Taiwan has become the world’s clearest example of how an economy can boom while many people feel left behind. Under constant military pressure from China and amid trade tensions with the United States, the island has still been posting spectacular numbers. GDP has grown around 8% for two quarters in a row, and overall growth is expected to reach about 7.4% in 2025 – even faster than China.
The engine is obvious: high tech.
Taiwan’s factories build the chips and servers that power today’s artificial intelligence revolution. Its champion, TSMC, supplies giants like Nvidia and AMD and has lifted its own revenue forecast into the mid-30% range. Exports have exploded – up more than a third this year, with shipments to the US jumping over 60% as American tech companies race to build AI data centres. Taiwan’s stock market has surged into the world’s top ten on this wave of AI enthusiasm.
But this success story has a shadow. A rich economy, ordinary pay.
Electronics manufacturing now makes up more than 15% of Taiwan’s GDP while employing only about 6.5% of the workforce. That means a huge share of new wealth is concentrated in a relatively small, highly skilled segment of society.
On paper, Taiwan looks rich: GDP per capita is set to pass $38,000, ahead of Japan and South Korea. In reality, average wages are at least 30% lower than in those neighbours. Real wage growth has been weak since the early 2000s, and labour’s share of national income has fallen from about 50% to roughly 44%.
Nurses and doctors complain of stagnant pay, many leaving the country or the profession. Even in the star electronics sector, salaries now sit more than 70% above the economy-wide average, widening the gap with workers in other industries. Some economists argue that decades of wage restraint were used to keep exports competitive – good for corporate profits, less so for employees.
The government has been raising the minimum wage, but for many households the biggest pressure comes from housing. In Taipei, the house-price-to-income ratio has almost tripled in twenty years, overtaking London, New York and even Hong Kong.
Vulnerable strength
Taiwan’s export boom also carries risks. Chips and electronics now account for nearly three-quarters of its exports, up from around half five years ago. Traditional sectors such as metals, machinery and plastics are barely growing or shrinking. This heavy dependence on one industry – and arguably one company – makes the economy sensitive to any slowdown in the AI cycle or disruptions in global supply chains.
Politically, the island sits in a permanent state of tension. China claims Taiwan as its own territory and has not ruled out using force. At the same time, Taiwan’s record trade surplus with the US could attract the attention of Washington, especially under a protectionist president. For now, semiconductors have largely escaped punitive tariffs, particularly where companies like TSMC invest directly in American factories, but that protection is not guaranteed forever.
Cautious optimism
Despite the anxiety, some scholars see Taiwan’s permanent sense of insecurity as a kind of hidden strength. It pushes businesses and policymakers to stay alert, diversify and adapt. The island’s economic history, they argue, is less about perfect planning and more about evolution: thousands of small and medium-sized firms learning to move fast with global trends. That is how its semiconductor industry grew from contract manufacturing into a critical pillar of the world economy.
Today, Taiwan is a paradox:
- a small territory with one of the most powerful tech sectors on earth,
- a booming GDP where many workers still feel poor,
- a strategic partner for the West that lives under constant pressure from its neighbour.
Whether the current AI-driven surge becomes a broad rise in living standards or remains a narrow high-tech bonanza will depend on one thing: how successfully the island can turn its extraordinary economic strength into shared prosperity for its people.