When Jung Yoonseok was looking for an assembly partner for his artificial intelligence (AI) chip startup, he had his pick of almost any country in Asia, including his native South Korea. Instead, the Rebellions strategy chief opted for Taiwan because of what he sees as an unparalleled combination of talent, cost and speed.

“Taiwan is small, and Taipei is small, and in that small area everything moves super fast,” the 35-year-old Harvard graduate said.

Jung reached the same conclusion as thousands of businesses, executives and entrepreneurs who rely on the nation to turn their AI visions into reality. From Nvidia Corp and Microsoft Corp to OpenAI, the world’s AI frontrunners are increasingly turning to Taiwanese companies to fabricate their chips, build their servers and cool their devices.

Some investors think the $400 billion-plus rally is just the beginning. To the bulls, the world is witnessing the establishment of a ChatGPT-era manufacturing base concentrated in Taiwan. That would make the island a key beneficiary of the AI boom — and a critical determinant of its pace and direction.

“Taiwan is really the engine that’s driving AI,” said Sean King, a senior vice president at Park Strategies and a former US Department of Commerce official.

There are risks for Taiwan. For the first time in decades, an entire technology production ecosystem would be centered not in China but its tiny neighbor. Growing tensions between the US and China may have dissuaded some AI companies from producing hardware in China.

Yet the rising importance of Taiwan makes it all the more alluring for Beijing, which has long described the nation as a breakaway province it would eventually reclaim.

TSMC is the foundation of this success. As its rivals Intel Corp and Samsung Electronics Co struggle, the Taiwanese company is further extending its leadership in the chip industry, manufacturing virtually all of the world’s most advanced semiconductors. It is the only place where Nvidia chief executive officer Jensen Huang can get his AI accelerators made.

The nation is now chock-full of lesser-known firms that are just as essential for global AI development. These linchpins include server maker Quanta Computer Inc, power leader Delta Electronics Inc (台達電) and Asia Vital Components Co (奇鋐科技), a pioneer in creating computer cooling systems. Collectively, Taiwanese firms are poised to play an outsized role in an AI market that is projected to reach US$1.3 trillion by 2032.

“This time around the optimism for Taiwan names will be stronger and last longer than in the past,” said Edward Chen (陳奕光), chairman of First Capital Management Inc (第一金證券投顧), citing TSMC’s central role in selecting partners for the likes of Nvidia.

“This is elevating Taiwan tech to an entirely different level,” Chen said.

In recent years, the increasingly aggressive US trade sanctions on China have forced companies to scout out alternative production locations, knocking the country out of many supply chains.

In less than two years, for example, those curbs have effectively sidelined China’s AI hardware industry. Taiwan’s exports of servers and graphics cards — the building blocks of data centers for training AI models — in the first nine months of this year were more than double China’s output, according to data collected by Bloomberg. That is a sharp reversal from previous years.

Today, the biggest cloud service operators — Microsoft, Amazon.com Inc, Meta Platforms Inc and Alphabet Inc’s Google — all use Taiwanese assemblers to fill their server farms as they seek to outdo OpenAI’s ChatGPT. Global spending on AI systems and services is expected to more than double to US$632 billion by 2028, according to the research firm IDC.

“Taiwan is a one-stop shop for AI-related hardware,” Taiwan Institute of Economic Research researcher Liu Pei-chen (劉佩真) said.


Taipei Time / Bloomberg