Bank of Korea: "Concerns Over Taiwan's Power Shortage Due to LNG Reliance and Middle East Conflict... Impact on Korean Exports"

Bank of Korea Releases "May 2026 Economic Outlook"

LNG Accounts for 50% of Taiwan’s Total Power Generation

Concerns Over Power Shortages Due to Middle East War and Climate Change

Impact Expected on Korea, Closely Linked in the Global Supply Chain

There are growing concerns that Taiwan, which maintains a very close relationship with Korea in the global semiconductor supply chain, may face power shortages this year due to energy supply issues stemming from the Middle East war and the impacts of climate change.

According to the "May 2026 Economic Outlook (Indigo Book)" released by the Bank of Korea on May 28, Taiwan's economic growth rate was 8.7% last year, and the growth rate in the first quarter of this year reached 13.7%, the highest in 39 years. This was largely driven by a significant expansion in semiconductor-related exports fueled by surging demand for artificial intelligence (AI).

As a result, the share of the semiconductor industry in Taiwan’s total power consumption jumped to 18% last year, with Taiwan’s leading foundry company, TSMC, accounting for nearly 10% alone.

Given the nature of the semiconductor industry, which cannot afford any production halts, Taiwan's power structure is cited as a potential factor that could hinder economic growth. After the 2011 Fukushima nuclear accident, Taiwan implemented an energy transition plan due to heightened earthquake fears, raising the share of LNG power generation to 50% of total power output as of May last year, while shutting down all nuclear power plants, bringing the nuclear share down to 0%.

There are serious issues with overreliance on certain LNG suppliers and insufficient maximum reserves. Taiwan relies entirely on LNG imports, with Qatar accounting for 34% and Australia for 33%, meaning these two countries provide about two-thirds of the total. Taiwan’s maximum LNG reserves cover only 11 days, which is much less than Korea’s 30 days and Japan’s 19 days.

Additionally, repeated surges in power demand during the summer have made maintaining a stable power grid another risk factor. Over the past five years, Taiwan has experienced three large-scale blackouts, and its power reserve ratio has fallen below the Ministry of Economic Affairs’ recommended level of 15% for five consecutive years.

Amid these challenges, the blockade of the Strait of Hormuz has halted imports of LNG from the Middle East, creating an urgent situation. Recently, Taiwan has begun diversifying its LNG import sources to include the United States and Australia, while also working to increase its total LNG imports in an effort to secure energy supplies.

However, if major importers such as Korea, China, Japan, and Europe compete to secure spot LNG supplies in preparation for summer, there are concerns that Taiwan could experience another large-scale blackout similar to the one that occurred in 2024.

The Bank of Korea analyzed, "If power demand surges in the summer, Taiwan will face challenges in allocating power between industrial and residential use, as well as between the semiconductor sector and other industries."

It is also analyzed that if Taiwan’s power shortage becomes a reality, it could impact Korea’s export-oriented economy.

This is because in the current structure, semiconductors produced by Samsung Electronics and SK hynix are packaged in Taiwan before being re-exported to the United States, so a large-scale blackout in Taiwan could disrupt the entire value chain.

In fact, Korea’s exports to Taiwan have increased since 2024, driven by the AI investment boom and centered on high-bandwidth memory (HBM), with last year’s export value reaching $49.1 billion, a 44.5% surge from the previous year.

A Bank of Korea official stated, "If Taiwan, which is closely linked to us in the global semiconductor supply chain, experiences a disruption in power production due to energy supply issues from the Middle East, it could have a direct impact on our exports."

This content was produced with the assistance of AI translation services.