ROI-Asia's AI chip boom could spark regional economic renaissance: Raychaudhuri

(The views expressed here are those of the author, the founder and CEO of Emmer Capital Partners Ltd)

By Manishi Raychaudhuri

HONG KONG, June 1 (Reuters) - Investors are piling into South Korea and Taiwan for semiconductor stocks, but the AI boom isn't just fattening profits at North Asia's chip champions. It is powering a broader economic resurgence, driven by stronger household consumption, rising investment and widening tax coffers.

Real GDP growth for two of North Asia's AI powerhouses - Taiwan and South Korea - has risen over the past 12 to 15 months, FactSet data shows, with Taiwan's now running at 11.8% in the first quarter.

This is largely thanks to the AI boom.

U.S. hyperscalers' seemingly insatiable demand for chips has boosted the earnings of North Asia's AI giants, attracted significant foreign investment, and - most importantly for domestic consumption - lifted employee compensation at large tech firms like never before.

South Korea's SK Hynix and Samsung Electronics (SSNLF) - two of the world's biggest chipmakers - now tie bonuses directly to operating profit. SK Hynix allocates 10% of operating profit to bonuses with no cap, a formula agreed in September that last year gave its 35,000 staff the equivalent of 29 months of base pay. Samsung's union deal agreed last week earmarks 10.5% of the chip division's profit as stock awards for its workers, ending a 50% bonus cap, after nearly 63,000 workers cast their votes.

Taiwanese rival TSMC takes a looser approach, with bonus pools for its roughly 65,000 employees set case by case by the board alongside capex plans. Based on record 2025 profits, the board approved a bonus pool of about T$206 billion ($6.56 billion), averaging just over T$2.6 million per employee, up from roughly T$2 million in 2024 - payouts that dwarf previous years. Its CEO last week also vowed a more than 30% incentive bump.

CONSUMPTION BOOM

Soaring technology wages already appear to be creating a consumption boom.

This is most noticeable in Taiwan, where retail sales growth is hovering in the 6% to 8% range between February and April, compared with an average of 2.1% in the previous 10 years, according to FactSet. But it's also becoming palpable in Korea, where retail sales growth has jumped to an average 4% in the first four months, up from 0.3% in 2025 and a past 10-year average of 1.4%.

This jump in consumption and overall economic activity is increasingly being reflected in the improving corporate earnings outlook.

Through the end of 2025, earnings upgrades in South Korea and Taiwan were driven almost entirely by the technology sector. Now other sectors tightly linked to the broader economy are joining the rally.

Since November 2025, Korean financials, Taiwanese financials and Korean retail have had their 2026 consensus EPS upgraded by 67%, 11% and 8% respectively, according to FactSet consensus estimates.

These broad upgrades, in turn, have provided further fuel for the epic equity rallies in both countries, generating positive wealth effects that promise to further boost consumption, creating a virtuous cycle.

Wealth effects appear most pronounced in Taiwan. Since the beginning of 2024 through late May, South Korea's KOSPI stock index has surged roughly 219%, outpacing the 149% gain in Taiwan's TAIEX. Yet the average Taiwanese citizen is more exposed to equities: 20% of their wealth was in stocks in 2024, compared with less than 6% for the average South Korean.

That being said, South Koreans' equity buying has picked up sharply of late. According to data from the Korea Exchange, Korean individuals bought $33.8 billion in equities during the first five months of 2026, reversing a $13.5 billion sale in all of 2025 and a meagre $782 million purchase in 2024.

That suggests positive wealth effects could become an increasingly strong tailwind for consumption there as well.

EXCELLENT TIMING

The AI-driven economic recovery has come at a particularly opportune time for North Asia. Both South Korea and Taiwan are large energy importers, and oil and gas prices are spiking due to the ongoing conflict in Iran. Yet, the increase in their import prices has been more than offset by the sharp rise in the prices of the goods they export - memory and semiconductors - according to FactSet. This improvement in their "terms of trade" has supported their currencies and reduced the need for interest rate hikes.

Rising wages and booming equity markets have also helped expand tax revenue - something that can give governments more breathing room as they face the prospect of higher-for-longer energy prices.

In the first quarter of 2026, Seoul's tax take rose over 16% year-on-year, after a roughly 11% increase in 2025. The government acknowledged the role of soaring semiconductor bonuses in boosting income tax receipts. Taiwan's tax revenue grew only a modest 0.7% in 2025, dragged down by a depressed property market, but individual income taxes rose by an above-trend 5.4%. Tax revenue is forecast to grow by 6% to 8% in 2026, according to Taiwan's Directorate-General of Budget, Accounting and Statistics (DGBAS).

Risks always lurk around the corner, however.

Investors continue to question whether AI spending can be monetised at scale, a concern with significant resonance for North Asia. A slowdown in infrastructure investment would mean lower semiconductor earnings, smaller employee bonuses, weaker consumption and shrinking tax revenue - in other words, an unwinding of today's positive trends. Additionally, the AI boom is already having political ripples in the region. A senior South Korean policy adviser this month proposed that a "citizen dividend" be paid to all Koreans from the AI infrastructure companies' "excess profits". The market plunged briefly at this proposal to "socialise" profits. Meanwhile, the showdown between Samsung and workers over bonuses could be a sign of things to come - and that could make shareholders nervous.

For now though, the AI tide is lifting an increasingly wide range of boats in North Asia, and any storm clouds appear far in the distance.

(The views expressed here are those of Manishi Raychaudhuri, the founder and CEO of Emmer Capital Partners Ltd and the former head of Asia-Pacific Equity Research at BNP Paribas Securities.)

Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn, and X. And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week. ($1 = 31.3840 Taiwan dollars) ($1 = 1,505.3900 won)

(Writing by Manishi Raychaudhuri; Editing by Marguerita Choy and Anna Szymanski)