The Shadow of Taiwan's Economy Hidden Behind TSMC's Success: Deepening K-shaped Polarization

Taiwan recently distributed cash to all citizens from a massive tax surplus. This was because an astounding 82 trillion KRW (approximately 60 billion USD) in tax revenue had accumulated over four years, exceeding initial estimates. Consequently, the Taiwanese government distributed a cash bonus of 440,000 KRW (6,000 TWD) per person to its 23 million citizens.

Taiwan's average monthly salary saw its largest increase in 26 years according to statistics, yet the real wage increase rate, adjusted for inflation, was only 1.4%. This is because inflation has outpaced salary increases in recent years, weakening the real purchasing power of citizens.

The commonly cited average monthly salary in Taiwan is 47,884 TWD (about 2.11 million KRW). However, this figure is a result of the high salaries of semiconductor company employees pulling up the average. The median income, which better represents the income level of the majority of citizens, is only 1.69 million KRW. This illustrates the concentration of wealth among top earners.

Even within the tech industry, the uneven distribution of growth benefits is palpable. Mr. Lee, an engineer at Asus, stated that most non-tech industries don't seem to feel the benefits, and the distribution doesn't feel even. Even tech industry workers are experiencing economic hardship as inflation and rent burdens outpace increases in household income.

A survey of Taiwanese researchers revealed that 40% of 1,000 voters responded 'anxious' or 'very anxious' about their household finances. At a time when the national treasury was overflowing and distributing cash to citizens, 4 out of 10 recipients were worried about making ends meet next month.

The population employed in Taiwan's semiconductor industry is approximately 300,000, which accounts for only about 2.7% of the total labor force of 11 million. The majority of Taiwanese workers are engaged in service and self-employment, meaning the growth of the semiconductor industry does not translate into employment and income for the entire population.

Wage disparities across industries are becoming more entrenched. Wages in electronics-related sectors increased by 5.3%, while those in accommodation and food service sectors decreased by 0.5%. This indicates a deepening K-shaped economic polarization.

94% of Taiwan's economic growth originated from exports, with domestic consumption contributing minimally to growth. Private consumption, where people actually opened their wallets, increased by only 1.35% throughout the year. This suggests that the export-dependent growth structure is not leading to the revitalization of the domestic economy.

More than half of Taiwan's semiconductor industry is concentrated in Hsinchu Science Park, located southwest of Taipei. This park houses not only semiconductor production but also materials, equipment, and inspection companies, indicating a very high physical concentration of the semiconductor industry.

Even in the households of high-income semiconductor industry workers, underlying difficulties exist. Wives frequently take on the sole responsibility for childcare and housework due to their husbands' long working hours, a phenomenon referred to as 'fake single parents.' Ms. Ge Jiashen stated that Hsinchu mothers use this term to describe situations where the husband is always at the factory, leaving the wife to handle everything alone, from raising children and cooking to repairing things at home.

The time it takes to purchase a home is 15 years in Taipei and 14 years in Seoul. The reason Taiwanese people feel suffocated by home purchases is not simply because prices are high, but because housing prices have surged around job centers in specific areas, making the perceived burden significant.

Taiwan recorded its largest ever trade surplus of 157.1 billion USD (about 225 trillion KRW) as of 2025, but it is experiencing structural capital stagnation where this money does not lead to domestic consumption or investment but instead accumulates. The Taiwanese government predicted that unused funds that have accumulated without being spent anywhere will exceed 9 trillion TWD, or 397 trillion KRW, for the first time this year.

The capital of Taiwan's insurance industry amounts to 1.3 times the size of the national economy, with 60% of this capital operating outside Taiwan. While money flows overseas, Taiwan has gradually removed its safeguards, exposing it to exchange rate fluctuation risks where the value of overseas assets could decrease and directly lead to losses if the Taiwan dollar appreciates.

In the last utility rate adjustment, Taiwanese authorities froze industrial electricity rates, citing concerns about increasing corporate burden due to US tariffs, while raising residential electricity rates by an average of 3.12%. This demonstrates a structure where households bear the real burden in the process of energy cost sharing.

As a result of 64 raids by Taiwan's Investigation Bureau, 17 Chinese companies were found to have illegally recruited Taiwanese semiconductor talent by posing as Taiwanese companies or using labor agencies. They focused on poaching key engineers in semiconductor design and manufacturing.

Half of the 2,200 employees at TSMC's Arizona factory are dispatched from Taiwan. Among field engineers, the grueling schedule due to longer working hours compared to Taiwan is self-deprecatingly described as 'selling one's liver.' This shows the hardships faced by key production personnel.

Most of the key production personnel working on the Hsinchu semiconductor line today were born more than 20 years ago. However, last year, the number of births in Taiwan plummeted by 20% compared to the previous year, to about 100,000, and the country is entering a super-aged society with the world's lowest birth rate (0.72 children). This foreshadows serious disruptions in the supply of new talent to lead the future semiconductor industry. The shortage of young people could pose a significant threat to maintaining technological competitiveness.

Taiwan's case offers important implications for the Korean economy. South Korea's exports are 24.4% concentrated in semiconductors, giving it an economic structure similar to Taiwan's, and it exhibits more severe indicators of wealth inequality than Taiwan. Taiwan's K-shaped divergence did not happen because the semiconductor industry failed, but rather because it succeeded too well. This should be taken as a warning about the K-shaped polarization that the success of the semiconductor industry can bring.