Value context and insight. lkm@koreatimes.co.kr
Korea overtaken by Taiwan in per capita GDP due to export slump
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By Lee Kyung-min
By Lee Kyung-min
Korea's per capita gross domestic product (GDP) of $32,237 (43.22 million won) in 2022 fell short of Taiwan's $32,811, for the first in 18 years, in what market watchers say was a consequence brought on by a lack of long-term policy assistance to foster semiconductors and broaden manufacturing industries.
Propelling Taiwan's outperformance was years of its industrial competitive edge fortified by the Taiwan Semiconductor Manufacturing Company (TSMC), a global logic chip powerhouse based out of the island nation, in line with and ahead of rapidly growing digitization demand from around the globe.
Also favorable for Taiwan was the sharper-than-expected depreciation of Korea's currency, an indication of overall weaker fundamentals to withstand external uncertainties, including Russia's invasion of Ukraine and the rapid monetary tightening of the U.S. over the past few months.
Observers say Korea's Samsung Electronics, the top competitor of TSMC, will no longer be able to sustain the once-thriving memory chip boom, in a dramatic restructuring of global value chains and the U.S.-China hegemony war, unless buttressed by immediate policy measures to bolster the growth driver industry which accounts for about a fifth of the country's total exports.
Taiwan registered a trade surplus of $51.4 billion last year, whereas Korea logged a trade deficit of $47.8 billion due to COVID-19 quarantine measures in China, its largest export destination, compounded further by a spike in energy prices.
Figures
Data from Central News Agency, a news organization in Taiwan, showed that the country's per capita GDP in 2022 amounted to $32,811, higher than Korea's $32,237.
Taiwan was able to register an annual average growth of 3.2 percent over the past 10 years, faster than Korea's 2.6 percent in the same period, as underpinned by stronger competitiveness in the semiconductor industry.
Most pronounced was the widening gap between the two in the growth of manufacturing.
Added value created by manufacturing came to 34.2 percent of Taiwan's total GDP last year, up 5.1 percentage points from 29.1 percent in 2013.
The figures for Korea slumped to 25.6 percent, down by over 2.2 percentage points from 27.8 percent in the same period.
Taiwan's manufacturing was powered by the annual growth of electronics and precision equipment combined averaging 8.7 percent from 2013 to 2021, far faster than its overall manufacturing industry's growth of 5.5 percent in the same period.
The rapid growth is also explained by the two leading sectors' combined share of 54.8 percent in the country's manufacturing in 2021, up 9.4 percentage points from 2013.
Also anchoring Taiwan's growth was committed government investment, as illustrated by annual growth of 5.7 percent in fixed investment from 2013 to 2022, far greater than Korea's 2.8 percent in the same period.
The long-term investments led to Taiwan's exports registering an annual growth of 4.6 percent from 2013 to 2022, the news organization said. The figure is not only higher than Korea's 2.2 percent in the same period, but also the global average of 3 percent.
Lee In-ho, former president of the Korean Economic Association, said the government should outline a growth strategy for local chipmakers as soon as possible.
“The government should invest in the semiconductor industry and make research and development commitments,” he said. “The later the measures, the bigger the consequences for Korea's neglect in competition review over the past few decades, as left unmonitored due to Korea's lead in the IT boom in the early 2000s and the rise of China as a new manufacturing powerhouse thereafter.”