Taiwan’s manufacturing sector expanded at its fastest pace in more than three years last month, as Middle East tensions pushed up raw material costs and prompted firms to accelerate orders, while sustained demand for artificial intelligence (AI) and semiconductors continued to underpin production, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The manufacturing purchasing managers’ index (PMI) rose 4.9 points to 60.3, the strongest reading since September 2021, signaling a pickup in activity driven by pre-emptive stockpiling and capacity adjustments across key industries, the CIER said.
Volatility in petrochemical prices and delivery schedules has led manufacturers to front-load purchases — particularly of raw materials — amplifying production momentum, the Taipei-based think tank said.
Photo: CNA
“The conflict in the Middle East has triggered a clear pull-forward in demand,” CIER president Lien Hsien-ming (連賢明) said. “This is most evident in raw materials, where stronger buying has lifted both input prices and output activity.”
The raw materials price index surged to 86, marking the fastest increase since April 2022, while the new orders gauge rose for a seventh consecutive month to 52.1, reflecting resilient demand despite external uncertainties.
Beyond geopolitics, support from technology investment remains strong, CIER said.
Global expansion in semiconductor manufacturing, AI servers and data centers — alongside rising demand for drones and power grid infrastructure — has boosted orders for high-end equipment and industrial automation systems, with the electronics sector leading gains and spillovers across its supply chain, it said.
However, the outlook is increasingly uneven, CIER said. Electronics, optical components, electrical machinery and basic materials firms expect continued expansion over the next six months, while suppliers of transportation equipment, chemicals and biotechnology, and food and textiles expect a contraction, it said.
The non-manufacturing index also rose, climbing 4 points to 58.3, marking 14 consecutive months of expansion and the fastest pace since July 2024, the CIER said.
Activity was supported by strong demand from high-end manufacturing clients and seasonal consumption linked to Mother’s Day and peak retail periods, it said. The six-month outlook improved, rising 4.3 points to 56.7.
Academia Sinica research fellow Kamhon Kan (簡錦漢) cautioned that growth momentum is becoming increasingly concentrated in a narrow set of drivers, particularly AI-related investment.
With the Strait of Hormuz still constrained and energy costs weighing on Asia and Europe, growth in Taiwan and the US is increasingly being driven by AI rather than broad-based demand, he said.
That concentration makes overall activity more vulnerable, Kan said, adding that any slowdown in AI investment or escalation in external shocks could trigger sharper swings in economic momentum.
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