Taiwan’s manufacturing sector expanded at its fastest pace in nearly five years in July, buoyed by strong exports and continued AI optimism.
The seasonally adjusted Taiwan Manufacturing Purchasing Managers’ Index rose 0.8 percentage points from June to 61.5%, marking its 10th consecutive month of expansion, according to a Chung-Hua Institution for Economic Research release. It was the fastest growth rate since September 2021.
The New Orders Index climbed 2.9 percentage points to 63.3%, marking its fastest growth since March. The Production Index surged 4 percentage points to 62.7%, also reaching its highest level since September 2021.
CIER President Lien Hsien-ming said that the rise in the PMI reflected strong export conditions and continued AI optimism. However, manufacturers reported that rising raw material prices were creating production bottlenecks and the impact of higher costs on industry and consumer prices will need monitoring.
Memory chips, particularly high-bandwidth memory, are among the biggest bottlenecks facing the AI industry, Lien said. Taiwan has an advantage in chip manufacturing, but servers still require memory, while tight global supplies have pushed up prices, particularly for servers.
The supply crunch is not expected to ease soon, further increasing manufacturing costs for electronic products. Memory-dependent products such as smartphones and computers could also be affected.
Employment continued to grow at a slower pace, with the Employment Index decreasing 2.4 percentage points to 53%. Supplier delivery times lengthened for the 20th consecutive month, with the Supplier Deliveries Index inching up 0.7 percentage points to 67.6%.
The Inventories Index fell 0.8 percentage points to 61.1%. Manufacturers reported that their customers’ inventories were too low for the second consecutive month, with the Customers’ Inventories Index falling 1.1 percentage points to 48.3%.
The Prices Index remained above 70% for the seventh consecutive month, despite falling 5.3 percentage points to 71%. The Backlog of Orders Index rose for the eighth consecutive month, edging up 0.2 percentage points to 61.1%.
All six manufacturing industry categories expanded, led by Electronic & Optical at 65.5%. However, Foods & Textiles and Basic Materials had contractionary outlooks for August.