Taiwanese manufacturers turned more optimistic last month, ending a five-month streak of declining sentiment as concerns over US tariffs, currency volatility and China’s overcapacity began to ease, the Taiwan Institute of Economic Research (TIER) said yesterday.
The manufacturing business confidence index rose 1.17 points from June to 86.8, its first rebound since February.
TIER economist Gordon Sun (孫明德) attributed the uptick to fading trade uncertainties, a steadier New Taiwan dollar and reduced competitive pressure from Chinese producers.
Photo courtesy of the Taiwan Institute of Economic Research
Taiwan’s semiconductor industry is unlikely to face significant damage from Washington’s ongoing probe into semiconductors, given the US’ reliance on Taiwanese chips to power artificial intelligence (AI) development, Sun said.
“US tech companies have invested US$350 billion in AI this year, with plans to pour US$3 trillion into AI infrastructure over the next three years,” Sun said.
A 100 percent tariff on semiconductors could raise costs for US firms by as much as US$1 trillion, he said.
While large players such as Google and Amazon.com Inc might be able to absorb the shock, smaller firms could collapse, threatening AI data centers that underpin US service exports, he added.
TIER president Chang Chien-yi (張建一) said that while AI investment appears robust, risks of overheating remain.
Sun echoed that concern, adding that previous technology booms — personal computers in the 1980s, the Internet in the 1990s and smartphones in the 2000s — each required more than a decade to achieve widespread adoption.
“Right now, AI runs on faith, not productivity, and eventually, the risk of a bubble will emerge,” Sun said.
However, the institute’s monthly sentiment survey showed mixed results across sectors.
Confidence among service providers slipped 0.33 points to 87.8, indicating a largely flat outlook.
For example, the banking sector was weighed down by geopolitical tensions, a weakening global economy and uncertainty over US trade policy, which have fueled financial market volatility and eroded investment returns, the TIER said.
Although slowing credit demand has narrowed loan-deposit spreads, stable interest rates and banks’ continued efforts to optimize funding structures should help sustain steady earnings from lending and deposit operations, it said.
Sentiment in the construction industry fell 0.96 points to 93.79, reversing a brief uptick in June, it added.
TIER researcher Arisa Liu (劉佩真) said that housing demand remains weighed down by government curbs on speculation and tighter credit, while supply remains ample.
“Unless the central bank eases mortgage terms, the property market slowdown will persist,” she said.
Chang, who also sits on the central bank’s board, urged property developers “not to morally blackmail the central bank” into lowering interest rates.
The housing market is far from a collapse, and the broader economy remains sound, making rate cuts unnecessary this year, he added.
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