Taiwan’s economy expanded at its fastest pace in nearly 39 years thanks to robust demand for artificial intelligence technology, data showed Thursday, despite concerns over the Middle East crisis.
The island is a global powerhouse in the manufacturing of semiconductor chips, which power AI, and its economy has been growing at a fast clip in recent years.
But the Iran war has raised concerns about the potential impact on the economy, particularly the critical chips sector, owing to Taiwan’s almost total reliance on energy imports to keep the lights on and production lines running.
Gross domestic product expanded 13.7 percent on-year in the first quarter of 2026, the fastest pace since the second quarter of 1987, according to the statistics agency.
It was also better than the 11.3 percent forecast in a survey by Bloomberg News, and a pick-up from the 12.7 percent recorded in the previous three months.
“The rapid expansion of AI applications has sharply boosted demand for computing power, which in turn has driven strong export momentum for products in AI infrastructure-related supply chains,” said Chiang
Hsin-yi, an official at the Directorate General of Budget, Accounting and Statistics.
She added that the impact from the Middle East war “doesn’t seem that evident at this point”, although some data for March “is not that complete yet”.
Taipei has sought to limit the economic impact of the Iran war by absorbing most of the increase in fuel prices, while also ensuring the island has a secure supply of LNG and oil, much of which comes from the Middle East.
Wendell Huang, chief financial officer of chip titan TSMC , said this month that the company did not expect the war to impact its supply of key chipmaking materials such as helium and hydrogen in the near term.
TSMC is the biggest contract maker of microchips that are used in everything from Apple iPhones to Nvidia’s processors.
Nevertheless, Taiwan’s “consumption likely slowed” and “investment probably fell” in the first quarter as sentiment was hurt by the conflict, Bloomberg reported before the data was released.
The export-driven economy grew 8.6 percent in 2025, its fastest pace in 15 years, but is expected to expand 3.5 percent this year.
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