iShares South Korea and Taiwan ETFs surge past 100% in chip rally

The iShares MSCI South Korea ETF (EWY) and iShares MSCI Taiwan ETF (EWT) have each surged more than 100% in 2026, powered by semiconductor manufacturing stocks.

"The rally is concentrated in the two economies that fabricate the world's most advanced semiconductors," said Priya Mehta, equity market strategist at Edgen. "ETF investors are using EWY and EWT to capture that exposure without taking single-stock risk."

South Korea's KOSPI index has more than doubled year-to-date, while Taiwan's TAIEX has posted similar gains, according to exchange data. The semiconductor sector accounts for roughly 30% of South Korea's benchmark and more than 50% of Taiwan's, making both indices among the most concentrated globally on chip exposure. The iShares ETFs have seen elevated trading volumes as investors seek diversified access to the rally.

The sustainability of the rally hinges on continued AI-driven chip demand. Both markets remain heavily dependent on semiconductor exports, and any shift in the global chip cycle would directly impact index performance. Investors are watching TSMC's upcoming earnings report for signals on second-half demand, with the company expected to provide guidance on capital expenditure and capacity expansion plans.

Semiconductor Concentration Drives Returns

The 2026 rally in North Asian equities has been led by the two countries that fabricate the world's most advanced semiconductors, according to a report from 247wallst.com. South Korea's Samsung Electronics and SK Hynix, along with Taiwan's TSMC, dominate their respective benchmarks and have been the primary beneficiaries of surging demand for AI chips and high-bandwidth memory used in data centers. The three companies together represent a significant portion of the weighting in both EWY and EWT, making the ETFs a proxy for semiconductor exposure in the region.

The iShares MSCI South Korea ETF holds roughly 200 South Korean stocks but derives more than a third of its portfolio weight from Samsung Electronics and SK Hynix combined. The iShares MSCI Taiwan ETF is even more concentrated, with TSMC alone accounting for more than 30% of its holdings, according to the fund's fact sheet. This concentration has amplified returns during the rally but also exposes investors to single-sector risk.

Risks to the Rally

Both indices now face valuation questions after their rapid ascent. The KOSPI and TAIEX have each more than doubled from their 2025 closing levels, raising concerns about how much further the rally can extend without a fundamental catalyst. Any disruption to semiconductor supply chains, a slowdown in AI-related capital expenditure by major US tech companies, or a shift in export controls could trigger outsized losses in both markets.

Trade policy remains a wild card. The US has increasingly targeted semiconductor exports as part of its strategic competition with China, and any escalation in restrictions could reshape demand dynamics for the region's largest exporters. Taiwan, in particular, faces geopolitical risk that has historically caused sharp but short-lived selloffs in its equity market.

For investors holding EWY and EWT, the key question is whether the semiconductor cycle has further room to run. With both ETFs up more than 100% year-to-date, the easy money may have been made — but the structural demand for AI chips suggests the trend may have further to go.

This article is for informational purposes only and does not constitute investment advice.