Recently, The Economist highlighted a growing concern for Taiwan, Japan, and South Korea: economic growth is becoming increasingly concentrated in AI, semiconductors, and related industries, raising questions about the sustainability of their export-driven economic models. Meanwhile, many traditional industries face mounting pressure from Chinese competition, particularly in sectors such as petrochemicals and automobiles. As wage growth and domestic consumption lag behind the expansion of AI-related industries, concerns have emerged that any future slowdown in AI could have an outsized impact on economic growth.
These concerns are not entirely unfounded. Taiwan is indeed experiencing uneven growth across industries. However, attributing the challenges faced by traditional sectors solely to a lack of competitiveness overlooks the significant external pressures reshaping global markets.
The petrochemical industry provides a clear example. Although exports have declined substantially from their 2021 peak, much of the downturn can be attributed to structural factors rather than weakening industrial capabilities. China's rapid capacity expansion and intensified price competition across Asia, coupled with the loss of ECFA preferential tariffs, have placed considerable pressure on Taiwanese producers. Nevertheless, excluding sectors directly affected by dumping and the normalization of post-pandemic shipping demand, non-AI sectors among Taiwan's listed companies still recorded YoY profit growth of approximately 7% in 2025, suggesting that Taiwan's manufacturing competitiveness remains fundamentally robust.
More importantly, the impact of AI is no longer confined to semiconductor companies. Its influence is increasingly extending into traditional industries. King Slide Works, originally known for furniture slides, has successfully entered NVIDIA's AI server supply chain, while UMC's collaboration with Intel has created new opportunities for mature-node semiconductor manufacturing. Strong demand for AI-related memory applications has also supported growth in the broader supply chain, with NTC reporting robust 35% YoY earnings growth as the memory materials industry emerged from a cyclical downturn.
Taiwan's industrial resilience is perhaps best illustrated by companies outside the technology spotlight. In aviation, EVA Air and China Airlines have benefited from AI server transportation demand and the recovery of international travel. In financial services, CTBC Financial Holding and Mega Financial Holding achieved record earnings and attractive dividend yields. In retail, President Chain Store Corporation (PCSC) continued to deliver record revenue and stable shareholder returns. Even in textiles, Eclat and Makalot maintain leading positions in the global functional fabrics market. These companies demonstrate that strong earnings growth and market leadership can be achieved without relying directly on the AI narrative.
Recognizing the value of such companies, Taiwan Index Plus (TIP) launched the Taiwan Pristine Stock Index to identify high-quality businesses beyond the electronics sector. Covering 31 industries, the index reflects the long-term strengths accumulated across Taiwan's economy and showcases the breadth of companies contributing to sustainable growth.
At the same time, Taiwan is cultivating new strategic industries that may become future growth engines. Drone exports have grown rapidly in recent years, supported by government initiatives and expanding private-sector participation. Companies such as AIDC, Air Asia, and EGAT are moving beyond maintenance and manufacturing services into military-grade systems and unmanned aerial vehicles. Taiwan is also strengthening its position in the low-Earth-orbit satellite supply chain, with companies including Universal Microwave Technology and Compeq supplying critical components to global space-industry leaders.
When the Internet first emerged in the 1990s, many questioned whether it would fundamentally transform industries. Three decades later, digitalization has become essential for virtually every business. AI may follow a similar path. Taiwan's challenge is not that AI has become too successful, but whether other industries can harness AI to create new sources of value. Companies that successfully integrate AI into their operations will be better positioned to move beyond low-price competition and capture higher-value opportunities. In that sense, AI is not a threat to Taiwan's traditional industries - it may become their next catalyst for transformation.