From Fortune · Nicholas Gordon · · 2m
Taiwan's stock market bets big on AI beyond TSMC
The chair of Taiwan's exchange wants to diversify from chip dominance and build the world's most complete AI ecosystem.
In brief
The chair of Taiwan's exchange wants to diversify from chip dominance and build the world's most complete AI ecosystem. Taiwan's stock market is trying to reduce its dependence on TSMC by promoting other AI supply chain companies and improving corporate governance, following Japan's playbook. Originally reported by…
Taiwan becomes world's fifth largest market
Taiwan's stock market reached fifth place globally by total value in May, behind only the U.S., mainland China, Japan, and Hong Kong. The TAIEX index is up 55% this year.
TSMC dominates but creates risk
TSMC makes up 40% of Taiwan's benchmark TAIEX index and is up 50% this year. The market's heavy reliance on one company limits its appeal to diversified investors.
Sherman Lin's diversification strategy
The Taiwan Stock Exchange chair wants to broaden appeal beyond TSMC to other AI supply chain companies and overlooked profitable firms called hidden champions.
Taiwan's complete AI ecosystem advantage
Lin argues Taiwan's real strength is not having one or two world-class companies, but the world's most complete and competitive AI ecosystem across the entire supply chain.
“Our real competitive advantage is not that we have one or two world-class companies. It's that we have the world's most complete and competitive AI ecosystem.”
Technology is in Taiwan's DNA
Lin describes Taiwan as a technology island with cities along the western coast functioning like an industrial park. The nation's identity centers on semiconductor and electronics manufacturing.
“We're like an industrial park. Technology is really in our DNA.”
Power Up program mirrors Japan's success
Taiwan's exchange is pushing companies to strengthen corporate governance through its Power Up program, following Japan and South Korea's approach to boost shareholder value and market performance.
IPO market still lags Hong Kong
Taiwan raised 3.3 billion dollars across 70 IPOs last year, a record for the island. Hong Kong raised 37.4 billion dollars across 119 deals in the same period, showing Taiwan's gap.
Trading hours remain a constraint
Taiwan's market closes at 1:30 PM, out of step with global trading. Lin suggested expanding hours but Taiwan's top regulator rejected it as not a priority.
AI boom is a three-year window
Lin sees the AI boom lifting chipmaker valuations across Asia as a unique opportunity for Taiwan, but warns this advantage may only last about three years before the market matures.
The key point
Taiwan's stock market is trying to reduce its dependence on TSMC by promoting other AI supply chain companies and improving corporate governance, following Japan's playbook.
