30-Second Overview: Leveraging TSMC's production of NVIDIA AI chips, Taiwan holds a critical position in the global AI hardware supply chain. Following the 2023 generative AI explosion, Taiwan has shifted from "manufacturing chips for others" to contemplating "how to utilize AI." While the government is promoting four major AI strategies, seventy percent of enterprises have yet to cross the threshold of AI integration. Taiwan is transitioning from hardware OEM/ODM toward AI application innovation.
When ChatGPT emerged at the end of 2022, many in Taiwan might not have realized that much of the hardware foundation supporting this AI revolution is "Made in Taiwan."
TSMC's AI Chip Empire
The story begins with TSMC (Taiwan Semiconductor Manufacturing Company). When NVIDIA launched its RTX 30 series GPUs in 2020, TSMC's 7nm process technology played an indispensable role. When NVIDIA became a sensation in 2023 due to ChatGPT, and demand for H100 AI chips skyrocketed, TSMC once again became the force behind the scenes.
This was no accident. Since 2016, TSMC has engaged in deep collaboration with NVIDIA, investing in the most advanced process technologies. At the time, many believed AI was still too far off, but TSTSMC placed the right bet.
In 2024, AI-related revenue accounted for over 50% of TSMC's total revenue. Beyond NVIDIA, major AI chip players such as AMD, Broadcom, and Marvell cannot function without TSMC's manufacturing technology. It can be said that without TSMC, today's AI boom would not exist.
However, this has also prompted Taiwan to reflect: are we merely manufacturing chips for others, or should we develop our own AI capabilities?
From OEM Mindset to Application Innovation
Following the global AI craze triggered by ChatGPT in 2023, both the Taiwanese government and enterprises began seriously considering AI strategies.
In 2024, the Executive Yuan launched the "Four Major AI Strategies": expanding computing power, connecting industry-use scenarios, attracting talent, and demonstrating applications. In plain terms, this means: building AI computing centers, identifying AI application scenarios, cultivating AI talent, and promoting AI adoption across all industries.
However, actual implementation has proven highly challenging. According to a 2025 enterprise survey, 70% of Taiwanese companies have not truly implemented AI. The primary reasons are pragmatic: they do not know how to use it, lack sufficient data, lack talent, or find the costs too high.
This reflects a characteristic of Taiwan's industry: hardware is strong, while software remains relatively disadvantaged. We can manufacture the world's most advanced chips, but we may not necessarily know how to use AI to solve business problems.
Taiwan's Story in Medical AI
Nevertheless, there are success stories. Taiwan's medical AI is considered a relatively well-developed field.
The pathology imaging AI system developed by Cloud-X (雲象科技) can automatically interpret cancer pathology slides with accuracy comparable to that of senior physicians. This system is already in use at top-tier medical centers such as National Taiwan University Hospital and has received US FDA certification.
Why is medical AI succeeding in Taiwan? Several key factors are at play:
First, Taiwan possesses a world-class healthcare system. The National Health Insurance (NHI) system allows Taiwan to accumulate massive amounts of high-quality medical records. Second, Taiwan's physician training is rigorous, making the "ground truth" for AI systems highly reliable. Finally, Taiwanese doctors are relatively open and willing to try new technologies.
Cloud-X (宏碁智醫) has also made breakthroughs in diabetic retinopathy detection. Their AI system can interpret fundus photographs within 30 seconds with an accuracy exceeding 90%. This is particularly helpful for rural healthcare—it allows general clinics to provide professional-grade diagnoses without needing a specialist on-site.
AI Experiments in Manufacturing
Taiwan's manufacturing sector is also attempting AI transformation, though progress is uneven.
Delta Electronics (台達電) serves as a relatively successful example. They implemented an AI quality inspection system in their electronics factory, using machine vision to check for defects on printed circuit boards. What previously required manual visual inspection can now be handled by AI 24/7, and with greater accuracy than the human eye.
Foxconn (鴻海) is also promoting "AI factories," using AI to predict equipment failure and optimize production scheduling. However, due to Foxconn's massive scale, the implementation progress varies across different factories, and the ultimate effectiveness is still being evaluated.
In contrast, AI adoption among small and medium-sized enterprises (SMEs) is more difficult. A lack of resources, a shortage of professional talent, and not knowing where to begin are widespread issues. Although the government offers subsidy programs, the complex application procedures often deter SMEs.
The AI Conservatives in Finance
The Taiwanese financial sector maintains a relatively conservative attitude toward AI, primarily due to concerns regarding risk management.
There are still some attempts, however. E.SUN Bank (玉山銀行) has developed an AI customer service system capable of answering general banking inquiries. CTBC Bank (中信銀行) uses AI to analyze credit risk, improving the accuracy of lending decisions.
Overall, however, AI applications in Taiwan's financial industry remain somewhat superficial, mostly limited to the stage of customer service chatbots. Core AI applications, such as algorithmic trading and risk modeling, have not yet achieved large-scale adoption.
This may be related to the conservative culture of the financial industry, as well as a stricter regulatory environment. Issues regarding the explainability and fairness of AI decisions are particularly sensitive in finance.
The War for Talent
AI talent is currently Taiwan's greatest bottleneck.
According to employment agency statistics, the average salary for AI-related positions jumped from NT$41,000 to NT$57,000 in 2024, an increase of over 30%. Salaries for senior AI engineers are even more likely to exceed one million NTD.
Yet, even with higher pay, talent remains insufficient. Although National Taiwan University has introduced many AI-related courses, the students trained are often too focused on theory and lack practical experience.
The corporate sector has begun cultivating its own talent. Large enterprises like TSMC and Foxconn have internal AI training programs. Some AI startups have also begun collaborating with universities to provide internship opportunities.
Competition for international AI talent is even more intense. Companies such as NVIDIA, Google, and Microsoft are setting up R&D centers in Taiwan, aggressively recruiting talent with high salaries. Taiwanese companies face significant pressure to retain their talent.
Struggles of the Startup Ecosystem
Taiwan's AI startup environment is still in its early stages.
Compared to Silicon Valley in the US or Shenzhen in China, Taiwan has fewer AI startups, and they are generally smaller in scale. The primary reasons are a small market, insufficient capital, and limited talent.
However, there are bright spots. Venture capital firms such as AppWorks and Initial Capital (之初創投) have begun focusing on the AI sector, providing funding and mentorship. The government's "AI Innovation Research Center" also provides technical support.
Interestingly, Taiwanese AI startups often choose to specialize in vertical domains rather than creating platform-based products—for example, focusing specifically on agricultural AI, textile industry AI, or specialized medical AI. This may better align with the characteristics of Taiwan's industries.
Impact of the US-China Tech War
The US-China tech war has a significant impact on Taiwan's AI industry.
On one hand, US export controls on AI chips to China have benefited Taiwanese companies like TSMC. US companies such as NVIDIA require more chips manufactured in Taiwan to meet global (excluding China) AI demand.
On the other hand, Taiwan also faces pressure to "choose sides." As certain AI technologies are listed as controlled items, Taiwanese companies must be increasingly cautious regarding technical cooperation.
More complex still is the fact that many Taiwanese companies have significant business operations in China. How to maintain commercial relationships with China while complying with US regulations has become a difficult dilemma for enterprises.
Characteristics of Taiwan's AI
After several years of development, Taiwan's AI industry is beginning to develop its own unique characteristics.
The first is "Hardware-Software Integration." Taiwan possesses strong hardware manufacturing capabilities; when combined with software applications, it can provide complete AI solutions. This is an advantage for Taiwan compared to pure software companies.
The second is "Vertical Application." Taiwan has deep industrial know-how in specific sectors (such as healthcare and manufacturing). "AI + Domain Expertise" may be Taiwan's unique path.
There is also "Cost-Effectiveness." Taiwan's AI solutions are typically cheaper than those from Europe or the US, yet more reliable than those from China, giving them a certain level of competitiveness in the international market.
Future Opportunities and Challenges
The future of Taiwan's AI industry depends on finding its own position.
It is unlikely that we will compete with the US in foundational models, nor is it likely that we will compete with China in terms of market scale. However, we may find opportunities in specific application domains, hardware-software integration, or cost-effective solutions.
Edge AI could be one such direction. Taiwan has advantages in IoT and embedded systems; combined with its AI chip manufacturing capabilities, the complete supply chain for Edge AI devices could be a strength for Taiwan.
Green AI is also an opportunity. As Taiwan promotes net-zero carbon emissions, there is significant demand for AI technology in areas such as energy saving and optimization.
However, the challenges are very real: talent shortages, small markets, and intense international competition. For Taiwan's AI industry to succeed, it requires the concerted efforts of government, industry, and academia, as well as more patience and long-term investment.
Ultimately, AI is not a technology that can be achieved overnight; it is a capability that requires long-term accumulation. Taiwan has the opportunity, but the road ahead is long.
References
- National Science and Technology Council: AI Policy Development Directions
- Ministry of Economic Affairs: AI Industry Promotion Office
- III: Current Status of Taiwan's AI Industry Development
- TSMC: 2024 Annual Report AI Business Analysis
- Ministry of Digital Affairs: Achievements in Promoting the Four Major AI Strategies