Semiconductor and ICT growth strengthen Taiwan economic outlook

Taiwan’s exports surged sharply in October 2025, posting the largest year-on-year growth in almost 16 years and signaling the country’s complete pivot to a high-performance computing-driven economy. Export revenue hit a robust USD 55 billion, up 18% year-on-year, a significant contribution that underpinned Q3 GDP growth of 4.9% y/y. This boom is entirely attributable to surging global demand for advanced semiconductors, AI hardware, and other high-tech components, consolidating Taiwan’s role as the single most critical node in the global technology supply chain and validating its long-term industrial strategy.

The mechanism driving this expansion is a powerful feedback loop initiated by global AI infrastructure spending. Semiconductor exports, which now form approximately 35% of total shipments, surged by a remarkable 22% y/y. This windfall primarily benefits the integrated circuit (IC) design and foundry ecosystem, including giants like TSMC (2330.TW) and MediaTek (2454.TW). These firms have significantly accelerated corporate investment in cutting-edge fabrication (fabs) and R&D—expenditure supported by low-cost capital, favorable government tax incentives, and the strategic necessity of maintaining technological leadership in sub-5nm processes.

This industrial expansion has translated directly into domestic economic benefits. Employment in the high-tech sectors increased a solid 2.5% y/y, while the nominal wages for skilled engineering and technical labor rose by 4.3%, creating a strong pillar of support for recovering domestic consumption. Financial markets have enthusiastically reflected this optimism: the benchmark TAIEX index has risen 8% YTD, almost entirely led by chipmakers, advanced packaging firms, and ICT equipment suppliers, reflecting the market’s belief that the AI cycle is still in its early stages.

The macro implications are strong and stabilizing for Taiwan’s external balances. The surge in export revenues widened the current account surplus significantly—to USD 9.6 billion in October—which acts as a crucial buffer, bolstering the stability of the TWD near 31.5/USD. Sovereign yields have remained stable, with the 10-year yield anchored at 1.58%, signaling high investor confidence in the nation's export-driven fiscal health and macro-economic resilience.

However, this hyper-specialization, while profitable, centralizes geopolitical risk. Cross-strait tensions remain the primary potential source of volatility for both trade flows and investor sentiment; any perceived military escalation could instantly trigger a flight of capital, disrupting the $1.6 trillion in annual global revenue linked to Taiwanese chips.

Forward-looking, key indicators such as global chip orders, the health of the PMI sub-indices (especially for new export orders), and the continued momentum of global AI spending will determine whether these high growth rates are sustainable against rising geopolitical uncertainty. If current trends in AI adoption persist, Taiwan’s semiconductor exports could grow another 15–18% in 2026, strongly supporting overall GDP growth near 5% and maintaining the current stability of the FX and equity markets.