As the global investment boom driven by AI gradually cools, 2026 will mark a “moment of reckoning” for Taiwan’s industries. Hsien-Ming Lien, President of the Chung-Hua Institution for Economic Research (CIER), points out that the global economy will enter a “plateau period” characterized by constrained AI expansion. Amid weak domestic demand and heightened geopolitical uncertainty, major economies will reinstate accommodative policies, while the U.S. midterm elections add further variables to the situation.
President Hsien-Ming Lien analyzes that Taiwan’s economic growth in 2026 will remain dependent on AI and semiconductor momentum, but the nation must be alert to two major structural challenges.
First, AI infrastructure is constrained by limitations in power supply and transformer capacity, which provide short-term price support but also signal that capacity expansion is approaching its ceiling.
Second, rapid hardware iteration is increasing depreciation risk. If large enterprises discard high-cost equipment in pursuit of the latest chips, it could drag down the supply chain and weaken Taiwan’s exports and investment.
Traditional Industries Under Pressure, Tech Sector Remains Strong – Taiwan Must “Set Sail on a Larger Vessel”
Traditional manufacturing is still under pressure from asymmetric competition from China, facing the impact of low prices and, in some cases, loss-making market capture. This has resulted in a polarized landscape of “AI prosperity and traditional industry downturn.”
In response to structural challenges, President Hsien-Ming Lien proposes a “set sail on a larger vessel” strategy, arguing that the government should facilitate semiconductor leaders in increasing their local procurement ratio to drive upgrades in domestic equipment, materials, and technical services. Meanwhile, traditional industries must improve standardization and service capabilities to become reliable partners in advanced supply chains.
AI prosperity should not be viewed as the norm. Taiwan must deepen its industrial structural adjustments to maintain strong competitiveness in the post-AI era.
Author: CIER Editorial Team
Date: November 28, 2025