Taiwan’s GDP Per Capita Leapfrogs Japan’s, South Korea Next

The wealth generated by the Taiwanese semiconductor industry has been revitalizing the island’s economy as a whole, leading to Taiwan’s National Development Council (NDC) recently unveiling its estimation that Taiwan would overtake Japan in terms of GDP per capita this year, South Korea next year and catch up with Israel at some point in the future. Specifically, the NDC predicts an increase in GDP per capita from US$39,105 in 2025 to US$42,787 in 2028 on the back of GDP growth of between 2.8 percent and 3.6 percent.

The International Monetary Fund (IMF) is even more optimistic, expecting the island’s per capita GDP to reach US$34,430 this year, surpassing Japan’s US$33,100 and South Korea’s US$34,160, eclipsing China as a whole with 2023 GDP at the equivalent of only US$12,614. UBS Group projected a 47 percent increase in the number of Taiwanese individuals with assets exceeding US$1 million by 2028, representing the highest growth rate among 56 countries surveyed.

The NDC attributes the strong momentum to a rush by US tech giants to develop artificial intelligence (AI) services and applications benefitting Taiwan being the home to the world’s major suppliers of AI chips and servers. US chipmaker Nvidia is developing an AI R&D center in Taipei that will employ 1,000 engineers. US chipmaker AMD will build a US$263.4 million AI and silicon photonics R&D facility on the island. Amazon will invest billions of dollars in Taiwan over the next 15 years to build data centers. TSMC, the world’s largest semiconductor foundry, for its part, is constructing a state-of-the-art 2-nanometer semiconductor plant in Kaohsiung, already creating 9,000 jobs, with another 9,000 expected once the new facility is operational. As tech industry workers invest their rising salaries in real estate, the property market is enjoying stiff tailwinds.

Meanwhile, Japanese GDP per capita has been falling since 2021, meaning the looming surpassing of Japan’s GDP per capita represents a mixture of positive factors for Taiwan and negative factors for Japan. In 2023, for the first time in 55 years, Germany overtook Japan in GDP, due in part to the weak yen, pushing Japan back one place to make it the world’s fourth-largest economy.

“Benefiting from the supply chain shift caused by the previous US-China trade war, the epidemic accelerating digital transformation, and the continued expansion of demand for high-performance computing, artificial intelligence, and cloud industries, Taiwan’s economic growth performance in recent years has been significantly better than that of Korea and Japan,” Gordon Sun, Director of the Taiwan Institute of Economic Research (TIER) Macroeconomic Forecasting Center, told Asia Sentinel.

“And the depreciation rate of the New Taiwan dollar exchange rate is much lower than that of the Japanese yen and Korean won.”

Nevertheless, there are some caveats. Nick Marro, the Economist Intelligence Unit’s (EIU) Principal Economist, Asia, in an interview with Asia Sentinel, pointed out that GDP per capita has its limitations, just being a measure of output divided by total population, which is hardly the most meaningful indicator of prosperity.

“For example, when we look at average monthly wage levels, benchmarked in US dollar terms for the purpose of comparison we see Japan and South Korea continuing to outstrip Taiwan by quite a large margin — even if Taiwanese wages have grown at a faster relative pace over the past few years,” Marro said. He went on to warn that the levels of compensation in Taiwan, still relatively low compared to the rest of the region, have implications for international talent attraction and retention. This is reflected by data from the Taiwanese interior ministry showing that in the 12 months between July 2023 and July 2024, the number of foreign white-collar workers (classified as traders, technicians, and engineers) grew by fewer than 600 despite the electronics manufacturing boom. With a total fertility rate for Taiwan in 2023 of 1.236 births per woman, a minuscule 1.39 percent increase from 2022 and well below the 2.1 per woman needed for a stable population, Taiwan faces the same diminishing workforce problems of other industrialized Asian societies including Japan and South Korea. Attracting foreign workers will become increasingly critical.

Several Taipei residents talking separately to Asia Sentinel lamented an imbalanced development between the semiconductor industry and the Taiwanese economy’s other sectors.

“We Taiwanese are indifferent, because the growth is driven by the technology industry, while the service industry is still the same and our salaries have not kept up with inflation,” said Cindy Chen, a private school lecturer in her 60s. “The depreciation of the New Taiwan dollar is not as great as that of Japan’s yen, so under Japan’s bad circumstances surpassing their GDP per capita is an inevitable result that gives our government an opportunity to make great publicity but doesn’t do the people any good.”

The NDC in its latest announcement said it is “working to create a more sustainable balance by placing more emphasis on social investment.” An inquiry sent to the NDC by Asia Sentinel has not been answered.