Taiwan’s factory activity remained firmly in expansion territory last month, supported by robust artificial intelligence (AI)-driven demand, even as supply chain bottlenecks and easing raw material costs tempered the pace of growth, the Chung-Hua Institution for Economic Research (CIER, 中經院) said yesterday.
The manufacturing purchasing managers’ index (PMI) eased to 60.7, from 61.4 a month earlier, remaining well above the 50-point threshold that separates expansion from contraction and marking the ninth consecutive month of growth, the institute said.
“If AI demand continues at the current pace, Taiwan’s exports could exceed NT$1 trillion [US$31.37 billion] this year,” CIER president Lien Hsien-ming (連賢明) said at a news conference in Taipei.
Lien said he did not see a meaningful impact from potential US interest-rate changes, adding that exports remained resilient through the first quarter.
While manufacturing output and new orders continued to expand, growth moderated as supplier delivery times and inventory accumulation slowed, the institute said.
The deceleration was most evident in the electronics and optical products sector, where the PMI remained above 60, but delivery times and inventory readings each shed 4.9 points, Lien said.
Companies reported persistent supply chain pressure, with lead times for key components — including passive components, printed circuit boards and optical materials — continuing to lengthen, the institute said.
Some manufacturers were unable to secure sufficient materials even after offering higher prices, underscoring a mismatch between strong orders and constrained production capacity, it said.
At the same time, easing geopolitical tensions in the Middle East helped lower input costs. Cooling hostilities between the US and Iran had led to a noticeable decline in commodity prices, reducing procurement expenses for manufacturers, Lien said.
The raw material price index plunged 18.7 points to 51.1, marking one of the sharpest monthly declines in the survey.
Lower prices have encouraged some customers to delay purchases, while petrochemical and upstream material producers reported weaker pricing in China and softer inventory demand following earlier stockpiling.
The survey also highlighted growing divergence within Taiwan’s industrial sector. The six-month outlook for basic materials producers remained in expansion for a fifth straight month, supported by demand linked to semiconductors, AI servers, cooling systems, power equipment and advanced manufacturing, Lien said.
The trend suggests AI-related spending is spreading beyond chipmakers and electronics assemblers to upstream suppliers of specialty metals, industrial materials, heat treatment services and thermal management components.
Academia Sinica economics research fellow Kamhon Kan (簡錦漢) said rising prices for memory chips and other electronic components could eventually be passed on to consumers.
Higher prices for smartphones, computers and other electronics might weaken consumer demand, he said, potentially creating winners and losers across industries.
The manufacturing sector’s six-month outlook index fell 2.6 points to 64.2, but remained above 60 for a sixth consecutive month, indicating continued confidence in near-term growth, CIER data showed.
Taiwan’s services sector also strengthened last month. The non-manufacturing index rose 1.7 points to 59.9, the fastest expansion since December 2021, the institute said.
Its six-month outlook rose to 63.5, the highest level since June last year, as strong underlying economic fundamentals continued to support domestically oriented business activity, it said.
By Crystal Hsu / Staff reporter
Thu, Jul 02, 2026
Taipei Times