening brokerage accounts to funnel their savings into semiconductor stocks. On social media, young people question the point of their jobs, saying they could earn as much -- or more -- trading stocks. Yet the windfall is masking a far bleaker picture across much of the rest of the economy. Industries outside chip making are struggling to navigate a turbulent landscape upended by energy and tariff shocks. Household debt and real estate prices continue to rise. Both currencies remain weak despite repeated government interventions to prop them up. For both places, the skyrocketing growth springs from a narrow, highly specialized sector that employs only a sliver of the population. Everybody else is left scrambling to find a way in. As investors pour money into chip stocks, chasing a share of the A.I. bonanza, they are amplifying the market's wild swings. Korean stocks plunged 10 percent on Tuesday, setting off a global tech sell-off, before rising over 3 percent a day later. Economists describe the phenomenon as a "K-shaped" divide, in which some industries and socioeconomic groups thrive while others stall or fall behind. Around the world, including in the United States, that divide has widened since the Covid-19 pandemic. Now, the A.I. boom threatens to make it even more expansive. The enormous A.I. demand, Taiwan's central bank cautioned in a statement this month, risks creating an economy in which "different groups or industries experience drastically different economic outcomes." "The wealthy thrive," the bank said. "The low-income group struggles." Few places illustrate that split more clearly than the homelands of the world's semiconductor giants, where companies including Samsung, SK Hynix and Taiwan Semiconductor Manufacturing Company are reaping record profits while much of the rest struggles. South Korea's benchmark KOSPI is the world's best-performing major stock index since the start of the year. Samsung and SK Hynix have each crossed $1 trillion in market valuation. Samsung shares have more than doubled this year, while SK Hynix has tripled. The Bank of Korea raised its economic growth forecast after exports surged. In May, South Korea's exports rose 53 percent from a year earlier to a record monthly high. Want to stay updated on what's happening in South Korea and Taiwan? Sign up for Your Places: Global Update, and we'll send our latest coverage to your inbox. Samsung and SK Hynix dominate production of the memory chips that help A.I. systems store information. These systems require enormous amounts of high-bandwidth memory, making the two conglomerates indispensable to the global A.I. build-out and all but guaranteeing demand for their products. "Because semiconductors now account for such an outsized share of Korea's export value, the headline numbers look strong," said Sang-Ha Yoon, executive director of the Korea Institute for International Economic Policy, a government-funded think tank. But those figures conceal a growing divergence. Non-semiconductor exports -- petrochemicals, steel, batteries, auto parts -- are struggling with weak demand and intense competition from China. "The same headline that reads 'Korea is doing well' also reads: 'Korea is doing well in a very narrow way,'" Mr. Yoon said. For workers outside the A.I. sector, Mr. Yoon continued, "the lived experience can be one of higher costs and stagnant real wages." As the benefits of the boom become increasingly concentrated, many South Koreans have started looking to the stock market to share in the gains. Last month, stockbrokers reported that South Korean seniors were cashing in life insurance policies and retirement savings to buy chip stocks. Nearly 83 percent of net stock purchases by retail investors on the KOSPI this year have been Samsung or SK Hynix, according to Young Gon Lee, an analyst at Toss Securities. "We are seeing capital that had remained in safer assets move into riskier assets in search of higher expected returns," Mr. Lee said. The enthusiasm extends to Taiwan, which last month overtook India to become the world's fifth-largest equity market. TSMC, which manufactures the world's most advanced A.I. chips, accounts for more than 40 percent of the value of Taiwan's benchmark index and carries a market capitalization approaching $2 trillion. The chip frenzy has helped propel Taiwan to some of the fastest growth rates in the world. The economy expanded nearly 13 percent in the fourth quarter of 2025 and almost 15 percent in the first three months of this year. But that has not translated into broader wage gains, said Dachrahn Wu, executive director of an economic research center at National Central University in Taoyuan. Most Taiwanese workers are employed outside the tech sector and earn less than $1,500 a month, Mr. Wu said. The small group of high earners can save and invest. Most cannot. Taiwan's economic growth accrues mostly for the wealthy, such as TSMC shareholders, Mr. Wu said. "But the salaries of ordinary people haven't grown much." Semiconductors and other technology products account for the vast majority of Taiwan's exports, said Ma Tieying, a senior economist at DBS Bank in Singapore. Other export-dependent industries, meanwhile, have been hit hard by tariffs and weakening demand. Taichung, a central Taiwanese city, was once a hub for machine tools, home to hundreds of thriving small businesses. But tariffs have transformed the industry, said Ian Chang, the second-generation general manager of Innovator Machinery Company, which makes woodworking machinery. Many companies have gone out of business, and others have put day laborers on unpaid leave -- widening the gap between workers in traditional manufacturing and those with steady jobs in the technology sector. Mark Ke has run his family's textile manufacturing business, Ecomax Textile Company, in nearby Changhua, for nearly five decades. The company pioneered the use of plastic bottles and other recycled items to make fabric, supplying international brands including the British retailer Marks & Spencer and producing material used in the balls for the 2014 FIFA World Cup. Since then, however, textile manufacturers have faced growing competition from rivals in China and Southeast Asia. Rather than shoring up the sector, the government provided incentives like tax breaks and infrastructure for the island's prized chip makers, Mr. Ke said. "The direction of government support is entirely misplaced. It's primarily focused on the A.I. industry," he said. Textile products fell by the wayside. Questions about who benefits from the technology windfall have become a source of political and labor tension in South Korea. Last month, workers at Samsung threatened a strike that would have disrupted the national economy and the global technology supply chain, demanding that the company commit 15 percent of its operating profit to employee bonuses. Samsung agreed to 10.5 percent. Should Samsung reach the roughly $200 billion in operating profit this year projected by some financial analysts, workers in its semiconductor division could receive bonuses of as much as $430,000, a spokesman for Samsung said. The average monthly wage in South Korea last year was around $2,800, according to government data. Asked at the company's annual shareholders meeting this month whether TSMC might adopt a similar arrangement, its chairman, C.C. Wei, said the company had increased employee bonuses over the past three years. The dispute at Samsung may be an early sign of a wider debate over how the gains from artificial intelligence should be shared. Before workers reached an agreement with the company, Kim Yong-beom, chief of staff to Lee Jae Myung, South Korea's president, floated the idea of using tax revenues from companies benefiting from A.I. demand to fund what he called a "national dividend." "The critical concern is the potential for the excess profits generated in the A.I. era to structurally exacerbate the 'K-shaped' economic divide within society," Mr. Kim wrote in a Facebook post that has now been deleted. Allocating a portion of these profits to workers should not be viewed merely as an act of redistribution, Mr. Kim said, but a "necessary cost for maintaining the stability of the entire system." Amy Chang Chien, Xinyun Wu and Jin Yu Young contributed reporting.

The AI boom is making Taiwan rich. So why do its people feel poor?

"Whenever I hear news that the Taiwanese economy is booming, I always want to stop people on the street and ask, 'Is it really that good? Are the conditions in places with clusters of semiconductor firms and factories getting better?'" Spurred by the artificial intelligence and semiconductor boom, the Taiwanese economy has entered an era of rapid growth for the first time in 16 years. However, everyday life is growing tougher for Chien, who works at an SME in Taipei. As a member of the "kangaroo tribe" who live with their parents, the 35-year-old Chien says independence is a bridge too far. "To live in a one-room house, monthly rent and living expenses would come to 25,000 Taiwan dollars," he said. Although he has been working for seven years, Chien earns just 45,000 Taiwan dollars (around US$1,420) per month. He has all but given up on marriage or having children. Behind the rosy figures of a wealthy Taiwan buoyed by TMSC, the world's largest semiconductor foundry, the Taiwanese people are being squeezed by steep housing costs, low wages and a high cost of living, cynically referring to their homeland as a "ghost island." The boom is evident from Taiwan's economic indicators. Data released by Taiwan's Directorate General of Budget, Accounting and Statistics show that first-quarter gross domestic product (GDP) growth amounted to 14.55% year over year. This is the highest figure in 48 years. On June 18, Taiwan's Central Bank elevated its growth forecast for this year to 9.45%. If this comes true, Taiwan would record its highest growth rate in 16 years since reaching 10.25% in 2010. AI is the driving force behind this growth. Taiwanese exports in May jumped 51.7% year-on-year, posting the second-highest value by month of all time. Exports of electronic components and IT products spiked by 66.9% and 118%, respectively. This is the result of Taiwan's semiconductor and ICT industries being prime beneficiaries of the global AI fervor. However, these numbers do not align with the economic experience of most Taiwanese people. Taiwan's consumer confidence index fell to 62.08 in May from the previous month's figure of 62.47, reaching the lowest level since January 2023. Produced by the Research Center for Taiwan Economic Development at Taiwan's National Central University, this index measures composite consumer expectations toward the domestic economy, household economy, employment and consumer prices. A number below 100 indicates prevalent pessimism. This matches the economic outlook of Mao, who runs a beauty services business. "The economy seemed to have improved since last year, but I haven't seen an increase in customers," she said. Although she was keen to expand her operations if business picked up, those plans were ultimately canned. "It's clear to me that just because things are going well for a small minority of well-known companies doesn't mean everyday people have more in their pockets," she said. As it turns out, Mao's complaints are borne out by the numbers. The scale of Taiwan's economy is rapidly expanding, but the portion returned to workers has stagnated. Labor income share, which measures employee remuneration as a proportion of GDP, has failed to improve. Labor income share in Taiwan sat at 50% up until the 1990s, but then entered a state of gradual decline to bottom out at 43% in 2024. In 2025, the average monthly wage in Taiwan stood at 64,000 Taiwan dollars (around 3.1 million won) in 2025, just 73% of the corresponding figure in Korea. Taiwan's gross national income per capita breached the US$40,000 mark last year, overtaking Korea, but workers remain worse off than their Korean counterparts. The disparity between industries is also slowly widening. Employees at cutting-edge firms such as TSMC, MediaTek and Foxconn are able to enjoy the fruits of AI, while young people employed in services, traditional manufacturing and part-time or low-wage industries are excluded from the benefits of rapid growth. While certain industries and social classes experience rapid growth, those on the other side are stagnating or being squeezed out. This is why the expression "K-shaped economy" has emerged to describe the Taiwanese economy. In response to such criticism, Taiwan's Central Bank explained, "It's not that traditional industries are doing poorly, it's that growth in the electronics industry is excessively strong." However, this fails to sufficiently explain the gap that has emerged between aggregate economic indicators and public sentiment. Nowhere is this discrepancy more prominent than in housing. The phrase "eggshell suburbs" is commonly heard among Taiwanese youth these days. In this metaphor, where central Taipei represents the yolk and the surrounding areas are the egg white, young people unable to afford a house are increasingly being pushed into more fringe districts known as the "eggshell suburbs." Growing numbers of young Taiwanese claim that far from buying a house, they are struggling just to cover the cost of rent and commuting. In the capital of Taipei, the housing price-to-income ratio sits at 16, even higher than London and New York. The lifestyle of young people reflects this reality. "Beggar Superman" is another phrase that has recently garnered attention in Taiwan. This refers to the cohort of young frugal shoppers who use convenience store apps to check the stock of grab-and-go lunches and fresh food products that are soon to be discounted as their expiration date approaches. At a given time, they race to the store to purchase these products. Although some view this as sensible consumer behavior, the sight of young people running to purchase discounted prepackaged meals at a time when the national economy is breaking records is symbolic of the gap between growth on paper and everyday reality. This economic hardship is translating into lower birth rates. Lin, a 42-year-old woman who runs a publishing company, has been married for five years but decided not to have children. "Three of my five friends from university have married, but only one has a child," she says. Taiwan recorded 107,812 births last year, hitting a new low for the 10th consecutive year. The total fertility rate, defined as the number of children a woman is expected to have in her lifetime, also fell to a record low of 0.695. On May 28, Taiwan's President Lai Ching-te announced a new population strategy that will invest 380 billion Taiwan dollars to solve the problem of population decline caused by low fertility. Lai has pledged to build a "state-supported childrearing" system in which society, businesses and the state provide joint support for raising children. Lin says she has no plans to change her mind in spite of such policies. "It's true that there is a need for greater social support, but it ultimately comes down to the economic stability of each individual household," she said. Taiwan's semiconductor industry is highly competitive, but the gaps between industries, regions and professions are growing at the same time. A report released by the Industrial Technology Research Institute, an independent Taiwanese research agency, notes, "Between 2010 and 2019, corporate operating profits grew at an average of 4% per year, with similar rates for wage growth, whereas from 2020 to 2024 operating profits jumped by 7% while wage growth stagnated at 4%." "Due to this gap, most workers, and especially those outside of the electronics industry, are failing to see much benefit from rapid economic growth," the report added. The problems for Taiwanese society go beyond the risk of putting all its eggs in the semiconductor industry basket. Deep concerns remain over how to translate the fruits of growth into progress on issues including housing stability and wage growth. If the profits reaped by export giants and advanced industries fail to be returned to Taiwanese households and local communities, rapid economic growth could exacerbate polarization rather than rectify it. Cognizant of this, the Taiwanese government has pursued all sorts of policies, from cash payments to wage hikes, support for youth housing and expanding social housing. But short-lived, one-off programs are no match for entrenched polarization, meaning that the paradox of a wealthy Taiwan full of poor Taiwanese is likely to continue for the foreseeable future. Korea is no stranger to these types of worries. While the chip export boom is boosting numbers and supercharging the stock market, young people in the country continue to deal with high home prices, unstable employment and a sense that what they're earning isn't enough. Taiwan may have beaten Korea to the AI and semiconductor boom, but at the same time it is a lesson in what sorts of fractures may be in store for us if the fruits of growth are not shared with society as a whole. By Lee Jeong-yeon, Beijing correspondent