Taiwan's total wealth is expected to exceed South Korea's this year, marking the first breakthrough in over twenty years and signaling how Taiwan Semiconductor Manufacturing's (TSM.US) rise is reshaping Asia's economic landscape. According to the latest forecast released Thursday, Taiwan's GDP growth rate is projected to reach 4.55% in 2025, up from the statistics department's August estimate of 4.45%. Following this growth trajectory, Taiwan is expected to surpass South Korea's per capita GDP in 2025, one year ahead of schedule (one year earlier than the IMF's April forecast this year) - a core indicator measuring living standards. Taiwan's current per capita GDP is estimated at approximately $38,000, though only half of Singapore's level, it already leads Japan and the gap with South Korea is rapidly narrowing.

This transformation is driven by the artificial intelligence consumption boom's powerful impact on Taiwan's semiconductor industry. Global chip shortages during the pandemic elevated Taiwanese companies' status, with politicians and corporate executives from Europe and America scrambling to procure semiconductors essential for economic operations. Following ChatGPT's emergence, Taiwan Semiconductor Manufacturing, Foxconn and other companies experienced explosive growth, as they handle the assembly of most of the world's key AI chips and servers.

In contrast, South Korea's economic pillar Samsung Electronics, despite accounting for 11% of South Korea's economy, is gradually showing weakness in advanced process competition. South Korea's economy grew less than 1% year-over-year in the second quarter, with full-year growth expected at 0.9%. Central bank governor Rhee Chang-yong has repeatedly warned that structural issues including low birth rates and aging population have dragged potential growth rates into the 1% range.

Bloomberg Economics points out that South Korea has a broad industrial span with traditional sectors like petrochemicals performing poorly, while Taiwan has high technology concentration and benefits more from the AI boom. South Korea is constrained by sluggish traditional industries like petrochemicals and deteriorating demographic structure.

In August this year, Taiwan's export value surpassed South Korea for the first time - a milestone particularly significant since South Korea's population and overall GDP scale are more than double Taiwan's. Exporters rushing to settle foreign exchange combined with market speculation that authorities are willing to allow currency appreciation in exchange for bargaining chips in US trade negotiations pushed the New Taiwan Dollar up about 9% against the US Dollar this year, while the Korean Won gained only 6% over the same period. The exchange rate differential further widened the per capita GDP gap between the two economies.

However, Taiwan's economy also faces underlying concerns. Over-reliance on a single industry - especially with the US accounting for an increasing share of Taiwan's exports - could transform advantages into vulnerabilities, particularly amid Taiwan Strait geopolitical risks and tense cross-strait relations. Woods Chen, chief economist at Yuanta Securities in Taipei, noted that limited resources make industrial diversification difficult for Taiwan, requiring promotion of traditional industry transformation into high-tech supply chain segments, while the government needs to explore redistribution mechanisms for technology company profits to achieve balanced development.