‘Golden decade’: Taiwan set to extend AI chips dominance, say analysts

TAIPEI: When Jensen Huang visited Taiwan a few months ago in June, he set off a frenzy.
Everywhere the CEO of American chip giant Nvidia went, he was mobbed like a rock star.
Local media even coined a term for the excitement that surrounded him – “Jensanity”. 
The 61-year-old was in Taipei for Computex, one of Asia’s leading information technology shows.
He met with local tech bosses, including Morris Chang – the legendary founder of the Taiwan Semiconductor Manufacturing Company (TSMC) – as well as Taiwan’s richest man and tech magnate Barry Lam.
As part of his two-week trip, Huang also made a stop at the National Taiwan University for a keynote speech that painted a future revolutionised by artificial intelligence.
“Everything is going to be robotic,” he told an audience of thousands – including the biggest names in Taiwan’s tech scene – who had gathered to hear him speak.
“Factories will orchestrate robots, and those robots will be building products that are robotic.”
He noted that IT is no longer just an instrument for information storage or data processing. Instead, it is set to generate intelligence for every sector.
“For the very first time, the US$3 trillion IT industry is about to create something that can directly serve a US$100 trillion industry,” he said.
“Let us continue this journey into the AI revolution and build a successful and thriving industry together.”
With the ecosystem around Nvidia and the AI boom expected to further expand, local industry players are set to benefit from Huang’s close ties with Taiwan.
Born in the southern Taiwanese city of Tainan, Huang emigrated to the United States at the age of nine. But he still holds his birthplace dear in his heart.
Since his co-founding of Nvidia in 1993, the US chip powerhouse has worked closely with Taiwanese businesses across the semiconductor industry and its supply chain.
For example, Nvidia’s first graphics chips were sold to computer motherboard companies in Taiwan, recalled Colley Hwang, president of Taiwan-based technology newspaper DigiTimes.
Hwang also pointed to the cutting-edge chips made by TSMC, packaging and testing performed by Kaohsiung-headquartered ASE, as well as motherboards made by Taipei-based Wistron and Hon Hai.
Various subsystems that include servers, cooling systems, racks and accelerators are also made by Taiwanese counterparts for Nvidia.
Some observers have said that Huang’s tight relationship with Taiwanese firms, especially TSMC, in the past 30 years has been vital to Nvidia’s survival and dominance.
TSMC is the sole production partner for Nvidia’s most advanced training chips, including its latest next-generation Blackwell line.
This ensures that Nvidia has priority access to the most advanced chips, which are critical to its graphics processing unit (GPU) production and maintaining its position as a leader in AI hardware.
Taiwan’s speed and efficiency in semiconductor production often allowed Nvidia to be among the first to release next-generation GPUs that outperformed competitors like Advanced Micro Devices (AMD) and Intel in many benchmarks.
TSMC is expected to be a key beneficiary of the AI boom as demand surges for advanced semiconductors.
MediaTek, the world’s largest smartphone chip maker, is expected to benefit considerably from strong demand for AI-powered smartphones. It has introduced AI-focused chipsets that incorporate AI processing units for mobile devices.
Another Taiwanese giant, Foxconn, the world’s largest contract electronic manufacturer, as well as other smaller companies in the ecosystem, will also reap rewards from the AI boom.
For instance, Asia Vital Components (AVC), which develops liquid cooling systems that can keep up with Nvidia’s far-hotter Blackwell generation of AI chips and systems, are set to be hotly sought after in the global market.
Taiwan produces more than 90 per cent of the world’s most advanced chips, putting it way ahead of all its competitors.
It has developed an intricate and highly efficient tech supply chain, with thousands of interconnected companies that provide everything from raw materials to final components. Key players rely on this ecosystem to provide critical components at lightning speed.
Observers said replicating Taiwan’s ecosystem requires not only a massive investment in infrastructure but also years of coordination among firms, local governments, and global partners.
While other Asian nations such as Malaysia and Vietnam are vying for a piece of the lucrative semiconductor pie, analysts said it will take them time to catch up to Taiwan’s standards.
“Taiwan has made breakthroughs step by step in the past 40 years. Taiwan can handle everything from upstream chips to downstream assembly of electronic products. This is Taiwan’s unique strength,” said Hwang.
“It’s almost impossible for emerging countries to do this… in the short term. My view is that this ecosystem will last at least 10 years, it will be a golden decade (for Taiwan).”
However, observers also cautioned that Taiwan’s dominance in semiconductors is not without risks.
Taiwan is due to become a super aged society next year, with 20 per cent of its population over the age of 65.
The problem is further exacerbated by its total fertility rate – one of the world’s lowest.
Official data shows that Taiwan could lose 35 per cent of its population by 2070, dealing a big blow to its workforce.
“The falling birthrate is a serious problem. It’s not just general workers that are in shortage, there’s also a shortage of engineers,” said Hwang.
However, some Taiwanese companies are already making necessary preparations to cope with labour shortage.
For instance, Quanta, the world’s largest laptop producer, has reduced its staff to a third of its workforce from five years ago by replacing employees with smart manufacturing technology.
Outside of domestic issues, fears of a military conflict in the Taiwan Strait amid strained relations with China could also dampen investor confidence and derail Taiwan’s AI dreams.