[BEHIND THE NUMBERS]
The growth trajectories of Korea and Taiwan — the two chip-driven economies once collectively called "Asian Tigers" — are diverging sharply amid the AI boom.
While rising expectations for global chip demand have significantly boosted the growth outlook for Taiwan — home to the world’s largest foundry, TSMC — Korea’s forecast remains subdued at under 1 percent, despite strong performances by Samsung Electronics and SK hynix, the world’s two largest memory chipmakers.
The Asian Development Bank (ADB) maintained Korea’s growth outlook steady for this year at 0.8 percent, unchanged from the July forecast, in its September report. But the institution revised up the outlook for Taiwan to 5.1 percent from the previous forecast of 3.5 percent, citing a surge in chip exports.
Other economic indicators reveal a widening growth gap between the two Asian countries, once jointly recognized as part of the high-growth economies known as the Four Tigers of Asia, alongside Hong Kong and Singapore.
Taiwan’s exports exceeded Korea’s for the first time on a monthly basis in August. Its gross domestic product (GDP) per capita — a key measure of living standards — is also expected to outstrip that of Korea’s for the first time in 22 years to climb from 38th last year to 35th this year, while GDP per capita for Korea is projected to fall from 34th to 37th, according to the International Monetary Fund’s (IMF) World Economic Outlook.
Korea - Asia's fourth largest economy - is projected to have a GDP of $1.86 trillion this year, according to the IMF, significantly outpacing Taiwan's $884.39 billion. However, this gap could narrow if Korea fails to lift its growth rate.
“If Korea’s sluggish growth and Taiwan’s strong performance persist over the next five years, it will only be a matter of time before Taiwan catches up economically,” said Prof. Hur Jung, who teaches economics at Sogang University. “In contrast to Taiwan’s chip-centric strategy, Korea must ensure that other major industries — including automobiles — achieve strong growth alongside semiconductors to sustain overall economic momentum.”
Pulled back by other industries
Global demand for advanced chips is soaring amid the AI boom, boosting sales and valuations of major chipmakers.
Samsung Electronics’ operating profit hit a 3-year high in the third quarter to jump 32 percent on year to 12.1 trillion won ($8.6 billion), while TSMC reported its highest quarterly profit in the July-September period with $14.8 billion in net earnings, up 39.1 percent on-year.
But the surge in demand has not translated into broader economic momentum for Korea, as it has in Taiwan. This is partly because Korea’s economy is supported by a wider range of export industries, and many of those sectors are expected to see slower growth due to U.S. tariffs.
Semiconductors accounted for 20.6 percent of Korea’s total exports last year, followed by automobiles that made up 13.9 percent. Steel took up 3.9 percent. On the other hand, Taiwan’s exports of integrated circuits — finished semiconductors — accounted for a whopping 34.7 percent of the country’s total exports in the same year, higher than Korea’s top two exports combined.
In Korea, weak exports from higher U.S. tariffs and lower investment buffeted by political uncertainty tamped down growth to 0.3 percent in the first half of 2025 from 2.8 percent in the same period in 2024, said ADB in their September report.
“Front-loading of exports in anticipation of U.S. tariffs and a boom in artificial intelligence-related products raised export growth in Taipei, China, pushing GDP growth to 6.8 percent [in the first half of the year], the second-fastest in 15 years, despite softening domestic demand,” the report added.
Korea’s weak overall growth is expected to persist through the second half of the year due to global economic uncertainties.
Hyundai Motor, Korea’s largest carmaker, could be hit with 8.4 trillion won in annual U.S. tariffs — the heaviest burden of any global automaker — if Washington maintains its current 25 percent rate on Korean exports, compared to a lower rate of 15 percent by Japan and the European Union, according to NICE Investors Service analysis in October.
Korea’s steel exports also face concerns as the EU plans to introduce stronger tariff measures on imported steel. According to the proposal, the EU will cut tariff-free steel import quotas by almost half while doubling the out-of-quota duty to 50 percent.
Korea’s exports through September this year rose 2.2 percent on-year to $519.7 billion, according to the Ministry of Trade, Industry and Resources. That growth was led by outbound shipments of chips, which jumped 16.8 percent, and automobiles which rose 2.2 percent. But exports for steel fell 6.6 percent while that of petroleum products plummeted 13.3 percent.
Semiconductors: existential for Taiwan, strategic for Korea
Unlike Korea’s push for balanced growth across multiple industries, Taiwan has prioritized chips as a crucial driver for national growth and as a strategic safeguard — especially in light of the U.S.’s commitment to protecting Taiwan from China.
Last year, Taiwan expanded tax credits to 25 percent of research and development expenditures for companies innovating in technology, compared to Korea’s February hike from 15 to 20 percent for semiconductor facility investments by conglomerates and from 25 percent to 30 percent for small and medium-sized enterprises. Taiwan also earmarked $9 billion for its 'Taiwan Chip-based Industrial Innovation Programme,' to be carried out through 2033, with a focus on innovation and talent incubation.
This unwavering commitment to the semiconductor sector is evident even in times of crisis. During the severe drought in 2021, Taiwanese government deployed planes and used chemical agents to seed the clouds over reservoirs so as not to halt chip production, which relies heavily on a steady supply of water.
By contrast, Korea is taking a more measured approach.
A law aimed at supporting the chip industry by streamlining permit procedures and strengthening technology protection was broadened before its 2022 enactment to also cover displays, batteries and biotechnology to support more balanced growth.
“The regulation suggests that our country is not fully committed to the semiconductor industry, but rather emphasizes balanced development — unlike Taiwan, where the economy is so reliant on semiconductors that their absence could practically bring the nation to a halt,” said Kim Yang-paeng, Senior Research Specialist at the Korea Institute for Industrial Economics & Trade.
Despite improved benefits for the chip industry in Korea, industry insiders argue that additional measures are needed to support semiconductor development — such as exempting the sector from the 52-hour workweek limit, a provision that has faced strong opposition from labor groups.
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