AI Boom Masks Structural Export Weakness Across East Asia

Mali Chivakul, an emerging markets economist at Bank J Safra Sarasin, warns that reliance on AI infrastructure demand creates a deceptive economic picture. While chip-related exports soar, core sectors in Korea, such as motor vehicles and general machinery, have seen stagnant or declining growth between 2023 and 2025. Taiwan and Singapore show marginal gains in non-ICT exports, but Malaysia remains the regional outlier, maintaining robust growth outside the tech-equipment bubble.

The competitive pressure from China, often described as a second "China shock," now spans both low-tech and high-tech manufacturing. As Beijing climbs the technology ladder, local producers face increased rivalry in third-party markets and at home. Korea’s reliance on Chinese imports has climbed to 30 percent, reflecting a deepening integration that complicates export strategies. Meanwhile, data center investments in Malaysia and Thailand are driving imports of electronic components, balancing the gains from their burgeoning status as regional digital hubs.

To counter these risks, governments are utilizing the current AI windfall to finance long-term industrial upgrades. Taiwan’s development plan through 2028 targets digital transformation, while Korea is funneling capital into semiconductor research. Furthermore, geopolitical realignments provide a buffer; Korea’s shipbuilding industry, previously devastated by Chinese competition, has rebounded with double-digit growth since 2024, bolstered by strategic cooperation with the United States.