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Taiwan's status as the world's chip hub has kept the island's economy resilient.
The industry is so hot that Taiwan is expected to mint many new US-dollar millionaires in the next five years, according to Swiss bank UBS' annual wealth report, released on Wednesday.
Taiwan was home to nearly 790,000 US dollar millionaires last year. This number could surge by 47% to about 1.16 million millionaires by 2028, UBS predicts, leading the 56 global markets the bank analyzed in its report.
That said, the size of Taiwan's millionaire population pales when compared to the US.
The US was home to nearly 22 million millionaires last year, per UBS. That number is expected to grow 16% to 25.5 million millionaires over the next five years.
UBS attributes Taiwan's wealth growth to its semiconductor chip industry, which is "set to reap the rewards of the boom in artificial intelligence."
Taiwan is home to Taiwan Semiconductor Manufacturing Company, or TSMC, the world's largest contract chipmaker and the sole supplier of key advanced chips to Apple and Nvidia, among others.
Even though UBS expects a huge jump in the number of millionaires in Taiwan, much of the island's 23 million population is not likely to benefit from the AI craze.
UBS' data shows wealth inequality widened by about 10% in Taiwan from 2008 to 2023.
The median net worth in Taiwan stood at $110,521 per adult in 2023, according to UBS. The average net worth was nearly three times that amount at $302,551.
This means people at the top of the scale got a lot richer than those further down the totem pole over that time period, skewing average wealth upward.
Official data from Taiwan confirms the trend, showing that the wealth gap between the top 20% and bottom 20% of households has widened fourfold over three decades.
Taiwan's Gini coefficient, which measures inequality, also widened from 1991 to 2021, when the last two official wealth surveys were conducted.
One key trend contributing to wealth inequality in Taiwan is that its tech industry is doing better than industries not related to tech.
TSMC's performance has soared on the back of the AI rush, with its second-quarter sales growing 40% over a year ago — beating analyst expectations. On Monday, TSMC ADRs listed on the New York Stock Exchange briefly crossed the $1 trillion valuation mark.
It's not just TSMC. The rise of the chip behemoth has created an entire tech ecosystem in Taiwan, much of which is centered on hardware.
This ecosystem has been driving Taiwan's economy even amid longstanding geopolitical uncertainty as China claims the island as its territory. The country's GDP grew 6.5% in the first quarter of the year from a year ago. This was boosted by exports of machinery and electrical equipment, which surged nearly 28% from a year ago. However, domestic demand growth was modest, growing just 1% over the same period.
Ma Tieying, a senior economist at Singapore's DBS bank, wrote in a note on Wednesday that she expects the world's AI drive to continue fuelling demand for high-performance chips from Taiwan.
However, recovery in non-tech traditional manufacturing is expected to continue to be a drag due to the economic slowdown in China, which accounts for about one-third of Taiwan's total exports, Ma added.
