S. Korea’s GDP per capita is overtaken by Taiwan

The Taiwanese National Statistics announced that the country’s GDP per capita exceeded that of South Korea for the first time in 18 years. While both countries have semiconductors as their biggest export items, it is the result of more robust sales of application-specific integrated circuits, in which Taiwan holds the world’s No. 1 position, and recession for semiconductor memory, which is the field where South Korea is ranked No. 1 in the world.

Last year, Taiwan’s GDP per capita was 32,811 dollars, 1.8 percent higher than South Korea’s 32,237 dollars. The Taiwanese National Statistics pointed outstanding performance of the semiconductor industry and proactive changes made by companies as reasons to overtake South Korea’s GDP per capita for the first time since 2004. While South Korea achieved an annual average growth rate of 2.6 percent for the past 10 years, Taiwan grew 3.2 percent on average per year thanks to its improved industrial competitiveness.

TSMC, a well-known Taiwanese company, has a market share of almost 60 percent in the global foundry field, which is more than three times higher than the market share of Samsung Electronics, which is ranked in second place in the industry. The market cap of TSMC exceeded that of its South Korean counterparts at the end of 2019. Such a gap between the two countries’ major export companies is directly reflected in their trade balance and national income. South Korea recorded a trade deficit of 47.8 billion dollars last year due to the recession of the Chinese manufacturing industry, which used to purchase 40 percent of South Korean semiconductors. Meanwhile, Taiwan recorded a trade surplus of 51.4 billion dollars thanks to system semiconductors’ export growth.

The growth of Taiwan, which was considered one of the Four Asian Tigers along with South Korea, Hong Kong, and Singapore in the 1970s to 1990s, slowed down after the dotcom bubble burst in the 2000s as its growth strategy focused on small and medium-sized companies faced challenges. However, the country bounced back as the Taiwanese government focused its support on semiconductor manufacturers, including TSMC. Taiwan nurtured talents by allowing semiconductor departments of universities to recruit new students every six months and developed more proactive support measures than South Korea by offering a 25 percent tax credit for investment in semiconductor-related research and development.

South Korea has recorded trade degrowth for seven consecutive months and trade deficits for 14 consecutive months. The biggest reason behind such poor performance is a 41 percent reduction in its semiconductor export due to the decreased global demand. Unless South Korean companies put an even bigger gap against their competitors in the foundry and other areas with aggressive investment and the government and political circles support them by mobilizing the country’s full capabilities, it will be hard to catch up with Taiwan again.