{"id":287600,"date":"2026-02-12T13:38:16","date_gmt":"2026-02-12T13:38:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/287600\/"},"modified":"2026-02-12T13:38:16","modified_gmt":"2026-02-12T13:38:16","slug":"taiwans-ai-powered-economy-soars-in-the-shadow-of-bubble-fears-and-china-threats","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/287600\/","title":{"rendered":"Taiwan’s AI-powered economy soars in the shadow of bubble fears and China threats"},"content":{"rendered":"\n

TAIPEI, Taiwan (AP) \u2014 In Taipei, real estate agent Jason Sung is betting that home prices around a high-tech industrial park in the northern part of Taiwan’s capital will soon take flight \u2013 because of computer chip maker Nvidia<\/a>.<\/p>\n

The area is where Nvidia plans to build its new Taiwan<\/a> headquarters as it rapidly expands on the island, set to surpass Apple<\/a> to become the biggest customer of Taiwan semiconductor maker TSMC (TSM<\/a>), the biggest contract manufacturer of the advanced chips needed for artificial intelligence<\/a>.<\/p>\n

Nvidia CEO Jensen Huang describes Taiwan as the \u201ccenter of the world’s computer ecosystem.\u201d It’s riding high on the global AI frenzy. Its economy grew at an 8.6% annual pace<\/a> last year, and it’s hoping to maintain that momentum after it recently sealed a trade deal<\/a> with U.S. President Donald Trump that cut U.S. tariffs on Taiwan to 15% from 20%.<\/p>\n

\u201cWe have been lucky,\u201d said Wu Tsong-min, an emeritus economics professor at National Taiwan University and a former board member of Taiwan\u2019s central bank.<\/p>\n

But Taiwan\u2019s heavy reliance on computer chip makers and other technology companies carries the growing risk of the AI craze turning out to be a bubble.<\/p>\n

\u201cWhat if the AI bubble is real, and what if its rapid growth pace slows, what\u2019s next for Taiwan? That\u2019s the question many have been asking,\u201d Wu said.<\/p>\n

Escalating tensions<\/a> with Beijing, which claims independently governed Taiwan as mainland China’s territory, are another abiding threat, despite the island’s vital role in global chip and AI supply chains.<\/p>\n

An island of about 23 million people, Taiwan depends heavily on exports. They jumped nearly 35% year-on-year in 2025, as shipments to the U.S. surged 78% due to ballooning AI demand.<\/p>\n

That’s thanks largely to TSMC<\/a>, or Taiwan Semiconductor Manufacturing Corp., and electronics giant Foxconn, which makes AI servers for Nvidia and is a major supplier to Apple.<\/p>\n

Taiwan has undergone massive economic changes while shifting from mainly labor-intensive industries such as plastics and textiles to advanced manufacturing like semiconductor fabrication.<\/p>\n

The AI frenzy has made TSMC one of the world’s top 10 most valuable companies. Its profit jumped 46% last year to $1.7 trillion Taiwan dollars ($54 billion).<\/p>\n

The chipmaker is investing heavily both in Taiwan and in new factories in Arizona<\/a> in the U.S. It produces more than 90% of the world\u2019s most advanced chips.<\/p>\n

Foxconn<\/a>, formally known as Hon Hai Precision Industry Co., has doubled its value since 2023. The maker of Apple\u2019s iPhone and iPads now produces AI servers and racks and has a partnership with OpenAI<\/a> to supply AI data center equipment.<\/p>\n

Story Continues <\/p>\n

Taiwan’s heavy reliance on its technology industry means its biggest risk is that growth will be \u201cvery highly contingent on the AI boom and tech race continuing,\u201d said Lynn Song, chief economist for Greater China at ING Bank.<\/p>\n

Worries that the AI craze may prove to be a bubble<\/a> prone to a bust similar to the dot.com crash in 2000 that swept through markets, alarming many in Taiwan.<\/p>\n

\u201cI\u2019m also very nervous about it,\u201d C.C. Wei, TSMC\u2019s chairman said when asked about a potential AI bubble during an earnings call in January. \u201cBecause we have to invest about $52-$56 billion (this year).\u201d<\/p>\n

\u201cIf we did not do it carefully, that will be a big disaster to TSMC for sure,\u201d he said. \u201cI want to make sure that my customers\u2019 demands are real.\u201d<\/p>\n

In a recent report, analysts from Fitch Ratings argued that AI demand will remain strong at least in the near term. In the longer term, however, the risks \u201cwill depend on the evolution of AI, as well as trade and investment policies and the adaptability of Taiwanese firms,\u201d they wrote.<\/p>\n

Taiwanese electronics company Asia Vital Components, a key supplier of liquid cooling systems for Nvidia, is investing heavily in research and development. Its chairman, Spencer Shen, said he saw no signs of a slowdown in AI-related demand so far. The company is already designing thermal solutions for 2028 AI servers, he said.<\/p>\n

\u201cWe do not believe this is a bubble,\u201d Shen told The Associated Press in an interview. \u201cAI is driven by companies with real products and massive cash flows, like Amazon, Microsoft<\/a>, Google and Meta.\u201d<\/p>\n

\u201cIn fact, AI infrastructure is still in short supply,\u201d Shen added. \u201cI expect AI to trickle through to our everyday level and change the way that things will work fundamentally.\u201d<\/p>\n

Some in Taiwan believe that its pivotal role in the technology sector, especially as a maker of computer chips whose main material is silicon, helps to protect the island from attack by communist-ruled<\/a> Beijing, whose leaders have vowed to reunite the island with the Chinese mainland, by force if necessary.The two governments split in 1949 during a civil war. Beijing has been stepping up pressure,<\/a> conducting military drills nearby. Exercises in late December included live rounds landing closer<\/a> to the island than before, Taiwan officials said.Such geopolitical factors cloud the economic outlook, though many in Taiwan including its former President Tsai Ing-wen believe its importance to global chipmaking would deter China from attacking.The risk of an invasion is unclear. Both global tech companies and Chinese industries would suffer from massive disruptions of the chip supply chain, said Wu of National Taiwan University.Still, some companies have been identifying contingency scenarios in recent years on how to respond in case of military action by China, said Chen Shin-horng, vice president of the semi-official Chung-Hua Institution for Economic Research.\u201cWe need to understand the potential risk, potential damages to Taiwan,\u201d said Chen.While many of its core research and development activities are in Taiwan, TSMC already has plants in China, Japan and the U.S., and it’s expanding its offshore production in the U.S., Germany and Japan. Roughly 65% of Foxconn’s manufacturing is in China, and the company has factories in other parts of the world such as India, Mexico and the U.S. AVC has been expanding its production capacity in Vietnam.While some have called for Taiwan to diversify its economy<\/a> away from technology to reduce risks, others argue that doubling down on its world-leading technology is the way forward. \u201cIt is our greatest strength,\u201d said Shen of AVC. <\/p>\n

The AI boom has done wonders for Taiwan’s stock exchange, where the benchmark Taiex has climbed nearly 250% over the past decade, making many investors rich. Economists have significantly upgraded forecasts for Taiwan’s economic growth for 2026 based on its robust AI-related exports.<\/p>\n

But as is true elsewhere, the wealth is not evenly spread. Many Taiwan residents feel they have been left behind.<\/p>\n

Taiwan\u2019s wealth gap, according to official data, has roughly quadrupled over the past three decades.<\/p>\n

The pay of tech workers already earning high wages, especially chip engineers and managers, has skyrocketed. For other traditional industries, such as plastics and machine toolmakers, growth has lagged.<\/p>\n

Economists say that gap might widen as the AI frenzy<\/a> continues.<\/p>\n

\u201cIt can be tough to make a living,\u201d said Jean Lin, a 30-something manager of a takeaway outlet selling bento meals in a Taipei neighborhood where Foxconn’s office is located.<\/p>\n

\u201cMany of the younger generation still can\u2019t afford to buy an apartment,\u201d Lin, who wishes to start her own business one day, added. \u201cA lot of young people still feel they don’t have much money.\u201d<\/p>\n

___<\/p>\n

Associated Press video journalist Johnson Lai contributed.<\/p>\n","protected":false},"excerpt":{"rendered":"TAIPEI, Taiwan (AP) \u2014 In Taipei, real estate agent Jason Sung is betting that home prices around a…\n","protected":false},"author":2,"featured_media":287601,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,1657,184,85,46,146864,31318,15624,4625],"class_list":{"0":"post-287600","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-china","10":"tag-economy","11":"tag-il","12":"tag-israel","13":"tag-national-taiwan-university","14":"tag-taipei","15":"tag-taiwan","16":"tag-taiwan-semiconductor"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/287600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=287600"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/287600\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/287601"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=287600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=287600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=287600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}