The Chung-Hua Institution for Economic Research (CIER) released its October Manufacturing Purchasing Managers’ Index (PMI) on November 3, 2026. The seasonally adjusted index fell 0.9 percentage points from the previous month to 62.5%. Although the PMI remained in expansion for the 13th consecutive month, the pace of expansion slowed slightly. The CIER’s President Hsien-Ming Lien said the AI industry continues to grow, but warned that its progress may be uneven. Shortages of critical materials, including memory products and IC substrates, and growing concerns about returns on massive investments could create ongoing challenges. Volatility is likely to become the norm.
Critical Material Shortages Test Companies’ Ability to Fulfill Orders
The survey showed that the manufacturing new orders index fell 0.4 percentage points to 63.2% in October, remaining above 60% and firmly in expansion. The order backlogs index declined to 53.9%, its slowest pace of expansion since January 2026. The supplier delivery times and raw material prices indexes remained elevated at about 70%, indicating continued supply chain pressure from delivery delays and rising costs.
By industry, the electronics and optical PMI fell 2.6 percentage points to 60.0%, its slowest pace of expansion since March 2026. Demand for AI servers and advanced electronics applications remained strong. However, shortages of critical components such as memory products and IC substrates, mismatches between materials in shortage and excess, and rising costs continued to disrupt production schedules and order fulfillment. In consumer electronics, higher product prices weakened end-market demand.
Lien states that the recent slowdown in AI industry expansion primarily reflects shortages of critical components, which have extended delivery times. Market orders remain strong. The real challenge is whether manufacturers can fulfill them. Faced with soaring material prices, companies must also decide whether to purchase supplies at elevated prices or temporarily hold back and wait.
PMI Remains Elevated and Should Not Be Interpreted as Signaling an Economic Reversal
Addressing concerns regarding the potential peak of the AI boom, Lien noted that supply chain bottlenecks are not exclusive to Taiwan, as other major global markets encounter similar challenges. Although Taiwan’s manufacturing PMI expanded at a slower rate, the 62.5% reading still signifies robust growth. The current moderation should not be construed as an economic reversal.
Shin-Hui Chen, Associate Research Fellow at CIER’s Taiwan Economy Research Division, said having orders on hand does not guarantee smooth business operations. The more important challenges are whether companies can maintain production, deliver orders on schedule, and convert revenue into cash flow.
Chen added that AI adoption involves not only changes to corporate operating models, but also shifts in consumer behavior and market demand. Even major cloud service providers (CSPs) face challenges in transforming their business models in response to AI applications. Combined with supply chain bottlenecks, these pressures will inevitably cause industry volatility. The market should not expect the AI boom to proceed without setbacks.
Stable Material Supplies and the Ability to Pass On Costs Will Shape the 2027 Outlook
Looking forward, Lien indicated that demand for AI and advanced electronics remains supportive. However, the stability of critical material supplies, timely order fulfillment, and the ability of companies to transfer higher costs while maintaining product margins will be key factors influencing manufacturing growth in 2027. As the global AI industry evolves rapidly, companies must respond to market demand and enhance both supply chain coordination and cost management.
In the nonmanufacturing sector, the CIER reported that the seasonally unadjusted Non-Manufacturing Index (NMI) declined by 1.5 percentage points from the previous month to 55.4% in October, marking its twentieth consecutive month of expansion. With the onset of the fourth-quarter peak season for domestic demand, travel booking services, accommodation and food services, retail, and transportation and warehousing continued to expand. However, reduced business activity in financial and insurance services, wholesale trade, and information and communications moderated the overall pace of nonmanufacturing expansion.
Source: Economic Daily News (November 2, 2026). October PMI Expansion Moderates to 62.5% as the CIER Warns AI Boom Will Not Be Smooth Sailing https://money.udn.com/money/story/10869/9852490