The Economist has issued another warning about Taiwan’s economy, highlighting that growth in Taiwan, Japan, and South Korea is increasingly concentrated in sectors such as AI and semiconductors. This heavy reliance on a few industries, combined with their long-standing export-oriented economic models, poses significant long-term risks. In contrast, traditional industries facing fierce competition from China have seen their exports shrink by nearly 40%, most notably in the petrochemical and automotive sectors. Consumption growth and wage distribution in these countries also cannot keep pace with AI growth. Should the AI boom reverse, it would deal a massive blow to long-term economic growth.
Hsien-Ming Lien, President of the Chung-Hua Institution for Economic Research (CIER), points out that this assessment is not entirely wrong. Taiwan does indeed face the unbalanced growth issue. However, attributing the plight of traditional industries solely to a lack of competitiveness underestimates the drastic changes in the external environment.
Take the petrochemical industry as an example. The “petrochemical winter” stems from two main factors: the dumping of excess capacity by China and the suspension of preferential tariffs under the Economic Cooperation Framework Agreement (ECFA), which has further subjected Taiwan’s petrochemical sector to the pressure of rising tariff costs. Excluding the dumping-affected petrochemical and steel industries, as well as the shipping sector—which is now experiencing a decline from its pandemic-era profits—the overall profits of non-AI listed companies in Taiwan grew by approximately 7% year-over-year in 2025. This highlights a positive trend in profitability across these sectors despite the challenges faced by others, and indicates that the rise of AI has not impaired the structural competitiveness of Taiwan’s manufacturing sector.
Amid AI Concentration Concerns, Taiwan’s Traditional Sectors Continue to Show Structural Resilience
Lien explains that the AI wave has, in fact, transcended semiconductors and permeated enterprises traditionally viewed as conventional manufacturing. For instance, King Slide, which started with furniture drawer slides, entered Nvidia’s supply chain after obtaining certification for AI server rack rails. United Microelectronics Corp. (UMC) partnered with Intel to develop a 12-nanometer process, carving out a new positioning for mature node foundries outside the wave of advanced processes. Nan Ya, benefiting from robust demand for advanced AI memory driving DDR5 growth, saw its profits surge 35% year-over-year, demonstrating renewed recovery momentum for the cyclically sluggish traditional memory materials sector.
What better illustrates Taiwan’s industrial resilience than a cohort of companies with little connection to tech that still deliver stellar results? In the aviation sector, boosted by AI server transportation and booming international travel, EVA Air’s earnings per share (EPS) hit NT$4.84 in 2025, its second-highest on record. China Airlines also posted robust profits, with the two aviation giants boasting a combined market capitalization exceeding NT$300 billion.
In the financial sector, CTBC Financial’s EPS surpassed NT$4 for the first time in 2025, and both it and Mega Financial hit record high earnings per share, offering cash dividend yields approaching 5%. In retail, President Chain Store Corp. (PCSC) saw its consolidated revenue reach new highs in 2025, maintaining stable consecutive annual dividends of NT$9 per share. Even in the highly traditional textile industry, Eclat Textile and Makalot Industrial hold an international market share of over 30% in functional fabrics, and inventory buildup for the 2026 FIFA World Cup will inject additional momentum.
Viewing Taiwan’s Economy Through the Hidden Gems Index: Diversified Industries Anchor Long-Term Competitiveness
Lien believes these companies’ profitability figures demonstrate that, even without the AI halo, they continue to generate stable or even record-breaking earnings. Consequently, Taiwan Index Plus Corp. compiled the “Taiwan Hidden Gems Index,” aiming to uncover more high-quality hidden gem enterprises not concentrated in the electronics sector. The Hidden Gems Index spans 31 industries and fully reflects the foundational strength Taiwan’s economy has accumulated over the long term, showcasing the enduring vitality of Taiwanese industries.
Taiwan is also cultivating new strategic industries. Fully assembled drone exports doubled from NT$1.4 billion in 2024 to NT$2.95 billion in 2025, and reached NT$3.6 billion in Q1 of 2026 alone. The government has set a target for 2030 to achieve a monthly production capacity of 100,000 drones and a production value of NT$40 billion. Aerospace Industrial Development Corp. (AIDC), Air Asia Co., and Evergreen Aviation Technologies (EGAT) are gradually pivoting from maintenance OEM to fully assembled military aircraft and unmanned vehicles. In the space industry, Taiwanese manufacturers have penetrated the supply chains of low-Earth orbit (LEO) satellite operators like Starlink and OneWeb, covering antennas, ground equipment, and communication modules. Universal Microwave Technology (UMT) and Compeq Manufacturing have further emerged as critical global suppliers of satellite boards and high-frequency components.
When the internet first emerged in the 1990s, many questioned whether it could truly transform industries. Thirty years later, nearly all enterprises must master the internet to survive. AI’s diffusion trajectory may be similar. Taiwan’s problem has never been that its AI sector is too successful, but whether other industries can harness AI to find new growth engines. By grasping the AI advantage, Taiwan’s traditional sectors can break out of the low-price competition red ocean and discover a high-value, entirely new blue ocean.
Source: Hsien-Ming Lien (June 4, 2026). Traditional Industry Hidden Gems Forged by the AI Fire. Commercial Times. https://www.chinatimes.com/newspapers/20260609000216-260210