In a recent article, The Economist examined the hidden divide inside the export economies of Japan, South Korea, and Taiwan. As artificial intelligence fuels high demand for semiconductors and fab equipment, many of the region’s other industries are struggling to keep up with China.

Taiwan, a rich economy that in a good year might be expected to expand by 3-4%, is growing at 14%. That is thanks to an explosion in exports, which, even after adjusting for inflation, rose by over 40% last year. In a similar vein, operating profits at South Korea’s biggest firms ballooned by 159% over the past year, thanks chiefly to its mighty exporters. Even usually sluggish Japan is seeing record corporate profits. Since the covid-19 pandemic its exports have grown four times faster than its economy. On the face of things, north-east Asia is in the midst of an export-led bonanza.

That is only half the story, though. North-east Asia’s export industries increasingly operate on two tracks. On one track, the boom in artificial intelligence is driving high-tech exports, by the all-conquering chipmakers of South Korea and Taiwan, and by Japanese makers of equipment and materials used in chipmaking. On the second track, the rest of industry is clapped out. If you exclude semiconductors and AI servers, Taiwanese exports have actually fallen by 40% since 2022. In South Korea, non-AI exports have stagnated and Japan’s industry is in decline. In areas such as cars and chemicals, China is lapping the trio.

There is good news here of course, but it is prudent to look beneath the positive numbers. The question is not simply whether AI can keep delivering growth, but whether its gains will strengthen the rest of the industrial economy, conceal its decline, or hide the dispersion to other countries and economies. Read more over at The Economist for some more insight here.