Taiwan’s export-oriented economy is booming amid strong global demand for artificial intelligence (AI) applications, the National Development Council (NDC) said on Tuesday.
The composite index of economic indicators flashed “red” last month for the first time in a year, while the index of leading indicators — which gauges economic conditions over the next six months — also rose, reflecting growing optimism, the NDC said.
These gains came despite uncertainties stemming from US tariff policies unveiled in April last year and were driven by a stronger-than-expected AI boom, NDC Department of Economic Development Director Chen Mei-chu (陳美菊) said.
To date, much of Taiwan’s AI-related economic growth has taken the form of semiconductor exports, with Taiwanese chips powering servers that deliver AI services worldwide. However, Taiwan is increasingly well positioned to become a leader not only in chips, but also in the provision of complete AI systems, encompassing supercomputers, data centers, network infrastructure, and software stacks and frameworks.
That shift is already under way. Google opened its largest AI infrastructure hardware engineering center outside the US in Taipei in November last year, and the government last month inaugurated a new cloud computing center in Tainan intended to serve as a hub for innovation in high-performance computing, telecommunications, cloud services and digital content.
The facility forms part of broader government efforts, in collaboration with Nvidia, Taiwan Semiconductor Manufacturing Co and Asustek, to develop AI supercomputers in Tainan and Hsinchu, targeting a combined computing capacity of 1.2 exaflops.
The Ministry of Digital Affairs on Tuesday said that its Sovereign AI Training Corpus has surpassed 1.1 billion tokens in just more than a month after its launch. The platform, introduced on Dec. 24 last year, aims to collect high-quality data in traditional Mandarin to train sovereign AI models that better reflect Taiwan’s linguistic patterns and cultural context.
If successful, the initiative could provide a template for the development of sovereign AI models in other languages. One potential application is Paraguay, where Taiwan has reportedly held discussions on building a large data center to leverage the country’s abundant renewable energy. In line with the objectives of the Ministry of Foreign Affairs’ Diplomatic Allies Prosperity Project, such a facility could position Paraguay as a regional AI hub, with a Spanish-language sovereign AI model built on Taiwanese technologies.
This points to a broader strategic opportunity. Taiwan has the capacity to emerge as a global AI leader, and — building on its dominance in semiconductors — to offer a complete AI ecosystem supported by a “non-red” supply chain. The development of such a supply chain, including potential overseas investments, would align closely with US strategic interests by limiting China’s role as an AI investor in key regions. A high-capacity computing center in Latin America could also provide the US with an additional offshore option for cloud services.
Pursuing this path would allow Taiwan to diversify its economy while reinforcing the so-called “silicon shield” underpinned by its semiconductor industry. AI services are not as indispensable to the global economy as semiconductors, but that is likely to change. AI increasingly drives growth, efficiency and new markets, and is rapidly being integrated into the operations of governments and businesses.
AI is reshaping productivity and economic models, enabling advances in autonomous vehicles, drug discovery, financial trading, supply-chain optimization, search and recommendation systems, and large-scale content generation. Its relevance spans industries from medicine to entertainment.
Taiwan has laid much of the groundwork for the AI revolution by producing ever more advanced chips that allow AI applications to run at scale. AI cannot function without semiconductors, but semiconductors alone do not generate the productivity, automation and innovation that AI enables. The two are complementary.
As AI multiplies the value and efficiency of nearly all technologies and industries, demand for advanced chips would only intensify. A strategic shift toward AI hardware and software systems therefore does not diminish the importance of Taiwan’s semiconductor sector — it reinforces it.
Developing AI systems would not only strengthen Taiwan’s economic resilience at a time of growing pressure on globalization, but also deepen its indispensability within global supply chains. AI has the potential to become a new engine of employment, support the continued provision of social services, and evolve into Taiwan’s next “silicon shield” — raising the economic and strategic costs of any attempt by China to isolate or invade the country.
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